2022 is likely to go down as one of the most challenging years for investors since 2008. Year-to-date, the S&P 500 is down more than 20%, while there is equal pain in the bond market due to inflation and a hawkish Federal Reserve.
However, there are a handful of sectors outperforming over the past few weeks due to longer-term rates turning lower as recession odds spike higher. Out of these sectors, biotech stocks are the most attractive from a valuation and growth perspective. Additionally, biotech stocks are less impacted by a slowing economy or change in monetary policy.
Therefore, investors should consider investing in these three high-quality biotech stocks:
Biotech Stocks: Regeneron Pharmaceuticals (REGN)
Regeneron Pharmaceuticals (NASDAQ:REGN) is a biotechnology company that provides medicines for treating myriad diseases, including eye ailments, inflammatory and hematologic conditions, and infectious diseases such as Ebola and COVID-19.
Despite the stock’s underperformance over the last 2 years, it continues to post strong earnings results. In Q1, REGN had 17% revenue growth and an 18% increase in EPS. For the full year, analysts are forecasting 0.7% and 4.6% EPS and revenue growth, respectively.
REGN is facing some near-term struggles with its coronavirus treatment losing ground to newer treatments, it continues to have a powerful pipeline and major presence in large markets. These include cancer, cardiovascular issues, eye disease, inflammation, and asthma. Its most well-known products are Eylea for macular degeneration; Praluent to help manage cholesterol levels and Dupixent for asthma.
REGN also stands out due to its very attractive valuation. The company has a forward P/E of 14.3 and a P/FCF of 8.3. It also has nearly $7 billion in cash and low levels of debt which gives it plenty of firepower for buybacks.
These positives are reflected in the POWR Ratings as REGN has an overall grade of B which translates to a Buy rating. In terms of its component grades, REGN has a B for Quality due to its track record of successful drug development and patent protection for core products.
The company also has a B for Value with a forward P/E of 16 that is below the market average even when accounting for its revenue decline next year. See the complete POWR Ratings for REGN here.
Amgen Inc. (AMGN)
Amgen Inc. (NASDAQ:AMGN) is a pioneer when it comes to biotechnology-based human therapeutics, with successful products for renal disease and cancer supportive care products.
Its flagship drugs include red blood cell boosters Epogen and Aranesp, immune system boosters Neupogen and Neulasta, and Enbrel and Otezla for inflammatory diseases.
AMGN also has a promising pipeline in addition to expectations of a strong decade of growth as it expands into international markets. Its management also has a successful track record of making acquisitions or partnering with smaller companies. For example, the acquisition of Decode gave the company the ability to identify potential drug targets that are validated by human genetics.
The stock has an overall grade of B, which translates into a Buy rating in our POWR Ratings system. The company has a Value Grade of B, which isn’t surprising, with a forward P/E of only 14.9. AMGN also has a Quality Grade of A, which means it has a healthy balance sheet. As of the most recent quarter, the company had $10.6 billion in cash compared to only $91 million in short-term debt.
Biotech Stocks: Corcept Therapeutics (CORT)
Corcept Therapeutics (NASDAQ:CORT) is a biotechnology company that is focused on drug-development to help patients manage unstable cortisol levels.
Cortisol is the body’s stress hormone, and it can create adverse effects if not properly modulated specifically in areas like metabolism, mental health, and cancer.
The company’s primary product is Korlym which helped generate over $300 million in revenue last year. Currently, the stock has a valuation of $2.5 billion with $366 million in sales over the last 12 months.
The upside case for CORT is that Korlym continues to be approved for neat indications and age groups. Currently, it’s an approved treatment for adult patients with endogenous Cushing’s syndrome, suffering from type 2 diabetes, but there are other off-label uses as well.
CORT is also working on approval for additional indications that could potentially increase the TAM for Korlym. For Cushing’s, the drug has been given orphan status, although it is being challenged by generic drug manufacturers.
The company also has four different drug candidates that are in different stages of clinical trials. Most promising is Relacorilant which could be an improvement over Korlym due to fewer side effects and has also shown some positive effects in the treatment of several cancers. Another potential blockbuster is Exicorilant which is in phase 1 and 2 trials as a treatment for castration-resistant prostate cancers.
This type of upside makes CORT compelling, especially due to its extremely reasonable valuation. The POWR Ratings are also bullish on CORT as it’s rated a B which translates to a Buy. B-rated stocks have generated an average annual performance of 21.1% which compares favorably to the S&P 500’s average annual gain of 8%. Click here to see more of CORT’s POWR Ratings.
On the date of publication, Jaimini Desai did not have (either directly or indirectly) positions in any of the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Jaimini Desai has been a financial writer and reporter for nearly a decade. He has helped countless investors take profitable rides on some of the hottest growth trends. His previous experience includes writing for Investopedia, Seeking Alpha, and MT Newswires.
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