It’s been an up-and-down year for biotech stocks. The sector is down around 1.3% so far this year, while the S&P 500 has risen 24%.
Many biotech companies are seeing layoffs and other types of restructuring. However, there is reason to be enthusiastic about the potential for a market comeback for these stocks. Biotech companies, especially those that are years away from having a viable therapy, struggle in times of high interest rates.
Now that the prospect of rate cuts are on the horizon, investors are returning to the sector knowing that the cost of capital won’t always be this high. Lower interest rates also means that promising biotech stocks are more likely to be acquired by larger pharmaceutical companies looking to broaden their pipelines. Over the past month, the sector has risen by more than 8%.
There are still plenty of biotech stocks out there with promise, and in this article, we dive into our top 10 picks.
A Closer Look at the Best Biotech Stocks to Buy
Here is a more detailed look at the best biotech stocks that investors are looking at right now:
1. Regeneron Pharmaceuticals: Overall Best Biotech Stock to Buy
Regeneron saw sales rise 15%, year over year, to $3.36 billion, in the third quarter, led by sales for Dupixent and Eylea, as well as growing sales for oncology therapy Libtayo. The company reported earnings per share (EPS) of $8.89, down 24% compared to the same quarter, thanks in part to increased in-process research and development costs as well as the company’s $109 million purchase in September of Decibel Therapeutics, known for its gene-editing programs to treat hearing loss.
The company got approval this year for Eylea HD, a higher-dose version of the drug that will help Regeneron keep competitors at bay. Eylea HD is approved by the Food and Drug Administration (FDA) to treat wet age-related macular degeneration (wAMD), diabetic macular edema (DME), and diabetic retinopathy (DR). The company also got approval for Veopoz to treat Chaple disease, a rare genetic disorder affecting the immune system.
Dupixent has a good chance of adding indications, including to treat chronic obstructive pulmonary disease (COPD) as well as pediatric eosinophilic esophagitis, a chronic inflammatory disease that can cause damage to the esophagus. The company also has two promising oncology therapies that may be able to launch next year. Odronextamab, used to treat patients with relapsed/refractory follicular lymphoma., is being reviewed by the FDA and the European Medicines Agency (EMA) and could see approval as early as late March. Linvoseltamab, a treatment for multiple myeloma, will soon present its biologics license application (BLA) to the FDA after promising trial results.
On top of that, the company’s strong balance sheet, with $15.7 billion in cash, will allow it to pursue acquisitions that could bolster its therapy portfolio.
2. Medpace Holdings: Solid Pick-and-Shovel Biotech Stock
The contract research organization provides full-services clinical development services to biotech, pharmaceutical and medical device industries. The U.S. company has employees spread across 41 countries.
In the third quarter, Medpace reported revenue of $492.5 million, up 28.3%, year over year and net income of $70.6 million, up 6.9% over the same period last year. EPS was $2.22, up 8%, year over year.
The company’s guidance calls for yearly revenue to be between $1.87 billion to $1.89 billion, representing growth of at least 28.1%. It also forecasts net income of $272 million to $276 million, compared to $245 million last year. Next year, Mepace is calling for revenue to jump to $2.15 billion to $2.2 billion.
The expense and expertise needed to bring drug candidates through clinical trials and the regulatory process has increased the need for CROs such as Medpace. The company’s yearly revenue is on pace for a CAGR of 21.6% to 21.8% over the past five years while five-year net income is on pace for a CAGR of 30% to 30.4%.
3. Amphastar Pharmaceuticals: Capitalizing on Experience
Amphastar has more than 20 branded products and it focuses on those with a high level of technical expertise, giving it a decent-sized moat. The company’s stock is up more than 104% so far this year. In the third quarter, Amphastar reported that it had revenue of $180.5 million, up 50% year over year and EPS of $0.91, compared to EPS of $0.30 in the same period a year ago.
The company’s diabetes portfolio, led by Glucagon, is driving its revenue growth. The company’s generic Glucagon is a synthetic version of the hormone the pancreas uses to help regulate blood glucose (sugar) levels. The therapy brought in $29.5 million in the quarter, up 107%, year over year. Amphastar is also seeing a big increase in sales for Primatene Mist, used to treat asthma. It is the only FDA-approved asthma inhaler available over-the-counter. The company reported $24.8 million in Primatene Mist revenue, up 35% over the same period last year.
Amphastar shares rose after the company’s deal to buy Baqsimi. Previously, Amphastar got royalties from Lilly for the drug’s sales, but now, it will receive all of the drug’s sales. In the third quarter, Lilly reported the drug had $139,3 million in 2022 revenue.
The company has increased revenue with a compound annual growth rate (CAGR) of 14.4% over the past five years and annual EPS by a CAGR of 75% over that same period.
4. BioMarin Pharmaceutical: Focus on Rare Diseases Pays Off
The large-cap U.S. biotech company uses gene therapies to fight rare diseases. In the third quarter, the company reported revenue of $581.33 million, up 15%, year over year, and net income of $40.38 million, up from a loss of $6.7 million in the same quarter a year ago.
The company’s top-selling therapy is Vimizim, the only treatment for Morquio A Syndrome, a rare enzyme disorder that can cause short bones, difficulty moving and breathing, clouding of the eyes and hearing loss. The drug brought in $158.9 million in the quarter, up 2%, year over year.
BioMarin’s second top-selling therapy is Voxzogo, which, considering its sales growth, will likely be the top-selling therapy for BioMarin. Voxzogo was responsible for $123.1 million in sales in the quarter, up 155% over the third quarter of 2022. The drug gained a key approval recently with the FDA allowing the therapy to be used on children with the rare bone-growth disorder achondroplasia, regardless of age. BioMarin got approval for hemophilia A gene therapy Roctavian to be used in the U.S. and Europe in the second half of this year. While the company estimates that only 2,500 patients in the U.S. will be eligible for the therapy, it will likely bring in a great deal as it The Institute for Clinical and Economic Review said the upper price for the therapy would be $1.9 million per treatment.
BioMarin reported $2.05 billion in 2022 revenue. It is forecasting 2023 revenue of between $2.39 billion to $2.47 billion, then $3 billion in 2024. The company also said it expects net income of $380 million to $410 million in 2023, up from a loss of $141.56 million last year.
5. Vertex Pharmaceuticals: Expanding its Portfolio
Vertex’s big margins, due to its various cystic fibrosis therapies, has given the company the luxury to develop and broaden its portfolio. The company, thanks mainly to its leading CF therapy, Trikafta, had a 6%, year over year, gain in third-quarter revenue at $2.48 billion. Net income rose 22% over the third quarter of 2022 to $1.035 billion.
In November, Casgevy, a CRISPR-gene editing therapy that Vertex developed in collaboration with Crispr Therapeutics (NASDAQ: CRSP), was granted conditional approval by Great Britain and Bahrain to treat patients 12 or older who have severe sickle cell disease (SCD) or transfusion-dependent beta thalassemia (TDT), making it the first CRISPR gene-editing therapy to gain approval anywhere.
On Dec. 8, the FDA gave its OK for Casgevy as a therapy for SCD in the U.S. The therapy, which, during clinical trials, has been effective in ending the need for transfusions to treat SCD and TDT, has a target date as a TDT therapy in March.
The company just announced that its non-opioid pain therapy, VX-548, had positive Phase 2 positive results to treat patients with diabetic peripheral neuropathy. The therapy is also in three different Phase 3 trials for acute pain, with the readouts scheduled early next year. Acute pain and peripheral neuropathy represent huge patient populations. The potential for an effective non-opioid pain reliever makes the therapy one of the company’s most exciting therapies.
Vertex has tightened 2023 revenue guidance to be around $9.85 billion, compared to an earlier range of between $9.7 billion and 9.8 billion. Last year, the company reported revenue of $8.75 billion.
6. Amgen: Broadening its Horizons
Amgen just completed its purchase of Horizon Therapeutics for $27.8 billion in October, giving it access to Horizon rare disease portfolio, led by two up-and-coming therapies in thyroid eye disease drug Tepezza and gout therapy Krystexxa.
In the third quarter, Amgen reported revenue of $6.9 billion, up 4%, year over year, While Enbrel with $1.04 billion in sales, continues to be the company’s top-selling therapy, its sales were down 6%, year over year. The company did have seven therapies with record quarters, led by leukemia therapy Blincyto, osteoporosis drug Evenity, cholesterol treatment Repatha and Nplate, used to stop chronic bleeding due to immune thrombocytopenic purpura, all of which saw double-digit revenue growth.
Amgen, in November, expanded its collaboration with Amazon Web Services, a cloud platform, to create generative AI to improve the efficiency of the company’s pharmaceutical manufacturing.
Amgen raised its quarterly dividend by 5.6% this year to $2.25, the 12th consecutive year it has increased its dividend. The yield is around 3.27%, more than double the S&P 500 average.
7. Arcutis Biotherapeutics: Best Cheap Biotech Stock
Arcutis reported revenue of $38.1 million, in the third quarter, up 5,156% over the same period last year. At its current price of under $3 a share, it is the best cheap biotech stock on this list.That jump was mostly due to sales of the company’s lead therapy, Zoryve, a cream used to treat plaque psoriasis. Its sales jumped 70%, sequentially, in the third quarter, to $8.1 million. While Arcutis lost $44.8 million in the quarter, that compares to a loss of $107.8 million in the same period last year.
The company also just got an expanded approval for the drug from the FDA as a topical foam to be used to treat seborrheic dermatitis in patients 9 and older. The company has said there are 10 million people in the U.S. with the skin disease, which often causes red, itchy patches on the scalp, face, upper chest and back. Investors, seeing the approval, sent the stock 25% higher in less than a week.
The company sees more growth for Zoryve as the company is awaiting the results of its New Drug Application (NDA) for the cream version of Zoryve to be used as a treatment for atopic dermatitis (AD), which is the most common form of eczema. AD affects 16.5 million people in the U.S., according to the Asthma and Allergy Foundation of America.
8. Pliant Therapeutics: Plenty of Potential Due to Blockbuster Therapy
Pliant focuses on cell therapies to treat fibrotic diseases, which are a group of conditions associated with an excessive buildup of scar tissue in various organs and tissues.The company just had its IPO three years ago and now it is on the verge of getting its first drug to market.
Bexotegrast has received Fast Track Designation and Orphan Drug Designation from the FDA for idiopathic pulmonary fibrosis (IPF), which involves scarring of the lungs, and primary sclerosing cholangitis (PSC), which involves liver scarring, and Orphan Drug Designation from the European Medicines Agency in IPF and PSC. The therapy is in Phase 2 trials for both indications and so far has been shown to be effective.
The company has three other programs in its pipeline. PLN-101095 is in Phase 1 trials to treat solid tumors, PLN-1474 is about to start Phase 2 trials to treat fibrosis connected to nonalcoholic steatohepatitis (NASH), a type of fatty liver disease, and PLN-101325 is in preclinical development to treat various muscular dystrophies.
As a clinical-stage biotech, the company has no revenue yet, so there’s plenty of risk associated with the company. However, it does have $523.6 million in cash, enough Pliant says, to fund operations through 2026.
9. Alnylam Pharmaceuticals: Strong Revenue Growth Forecasted
The company has five therapies that treat rare diseases and a pipeline of 20 clinical programs, including 10 in late-stage trials. The company said earlier this month that it plans to have Investigational NDAs for nine or more programs by the end of 2025.
Alnylam’s commercial RNAi therapeutic products include two therapies to treat polyneuropathy, Onpattro and Amvuttra, that treat the nerve pain caused by an illness called hereditary ATTR (hATTR) amyloidosis. Together, the two therapies brought in $230 million in the third quarter, up 35%, year over year.
The company also has two therapies that treat ultrarare diseases in Oxlumo, to treat primary hyperoxaluria type 1 (PH1), a disease that can cause kidney damage, and Gilvaari, to treat acute hepatic porphyria, which causes severe abdominal pain. Together, they brought in $83 million in the quarter, up 33%, year over year. The company’s other marketed therapy is Leqvio, used to treat high cholesterol and atherosclerotic cardiovascular disease, but it is being developed and commercialized by Alnylam’s partner, Novartis (NYSE: NVS).
Alnylam, in the third quarter, reported revenue of $313 million, up 35% year over year. The company also updated guidance for 2023 collaboration revenue to be between $575 and $625 million and product revenue to be between $1.2 billion and $1.285 billion. Over the next two years, the company has a goal of 40% CAGR revenue growth.
10. Axsome Therapeutics: Ready to Turn a Corner
Axsome isn’t profitable yet, but its triple-digit revenue growth shows it is on its way there. In the third quarter, the company reported revenue of $57.8 million, up 244%, year over year. The surge was led by Major Depressive Disorder (MDD) therapy Auvelity, which saw sales rise 36%, sequentially to $37.7 million and Sunosi, a daytime sleepiness therapy that reported $20.1 million in revenue, up 20%, year over year.
The company said it is on track for two NDAs next year. In the first quarter, it said it plans an NDA for AXS-14 as a fibromyalgia therapy and in the first half of 2024, Axsome said it plans a resubmission of an NDA for AXS-07 as a migraine treatment. The drug’s first NDA received a Complete Response Letter, basically a temporary rejection, from the FDA in May of 2022 due to chemistry, manufacturing, and controls (CMC) considerations.
The company has several other solid late-stage pipeline candidates: AXS-05, which is trials as a smoking cessation drug and to treat agitation associated with Alzheimer’s Disease; AXS-12 to treat cataplexy (the sudden reduction or loss of muscle tone while awake) associated with narcolepsy; as well as potential new indications for Sunosi to treat attention deficit hyperactivity disorder (ADHD), binge eating disorder and shift work disorder.
Where to Get Biotech Stock Tips
AltIndex is a versatile way to decipher biotech stocks. The subscription service, which has a basic free package, as well as a $29 a month subscription package and $99 per month pro package that provide more services, as well as its enterprise package. AltIndex uses advanced algorithms and data sets to create timely insights to help investors make better choices.
The platform, which has more than 6,000 daily active users, provides more than 100,000 daily insights. AltIndex looks at a wide spectrum of data points, such as website traffic, job postings, customer satisfaction ratings, app downloads, social media followers and other indicators. It then looks at that data over time, comparing stocks to others in the same industry, to identify investment possibilities.
Here are just a sampling of the many ways the service can be used to help find better biotech stocks:
- AltIndex has its own top 10 list of Best Biotechnology Stocks. The platform updates its list every 30 minutes based on the company’s data points that determine the stocks’ AI score.
- Use AltIndex’s stock screener. The platform’s stock screener has a separate category for biotech stocks, with a drop-down menu that shows the direction a stock’s price, AI score, web traffic, job posts and other metrics that can help show where a stock might be headed.
- Look at biotech stocks listed in the platform’s AI stock picks. Vertex price target, for example, is shown among the picks as having an 18.3% upside, based on several AI-measured factors, including a long-term increase in Instagram followers, encouraging high employee job satisfaction, a spike in job posts, and a spike in web traffic.
- The platform’s stock alerts can keep you abreast of what is happening with your biotech investments or your potential biotech investments, using several social media metrics to show when something may be happening with a biotech company, even before any announcements come out. Along those same lines, the platform’s trending stocks page analyzes trending stocks across various stock platforms and investment forums.
Biotechnology stocks were already gaining in value before the COVID-19 pandemic. The use of biotechnology in various COVID-19 vaccines and therapies really ignited the industry’s growth and investors’ interest in biotechnology stocks.
A report by Grandview Research puts the CAGR for the global biotechnology market at 13.96% through 2030, jumping from an estimated $1.44 trillion market in 2022 to a $3.88 trillion market by 2030. That type of growth potential shows that there are opportunities for investors who focus on biotechnology stocks.
The 10 stocks in this list are a good starting point for investors interested in the biotechnology sector. The key for success, even more so than usual, is keeping up with developing trends in the nascent industry.
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