Some experts say we’re in “the golden age of biotechnology.” Scientific advances are opening up possibilities for the treatment and prevention of diseases that could only have been imagined in the past.
This golden age is also presenting tremendous opportunities for investors. Biotech stocks offer the potential for huge long-term returns. The best biotech stocks to buy right now boast strong pipelines, and some already have winning drugs on the market.
The COVID-19 pandemic has also created some tremendous opportunities for biotechs developing potential treatments and vaccines. Here are a few of the companies that investors should watch closely.
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GlaxoSmithKline (GSK), well-known for its vaccines as well as respiratory drug Advair, is another transformation story – this one underway since CEO Emma Walmsley took over in April 2017.
Walmsley’s plan includes spinning out consumer products like Sensodyne toothpaste, Advil pain reliever and Centrum vitamins in a joint deal with Pfizer, although that has been delayed. GSK is also divesting other assets, such as a joint spin-off with Pfizer, although that has been delayed. The company also continues to divest other assets, such as plants in Poland and Canada.
Given its vaccine work, it’s no surprise GSK is working on a COVID-19 vaccine with Sanofi, which Walmsley recently said will be sold at no profit. The companies are prepared to deliver 200 million doses should its vaccine gain approval.
The company’s top immunology drug, Nucala, is used in some cases of asthma and was recently approved for treating a rare blood disorder called hypereosinophilic syndrome, or HES. The drug works by preventing a protein from binding to white blood cells.
Argus Research’s Eade “Buy” calls GSK‘s price a buying opportunity and has a 12-month price target of $50 on the stock. He also calls out an attractive high dividend yield and says GSK shares trade below industry averages.
UBS’s Sutcliffe also sees GSK as a Buy. “The HIV business experienced a recent flattening of US sales, but new products mean the franchise has now returned to modest growth,” she writes. “Launch of a new injectable should further boost growth and we see mid-single-digit HIV sales CAGR through 2023.”
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Regeneron Pharmaceuticals (REGN), responsible for drugs such as macular degeneration Eylea and arthritis treatment Kevzara, has made headlines in 2020 for the monoclonal antibody cocktail REGN-CoV2, which was used to treat President Donald Trump’s COVID-19 infection.
It also is responsible for an impressive system for drug discovery. Velocisuite is a collection of techniques, based on mouse DNA models, that lets researchers quickly test drug compounds.
Regeneron also has collaborated on a number of drugs, including the aforementioned Libtayo and Dupixent, for instance, as well as Kevzara. As part of Sanofi’s exit from owning Regeneron, the two companies have restructured their collaborations on Kevzara and Praluent, a drug to treat high cholesterol that Regeneron feels will break even in 2020.
While clearly REGN-CoV2 has boosted the stock, the company itself has enjoyed double-digit revenue growth on average over the past few years. And it could continue to serve investors well as one of the best biotech stocks for 2021.
Canaccord Genuity analyst John Newman has a “Buy” rating and $700 price target on shares. He writes that “We are encouraged by REGN-COV2 data and see a strong need in the seronegative patient population. We also believe that the drug can be used at a lower dose, extending dosing capacity.”
Credit Suisse analysts have a $725 price target on shares, saying they also believe the company could get excellent results from the drug at lower dosages. They also don’t see LY-CoV555, a similar compound from Eli Lilly, as a threat. “We do not see this as a zero-sum game,” the analysts add.
Novavax (NVAX), as the name might suggest, specializes in vaccines. Novavax‘s vaccine candidate, called NVX-CoV2373, is boosted with an adjuvant called Matrix-M, which makes it possible to vaccinate more people with less of the drug.
NVAX stock has exploded in 2020 thanks to its work with COVID-19, with shares – which started the year around $4 – up a whopping 2,300-plus percent year-to-date. And yet its current share price is down 30% of what it was worth in August, showing the potential roller coaster you sign up for when investing in biotech stocks.
However, Novavax has been down this road before, and it has failed. Its ResVax vaccine failed two trials. The first (in 2016) resulted in layoffs, the second (in 2019) in a 1-for-20 reverse stock split.
Early trials of the new compound, conducted in South Africa, were promising. But that was true for ResVax as well. But a few pros think this time really might be different.
B. Riley analysts note that a Phase 3 study is progressing “ahead of plan” in part thanks to a second wave of daily news cases. They also view Pfizer and BioNTech‘s success as favorable to the likelihood of technical success for Novavax‘s program, “which is contrary to NVAX‘s equity weakness (of late) and in part also driven by investor confusion” regarding the company’s financials.And while only a handful of analysts cover the stock, the five tracked by S&P Global Intelligence on average expect NVAX to grow more than 50% from here, to $202.80 per share.
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