Watchlist: Three Biopharma Names to Watch Now

Markets were hit hard today after news broke about a new variant spreading across South Africa that has already popped up in Europe.  The new variant contains more mutations in the spike protein than the highly contagious delta variant and may have increased resistance to vaccines that are available.  

The CBOE Volatility Index, often referred to as Wall Street’s “fear gauge,” rose to 28, its highest in two months.  The Nasdaq closed the week 3% lower, and the S&P 500 and the Dow finished off by about 2% each.  

All sectors finished red today.  Travel-related stocks were hit hardest, and oil prices plunged, with the price for crude breaking below $70 per barrel.  Meanwhile, investors flocked into the vaccine makers and other stocks linked with existing and potential treatments.  

Renewed pandemic fears helped boost biopharma stocks in the face of today’s sell-off, and it’s not unheard of for a winning biotech stock to produce 10x or 20x returns in a very short period of time regardless of what’s happening elsewhere. 

The best biotech stocks to buy boast robust pipelines, and some already have winning drugs on the market.  In this article, we’ll cover a few of the biotech companies that investors should watch closely, considering current conditions.

Vir Biotechnology (VIR) is a commercial-stage immunology company focused on combining immunologic insights with cutting-edge technologies to treat and prevent infectious diseases.  Its current development pipeline consists of product candidates targeting COVID-19, hepatitis B, influenza, and human immunodeficiency virus.   

The company’s partnership with GlaxoSmithKline (GSK) on Sotrovimab, a dual-action antibody, is helping increase the drug’s reach.  The FDA granted Sotrovimab emergency authorization in May after it was shown to reduce the risk of hospitalization or death by 79% in adults with mild-to-moderate Covid-19 at high risk of progressing to severe disease.  Earlier this month the Wall Street Journal reported that the U.S. government would increase its recent order for 300,000 doses of the treatment, bringing its total contract to $1 billion up from $651.1 million.  Binding agreements have already been received for the sale of more than 720,000 doses of Sotrovimab worldwide.  Plus, the treatment is still undergoing review in several nations, which means plenty of untapped potential.  

Baird analyst Joel Beatty increased his projected 2021 total revenue projection for VIR from $426 million to $644 million upon announcement of the second contract with the U.S. government for additional doses of Sotrovimab.  He also raised his price target for the stock from $35 to $36 in light of the new contract.  

There’s much more to Vir’s pipeline than just their COVID antibody.  Along with some established collaborators, the company has made headway in some of the most profitable infectious diseases.  For instance, their stage 2 collaboration with Anyalam on siRNA (small interfering RNA) and antibody treatments for hepatitis B has produced VIR-2218; a treatment experts have touted as the potential best-in-class siRNA and a “backbone” of hepatitis B therapy.

Vir also has exciting prospects in HIV and influenza.  Their collaboration with the Bill & Melinda Gates Foundation on a T-cell treatment for HIV is rounding the corner into the second phase.  If all goes according to plan, Vir investors could have a significant victory on the horizon.

JPMorgan analyst Anupam Rama recently upgraded Vir, saying that the company’s broader pipeline (beyond COVID) should come into increasing focus in the next 12 months.  The analyst said he will be looking for the broader non-Covid pipeline to “emerge as a larger component value driver.”    

The current consensus among 8 polled analysts is to Buy VIR.  There are 5 Buy ratings and 3 Hold ratings.  There are no Sell ratings for the stock.  A median 12-month price target of $67.75 represents a 92% increase from the last price.

Global healthcare leader Eli Lilly And Company (LLY) has created high-quality medicines for more than a century.  The drug firm focuses on endocrinology, oncology, neuroscience, and immunology. Essential products include Trulicity, Jardiance, Humalog, and Humulin for diabetes; and Taltz and Olumiant for immunology; and Verzenio and Alimta for cancer.  

Last month, Lilly’s immunology drug Olumiant received emergency use authorization from the FDA to treat hospitalized COVID-19 patients.  What’s more, the drug has produced impressive results from phase 3 trials examining Olumiant’s efficacy as a hair loss treatment.  Positive final results and FDA approval for the drug as a hair loss treatment could be a game-changer for the drugmaker.  

The mega-cap pharmaceutical giant’s pipeline is locked and loaded with promising advancements, which means plenty of potential upcoming opportunities for investors to benefit.  In the first half of 2021, Lilly increased research and development spending for its up-and-coming treatment for diabetes Tirzepatide by 21% to $3.36 billion.  The drug is currently in phase three trials and has already proven to be more effective than competitors.

Berenberg Analyst Herry Holford recently upgraded Eli Lilly to Buy from Hold and raised the price target from $240 to $270.  “Pipeline progress has effectively locked in Eli Lilly’s long-term sales growth, which now stands at 10% annually through 2030 versus a peer average of 4%,” Holford tells investors in a research note.  The analyst says a “confluence of catalysts, superior growth and superior returns” on Research and development, compounded by the recent pullback in the stock, prompts a revisit to the investment thesis.  

The board of directors at Eli Lilly recently declared a fourth-quarter dividend of $0.85.  The dividend will be payable on December 10th to shareholders of record as of November 15th.  LLY’s dividend payout for the year is set for the low 40% range, which should allow for robust future dividend growth.

A strong pipeline and a stable dividend make Eli Lilly an attractive consideration.  The pros on Wall Street also think so.  Among 17 polled analysts, 12 say to Buy LLY, 4 call it a Hold, and only 1 rates the stock a Sell.  A median 12-month price target of $279 represents a 12.6% increase from its current price.

iShares Genomics Immunology and Healthcare ETF (IDNA)

IDNA holds a concentrated portfolio of global companies in the biopharmaceutical and healthcare equipment and services industries that could benefit from the long-term growth and innovation in genomics, immunology, and bioengineering. The fund is passively managed, and holdings are weighted by market cap and are constrained such that no individual security exceeds 4% weight of the portfolio. The index rebalances semi-annually.

It’s worth noting that IDNA beat Cathie Woods’ ARK Genomic Revolution ETF (ARKG) in the first ten weeks of 2020 when global markets were rocked by the coronavirus outbreak and investors were eagerly hunting for potential profit in companies researching treatment and vaccines. 

  • Weighted Average Market Cap  $34.48B
  • Price / Earnings Ratio   -95.16
  • Price / Book Ratio  4.97
  • YTD Daily Total Return  14.59%
  • YTD Return  18.82%
  • Yield  0.18%
  • Expense Ratio  0.47%
  • Net Assets   327.82M
  • Number of Holdings  50
  • Top Holdings: Moderna MRNA, Intellia Therapeutics NTLA,  BioNtech SE BNTX

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