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 substantial long-term returns. The best biotech stocks to buy now boast robust pipelines; some already have winning drugs on the market.
Here are a few of the companies that look like good options to move significantly higher in 2023.
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Vertex Pharmaceuticals (VRTX) is the undisputed leader in cystic fibrosis therapies. The company’s portfolio of approved CF drugs will deliver at least an estimated $8.4 billion this year, made possible by intense market penetration and decades-long devotion to research and development in the space.
So far, the company has managed to remain strongly profitable and has continued to expand revenue within the CF market at a steady pace. If management’s plans for expanded approvals for younger age cohorts continue to come to fruition over the next few years, Vertex will eventually be treating as many as 90% of all people with CF.
The company is moving its pipeline beyond CF with a handful of mid-stage clinical programs for pain relief, kidney disease, and genetic hematologic disorders like sickle cell disease. In other words, even if it eventually completely corners the entire market for CF therapies, there will still be other growth opportunities.
One potential catalyst is its partnership with CRISPR Therapeutics (CRSP) in developing gene-editing treatments for two rare blood disorders, which is expected to begin regulatory studies in March 2023. This means investors can look forward to a steadily increasing flow of new revenue and expanded approvals, which should significantly support the stock’s price.
Of 26 analysts offering recommendations for VRTX, 18 give the stocks a Buy rating, and nine rate it a Hold. There are no Sell ratings. It seems likely that Vertex will reward patient investors as the steadily growing biopharma company seems ripe for expansion for years to come.
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Drugmaker, Viatris’ (VTRS) portfolio currently comprises more than one thousand approved molecules across a wide range of key therapeutic areas, including globally recognized iconic and key brands, generic, complex generic, and biosimilar products. Branded products include EpiPen, Amitiza, Lipitor, and Viagra. Its biosimilar portfolio includes pegfilgrastim, trastuzumab, and adalimumab biosimilars.
Viatris is profitable, but it is looking for more growth. The company reported revenue of $4.1 billion in the third quarter, down 10.1% year over year. Adjusted earnings came in at $0.87 per share, surpassing consensus estimates but down from $0.99 per share in the year-ago quarter.
The company generated $144 million in revenues from products launched in 2022, primarily driven by lenalidomide, its myeloma treatment, its interchangeable insulin injectable Semglee, and its unbranded insulin pen in the United States. It is on track to achieve approximately $525 million in new product revenues in 2022, which is below expectations due to the timing of launches but with better-than-expected margins.
Viatris’ earnings are expected to contract by 4% in 2022, and the stock is down 21% year to date. However, analysts, on average, expect Viatris to rise nearly 18% going forward, according to FactSet. The reason behind Wall Street’s optimism is changes to the company’s business plan that have already been set into motion.
The company is in the process of trimming its less-profitable operations, including its biosimilars, women’s health division, and its over-the-counter drugs. In its place, it is adding an ophthalmology franchise through the $750 million acquisitions of Oyster Point Pharma and Famy Life Sciences. The deal is expected to close in the first quarter of 2023. Management expects the acquisition to generate at least $1 billion in sales by 2028.
The company has a relatively high debt-to-equity ratio of nearly two, but it has the right idea by trimming its less-profitable operations and paying down its debt. Management sees revenues expanding at a CAGR of 3% between 2024 and 2028 and EPS expanding at a CAGR of around 15% over the same period. VTRS hopes to use the expanding revenue to reward its investors through steady dividend growth. Its current yield is 4.4%, and its payout ratio is very safe at 20%. Though it’s a speculative recommendation based on the success of the company’s business transition, the rewards could be handsome.
Biogen is a biopharmaceutical company focused on therapies for neurological and neurodegenerative diseases. The company is on the leading edge of creating drugs and therapeutics for some of the more perplexing and chronic diseases like Alzheimer’s disease. Biogen has been working on drugs that can reduce the buildup of amyloid plaques which could be critical to stemming the advancement of the disease.
The neurological solutions pioneer has partnered with Eisai, a Japanese pharmaceutical company, to develop Lecanemab, one of its potential amyloid plaque-destroying drug candidates. The two companies will split the drug’s profits 50/50. Recent data from lecanemab has proven “robust” as the drug saw a 27% reduction in patients’ clinical decline on cognitive and functional metrics, causing the entire industry to rethink the historically elusive answer to Alzheimer’s.
Following the “better than expected” Phase 3 data for lecanemab, JPMorgan analyst Chris Schott raised the firm’s price target on Biogen to $275 from $221. The analyst foresees full FDA approval for lecanemab and believes there is a high probability that the Centers for Medicare and Medicaid Services will cover the drug. Schott would not be surprised to see further upside for the shares into year-end as he expects lecanemab to dominate the competition.
While lecanemab takes center stage, Biogen has a pipeline that features several drugs in various clinical stages. The company’s Spinraza for treating spinal muscular atrophy has been a blockbuster drug. Multiple sclerosis drugs Avonex and Plegridy generate nearly $2 billion in annual sales.
BIIB shares spiked on the positive lecanemab results and have dwindled since. A better entry opportunity may come, but for long-term-minded investors with a focus on growth, Biogen is an intriguing candidate even at its current level.
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