For those looking to add to their investing portfolio, you might want to consider investing in biotech stocks. Generally speaking, most investors will avoid biotech stocks because they think that there is too much risk involved. While this is true for a few biotech stocks, it is not the case for all of them. Plus, leaving out these stocks will mean that you’re giving up exceptional opportunities for growth.
Never bought a biotech stock before? Keep reading for a brief overview on the top biotech stocks investors should consider for 2017.
1. Celgene (NASDAQ:$CELG)
Out of the three biotech stocks on this list, Celgene is in the best financial shape. In 2016, Celgene made roughly $2 billion in earnings on revenue of $11.2 billion. At the end of the first quarter of 2016, Celgene reported a cash stockpile of $8.9 billion. This included cash, cash equivalents, and marketable securities.
Celgene’s case continues to grow, mostly due its robust blood cancer drug Revlimid. Even though Revlimid produces 64% of the biotech’s total revenue, sales for other biotech drugs are growing at a rapid pace. On the other hand, Pomalyst, which is a multiple myeloma drug, saw sales flow roughly 33% in the first quarter in comparison to sales the year prior. Not far behind was Otezla, which is a drug that treats psoriasis and psoriatic arthritis. Otezla had a 23.5% year-over-year sales growth.
Over the next couple of years, Celgene plans to grow adjusted earnings by an annual rate of 22%. There will be a number of pipeline candidates that will play a defining role in the achievement of this goal. By 2020, Celgene thinks that it could get regulatory approval for seven drugs that have massive sales potential.
Even though there are risks involved with Celgene, they are nowhere near as serious as other biotech stocks. Yes, Revlimid could be faced with competition down the road, but that wouldn’t be for several years. Still, Celgene is in fantastic financial shape and their deep pipeline makes it a prime stock for forward-thinking investors.
2. Regeneron Pharmaceuticals (NASDAQ:$REGN)
Perhaps not as good as Celgene, but Regeneron does look like it is is in good financial shape. It has been reported that this biotech stock had earnings of almost $896 million in 2016 on revenue of $4.9 billion. At the end of March, Regeneron had cash equivalents, cash, and marketable securities of $1.3 billion.
Similar to Celgene, Regeneron is entirely dependent on one drug for the majority of their revenue. Eylea, which is an eye-disease drug, produces nearly 78% of the biotech’s total revenue. Aside from Eylea, most of Regeneron’s revenue comes from their partnership with Sanofi (NYSE:$SNY) and Bayer. That said, as we move into the near future, there will be other drugs that will playing a defining role in Regeneron’s revenue.
According to Wall Street analysts, this biotech will grow earnings by 19% every year for the next five years. Other than Eylea, there are three other products that will play a defining role in this growth. In March, Regeneron and Sanofi won United States approval for Dupixent, which is an atopic dermatitis drug. Additionally, Regeneron won U.S approval for rheumatoid arthritis drug Kevzara in late May. Both Regeneron and Sanofi hope for promising results to come from a cardiovascular-outcomes study of Praluent.
Like anything, there are risks involved in this biotech stock. First, there are pipeline setbacks and the possibility that the drugs won’t perform on the market as well as they had originally expected. It’s also worth noting that Amgen could be successful in alleging that Regeneron and Sanofi imposed on its intellectual property rights in the development of Praluent.
3. Vertex Pharmaceuticals (NASDAQ:$VRTX)
Though it is not as advanced as Celgene or Regeneron, this biotech is definitely on the right route. Last year, Vertex reported a $112 million net loss on revenue of $1.7 billion. That said, in the first quarter of 2017, the biotech posted a profit totaling $248 million. Additionally, Vertex held a cash position of $1.4 billion, which included marketable securities, cash, and cash equivalents.
The two drugs that drive the most success for Vertex are Orkambi and Kalydeco, which are drugs that treat cystic fibrosis (CF). In the first quarter, Orkambi produced 41% of the company’s total revenue, while Kalydeco generated 26% of total revenue. The rest of the company’s revenue comes from partnerships, such as their key deal with Merck KGaA.
Wall Street analysts have predicted an average annual earnings growth of roughly 65% over the next couple years, which makes many believe that Vertex is in position to have a promising future. It’s important to note that some of this growth will stem from sales of Orkambi. That said, there is the potential for an even greater opportunity through the combination regimen of tezecaftor and Kalydeco in treating cystic fibrosis.
Keep in mind that, like the majority of biotechs, Vertex could potentially experience failure in clinical trials and rejections from regulatory agencies. Plus, there’s always the possibility that new competitors will enter the CF market. Despite the risks, if you’re are a small investor who wants to start investing in biotechs, this will be a stock that you will want to add to your portfolio.
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