3 must-have biotech stocks to buy now
Some investment decisions are much easier than others. When a stock is available at a steep discount and has great growth prospects, investors don’t have to worry too much about whether or not to buy it.
We asked three Motley Fool contributors which biotech stocks they thought were obvious to buy right now. Here’s why they selected Regeneron Pharmaceuticals (NASDAQ: REGN), Vertex Pharmaceutical (NASDAQ: VRTX), and Viatris (NASDAQ: VTRS).
The recent decline in this biotechnology offers a golden opportunity
Prosper Junior Bakiny (Regeneron Pharmaceuticals): Regeneron shares fell like a rock amid the vast market declines in September. For investors focused on the long term, however, this pullback simply provides a good entry point. This biotech giant has both short-term catalysts and long-term opportunities that will lead to above-average stock price gains.
First, the company is a market leader in COVID-19 drugs. Almost a year ago, its REGEN-COV received Emergency Use Authorization for the treatment and prevention of the disease. It can be given by infusion or injection. This product generated sales of $ 2.59 billion in the second quarter, helping to increase the company’s total revenue for the period to $ 5.14 billion, up 163% from year after year.
While a majority of Americans are now vaccinated against the coronavirus, factors such as vaccine reluctance among large segments of the population coupled with the spread of the more contagious Delta variant are unfortunately helping to prolong the pandemic. . Although Regeneron will soon face increased competition in the COVID-19 treatment market, REGEN-COV is expected to continue to contribute significantly to the company’s bottom line for some time.
Meanwhile, the company has other exciting products. In the United States, sales of Eylea, which treats several eye disorders, increased 28% in the second quarter to $ 1.43 billion. (Bayer owns the rights to this drug outside the United States) The treatment of Dupixent atopic dermatitis, the rights for which Regeneron shares with Sanofi, can also boost Regeneron’s sales. In the second quarter, Dupixent’s global sales climbed 59% year-on-year to $ 1.5 billion. Regeneron and Sanofi share equally the US profits and losses of this product, while the former is entitled to a fraction – not exceeding 45% – of Dupixent’s profits generated abroad. Dupixent and Eylea both appear to be on higher sales trajectories, which will help Regeneron deliver continued strong financial results.
And with more than two dozen pipeline programs, including nine in Phase 3 studies, the company is expected to expand its revenue base as soon as possible. In short, Regeneron is a great stock to buy right now, especially after the stock price’s poor performance over the past month and a half.
Playing with monopoly money
Keith Speights (Vertex Pharmaceuticals): The main reason to love Vertex is that it has a monopoly on cystic fibrosis (CF). There are four approved therapies that treat the underlying cause of the genetic disease; Vertex markets them all.
Of course, other companies are chasing Vertex with their own CF programs. However, none of these potential rivals have so far made it past Phase 2 testing. Meanwhile, Vertex is working to develop even better cystic fibrosis drugs.
Large biotech still has many growth opportunities in this indication. There are approximately 83,000 CF patients in key markets, including the United States. Of these, more than 30,000 are not treated with Vertex drugs.
Vertex’s CF franchise continues to generate strong cash flow. And it helped the company accumulate growing cash flow that totaled $ 6.71 billion as of June 30. The main way Vertex uses this money is by investing in research and development. Its pipeline includes a few Phase 2 programs, one targeting pain and the other targeting genetic kidney disease.
Business development agreements have also been key to Vertex’s efforts to grow beyond the CF. He teamed up with CRISPR Therapeutics to develop gene editing therapy for rare blood disorders, beta thalassemia and sickle cell disease. Its acquisition of Semma Therapeutics has introduced a promising gene therapy targeting type 1 diabetes into its pipeline.
Wall Street analysts believe this biotech value could soar by more than 40% over the next 12 months. I agree with this optimistic outlook.
A beaten biotech that will richly reward patient investors
Rich Duprey (Viatris): The name Viatris may not be very familiar to biotech investors yet, but they will likely be familiar with the names that make up its pedigree. It was formed last November by the $ 12 billion merger of the established pharmaceutical company of Pfizerthe Upjohn unit and generic drug maker Mylan.
While the combination of these two elements was expected to give greater strength to the entire company, the stock lost more than 28% of its value in 2021. Investors should see this as an opportunity.
Wall Street predicts that Viatris’ revenue will remain relatively stable over the next two years. However, its net income is expected to grow nearly 20% to $ 4.28 per share by 2025, while free cash flow per share is expected to grow at a compound rate of 14% per year during this period. .
The weak revenue forecast is due to the intense nature of competition in its branded products business, which accounts for over 60% of its sales, although it recently gained FDA approval for Semglee, a insulin drug for the treatment of diabetes and the first interchangeable biosimilar in the us
The true potential of Viatris will come as it repays its large debt, which will give it more funds available to invest in research and development. Management plans to reduce annual operating expenses by more than $ 1 billion by 2023 and will have paid off a quarter of the $ 26 billion debt it had at the time of the merger.
The average age of the US population continues to rise, as do prescription drug prices – a pair of trends that are expected to continue to drive the generic market forward, even as generics have lower margins for their products. manufacturers. Research and Markets predicts that the U.S. generic drug industry’s sales will grow 5.7 percent annually, from $ 171.8 billion in revenue in 2020 to $ 239.5 billion in 2026.
What makes Viatris a no-brainer here is that her stock is so greatly reduced. Stocks earn less than 4 times estimated earnings and less than 10 times free cash flow. This company trades below the book value of the company. And its dividend returns 3.3% to the current share price.
Viatris looks like a stock that could reasonably hit the target average price of $ 20 per share that Wall Street has set for itself. This is a potential gain of 51% over the next 12 months, and the stock could offer even better returns in the years to come.
This article represents the opinion of the author, who may disagree with the âofficialâ recommendation position of a premium Motley Fool consulting service. We are motley! Challenging an investment thesis – even one of our own – helps us all to think critically about investing and make decisions that help us become smarter, happier, and richer.