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The biotech industry has witnessed a great turnaround this year after the drug pricing issue crippled its performance last year. After declining 27.1% last year, the Medical-Biotech /Genetics industry has risen 15.3% this year so far, outpacing 12.7% gain for the S&P 500 in the same time frame.

The NASDAQ Biotechnology Index is up almost 26% year to date after sliding 19.1% in 2016. 

The Zacks Industry Rank is #106 (to 40% of the 250 plus Zacks industries) for Medical-Biomed and Genetics, indicating a bright outlook for the sector going forward.

The biotech sector has a number of things going in its favor. Strong quarterly results, new product sales ramp up with rising demand, successful innovation and product line expansion, strong clinical study results, more frequent FDA approvals and continued strong performance from legacy products have played a pivotal role in bringing the sector on track this year. Another factor that has contributed to the sector’s surge is that President Trump's expected action on drug prices may not be as onerous as previously feared.

These factors should continue to drive the sector through the rest of this year and probably the next as well despite challenges like rising competition, pipeline setbacks, slowdown in growth of mature products and generic competition for certain key drugs. On the broader macro front, the proposed tax reforms, if approved, will leave more cash in the hands of these companies. The cash can be invested for mergers/acquisitions, which have been relatively fewer this year compared with the last.

With biotech stocks on a tear, here we have picked three of the biggest biotech companies which look well poised for growth and can be added to one’s portfolio

Amgen, Inc. (AMGN - Free Report)

Amgen is one of the leading biotechnology companies in the world with several blockbuster drugs in its portfolio. Amgen’s newer drugs – Prolia, Xgeva, Vectibix, Nplate and Sensipar – are all performing well. Amgen is also progressing with its pipeline, including biosimilar drugs. Last month, it received FDA approval for Mvasi, its biosimilar version of Roche’s cancer drug, Avastin. Mvasi is the first biosimilar approved in the United States for the treatment of cancer. Other recent positive pipeline/regulatory developments at Amgen include EU approval for a pediatric formulation of Mimpara, positive long-term data from Kyprolis ENDEAVOR study, and regulatory filings for label expansion of Prolia and Kyprolis, among others.

Supported by the positive developments, Amgen’s shares have outperformed the industry so far this year. Shares have risen 28%, comparing favorably with the industry’s gain. Amgen carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Earnings estimates for 2017 have risen 1.2% while that for 2018 have gone up by 1.3% in the past 90 days.

Celgene Corporation (CELG - Free Report)

Celgene’s key growth driver, multiple myeloma drug Revlimid, continues to drive revenues at the company. Meanwhile, Celgene’s label expansion efforts for Revlimid bode well for further sales growth of the drug. Other key products – Pomalyst/Imnovid, Abraxane and Otezla – are also performing well. A recent positive development at Celgene was the FDA approval for Idhifa for the treatment of adult patients with relapsed or refractory acute myeloid leukemia (AML)

Celgene also carries a Zacks Rank of 2. Earnings estimates for both 2017 and 2018 have risen by 0.7% in the past 90 days. The stock has gone up by 26.1% this year, outperforming the industry.

Biogen, Inc. (BIIB - Free Report)

Biogen has a strong position in the multiple sclerosis market backed by a wide range of products. Biogen is trying to diversify its pipelineand is looking to strengthen its Alzheimer’s disease (AD) and other neurodegenerative disorders pipeline. Newly launched Spinraza for spinal muscular atrophy is also off to a promising start. Spinraza has witnessed faster-than-expected adoption in the United States and Biogen is ramping up launch efforts  internationally.

Recent key positive pipeline/regulatory developments at Biogen include promising long-term dataon Alzheimer disease candidate, aducanumab and EU approval of Imraldi, Biogen’s biosimilar version of AbbVie’s top-selling blockbuster drug, Humira. Biogen has made several new executive appointments to bring its management team back on track after several key executives departed over the past couple of years including CEO George A. Scangos and CFO Paul Clancy.

Biogen, also a #2 Ranked stock, has seen its 2017 earnings estimates rise 4.7% for 2017 and 2.3% for 2017 over the past 90 days. Shares have risen 11.5% this year.

Two other biotech companies, though smaller than the above mentioned companies, are worth mentioning.

Vertex Pharmaceuticals Incorporated (VRTX - Free Report) has seen its share price shoot up 106.6% this year so far with earnings estimates rising 5% for 2017 and 6.8% for 2018. The stock is riding high on the success of its cystic fibrosis (CF) pipeline, particularly its triple combination CF regimens as these have the potential to treat up to 90% of CF patients.

Regeneron Pharmaceuticals, Inc. (REGN - Free Report) saw the launch of its key pipeline candidates Dupixent for atopic dermatitis and Kevzara for rheumatoid arthritis in the United States this year. Both the drugs are also approved in the EU. Meanwhile, Regeneron’s key growth driver, Eylea, continues to drive revenues on market share gains and the company is expanding the drug's label for additional indications. While Regeneron’s shares have risen 25.9% this year, its earnings estimates have gone up by 16.6% for 2017 and 7.3% for 2018.

Both Vertex and Regeneron have been sporting a Zacks Rank #1 (Strong Buy) for quite some time and may soon join the league of the big biotech stocks.

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