It has been a roller-coaster ride for the biotech sector so far this year. While 2019 started with a bang announcing the mega merger between Bristol-Myers (BMY - Free Report) and Celgene (CELG - Free Report) that significantly perked up prices of quite a few stocks, these gains were partially offset over the course of time, primarily due to the overall weakness in the global market.
Nevertheless, the NASDAQ Biotechnology Index has seen 7.4% growth year to date.
Relatively, the biotech sector persisted to be riskier than the more stable large cap pharmaceuticals industry or the overall medical sector as investors are mostly banking on the companies’ product pipelines with a very few having approved drugs in the portfolios. An unfavorable outcome of a key study on a promising candidate can spell doomsday for the respective biotech player.
The sector has been in spotlight since the onset of the year as a slowdown in mature products due to increasing competition and rise of biosimilars have forced most pharma/biotech behemoths to target lucrative buyouts in this space to bolster their pipelines. Evidently, the focus is back on the mergers & acquisitions activity. The recent spree of consolidations is expected to continue with both big biotech and small biotech stocks, which have a dominant position in the lesser competitive arena of rare diseases and NASH and are well-equipped with path-breaking technology, respectively. A slew of licensing and buyout deals is struck with most companies eyeing smaller entities with impressive pipelines. Meanwhile, new drug approvals and label expansions of blockbuster drugs boosted investor sentiment and this upside should drive growth.
As fears of a global recession loom large on the overall economy, the inherent risk of the sector gets intensified. In such a scenario, choosing a biotech stock for investment can be tricky. Particularly, smaller biotechs are more hazardous as their product pipelines are several years away from commercialization. In contrast, investing in biotech biggies provides a cushion against volatility in the sector. Moreover, the Zacks Biomedical and Genetics industry is placed within the top 36% of the 256 Zacks-ranked industries.
Here we zero in on the three big biotech companies, which have outperformed the sector so far in 2019 and still hold enough room for an upside, backed by a broad and a strong product portfolio.
Alexion Pharmaceuticals, Inc. (ALXN - Free Report) is a biopharmaceutical company, focused on developing and commercializing life-transforming drugs for the treatment of patients with ultra-rare disorders. Alexion's blockbuster drug Soliris — approved for paroxysmal nocturnal hemoglobinuria (PNH) and atypical hemolytic uremic syndrome (aHUS) — continues to perform well. The drug’s label expansion for the generalized myasthenia gravis indication boosted sales significantly. The company received a significant boost with the FDA approval of its long-acting C5 complement inhibitor Ultomiris for the treatment of adult patients with PNH. The approval has strengthened Alexion's PNH franchise and reduced the company’s dependence on Soliris for growth. Alexion is working on the label expansion of Ultomiris and taking steps to further diversify its pipeline, which should reap returns in the long run.
Shares of the company have gained 8.5% in the year so far against the industry’s decline of 1.7% Alexion currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Vertex Pharmaceuticals Incorporated’s (VRTX - Free Report) key area of focus is cystic fibrosis (CF) and the company has a market leading portfolio for the same. The company's chief marketed products are Symdeko/Symkevi (tezacaftor in combination with ivacaftor), Orkambi (lumacaftor in combination with ivacaftor) and Kalydeco (ivacaftor). Consistent positive regulatory nods increased the eligible patient population for these drugs. The CF market represents a huge commercial potential and Vertex has been striving hard to further cement its pipeline. Notably, the company's CF pipeline is already quite strong and approval of new treatments will further leverage its dominant position in the market. Meanwhile, the company is also developing treatments for sickle cell disease, thalassemia and pain management.
Vertex presently carries a Zacks Rank of 2. Shares of the company have gained 6.3% in the year so far.
Amgen (AMGN - Free Report) is one of the top biotechnology companies in the world with a strong presence in the oncology/hematology, cardiovascular disease, neuroscience, inflammation, bone health and nephrology markets. While its legacy products reached the end of respective life cycles, growth products, such as Prolia, Xgeva, Vectibix, Nplate plus Kyprolis and Blincyto are performing well, gaining consistent approvals for label expansions. Moreover, Amgen has a solid biosimilars’ pipeline, which is expected to drive growth. The company has already launched two biosimilars in the EU, namely Amjevita (biosimilar of AbbVie’s Humira) and Kanjinti (biosimilar of Roche’s Herceptin).
Amgen currently sports a Zacks Rank #1. Shares of the company have inched up 0.5% in the year so far.
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