For stock investors, there really hasn’t been anywhere to hide from the market debacle that’s followed from the COVID-19 pandemic. All industries have been hit as investors dump risky assets.
It isn’t too surprising that shares of biotechnology companies have fallen along with the rest, since they typically involve significant risk. On the other hand, the pandemic is drawing attention to the enormous strides the industry has made in developing new platforms for vaccines and therapeutics. We may be seeing the political threat that worried investors so much in 2019 dissolve before our very eyes as the world looks to some of these companies for help in the global crisis.
It isn’t necessary to make risky and speculative bets to profit from biotech stocks in today’s environment. Vertex Pharmaceuticals (NASDAQ:VRTX), Emergent BioSolutions (NYSE:EBS), and BioMarin Pharmaceutical (NASDAQ:BMRN) all have healthy and profitable growth, and are reasonably priced.
1. Vertex Pharmaceuticals
Vertex Pharmaceuticals is a biotech that dominates its key market in cystic fibrosis (CF), is growing rapidly, and is highly profitable. If that weren’t enough to spark the interest of long-term investors, the company has promising drugs in its pipeline that could allow it to enter new markets in blood diseases and diabetes, and it is loaded with cash that it intends to use for business development deals.
The three medicines that have enabled Vertex to be the leader in treatments for CF are collectively approved to treat about half of the 75,000 CF patients in North America, Europe, and Australia. But it was an early approval of a fourth medicine with the potential to treat 90% of CF patients that boosted the stock last October. Trikafta, cited last year by market research firm EvaluatePharma as the most valuable research and development program in the entire pharmaceutical industry, is off to a fast start with $420 million in sales in the fourth quarter.
Even without Trikafta, Vertex’s CF franchise was delivering red-hot growth. Product revenue for the full year 2019 grew by $1.12 billion, or 37%, to $4.16 billion, and the company’s adjusted earnings per share rose 31% to $5.33.
Vertex is building a foundation that should allow it to expand into new and lucrative disease areas. The company partnered with CRISPR Therapeutics on a gene-editing therapy for transfusion-dependent beta thalassemia and sickle cell disease, and reported positive safety and efficacy results in the first two patients treated for the indications. The company is also excited about its acquisition last year of Semma Therapeutics, which is working on a cell-based treatment for type 1 diabetes that it thinks has the potential to be a cure for the disease.
Vertex has $3.8 billion in cash to help it buy its way into new markets, and has said it will be active in business development in 2020.
Despite the momentum Vertex’s business has, the stock is reasonably priced. Shares sell for 31 times analyst estimates of 2020 earnings per share, which are expected to grow 44% over last year.
2. Emergent BioSolutions
Emergent BioSolutions could be the… Continue reading at The Motley Fool