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Stock Picks: Three Biotech Big-Caps to Look At
While biotech stocks dropped by 10% as at end March this year, biotechs are still up by 200% since the industry begun a rally in 2011.
What is it about biotech stocks that make it so profitable? One word: Innovation.
Let us take a closer look at the three of the top biotech companies (including two from the industry watchdog’s list) and examine why they are worth your penny.
Gilead Sciences Inc. (NASDAQ: GILD) is all the rage the past year. J.P. Morgan believes the company will enjoy tremendous earnings again this year and pegs its price target for the stock at $100. It is possible, but we will never know until the company releases its first quarter earnings on Tuesday, April, 22, 2014, as Jutia Group had reported.
Gilead closed at $68.17 on Tuesday, according to latest Yahoo Finance market data. Over the last 52 weeks, its price fluctuated between $46.70 and $84.88 a share.
With a market cap of $104.86 billion, the company relies on the commercial success of its HIV and liver medications, which include Viread, Stribild, Vitekta and Truvada and Sovaldi, Viread and Hepsera. Currently, the company is focused on developing an impressive lineup of oncology, cardiovascular and respiratory drugs--most of which are awaiting US and EU regulatory approvals.
Another top biotech firm on J.P. Morgan’s list early this year was Vertex Pharmaceuticals Inc. (NASDAQ: VRTX). According to J.P. Morgan, the company caught investors’ radar following the success of its Hepatitis C drug. The company focuses on developing drugs for cystic fibrosis, multiple sclerosis, Huntington’s disease, cancer, and autoimmune diseases and viral infections. Its cystic fibrosis pipeline particularly holds promise—one drug, VX-809, has entered Phase Three of its developmental stage, according to the company’s website.
The company’s stocks traded at $63.27 on Tuesday, Yahoo Finance data showed. Analysts following the stock estimate this stock to average at $91.66 per share. The company has a market capitalization of $14.91 billion.
Biogen Idec Inc. (BIIG), whose shares rebounded to $285.49 a piece after the beating it took weeks ago. Share prices also continued to rise following its announcement on Monday it would be presenting new data from its clinical trials for its neurology pipeline drugs. Established in 1978, Biogen—which has a market cap of $67.49 billion—is one of the oldest biotechnology companies globally, according to a report on Seeking Alpha. The company continues to innovate in the field of neurology and cancer research.
Promising Upcoming Biotech Stocks
Some small biotech IPOs and micro cap stocks are emerging as major competitors. CytoDyn Inc. (OTCQB: CYDY), a micro-cap biotech company based in Vancouver, Washington, has a huge upside potential, especially due to its lead product candidate, PRO-140. PRO 140 is a monoclonal antibody-based antiretroviral drug that belongs to a new class of HIV/AIDS drugs. The drug prevents the virus from entering healthy cells—it protects CCR5, the “molecular portal” HIV uses to bind to healthy cells.
Clinical development for the drug has just entered phase 3. The drug is poised to replace Highly Active Antiretroviral Therapy (HAART), which is costly and combines the use of a “cocktail” of HIV/AIDS meds.
CytoDyn Inc. share prices are up on Tuesday, closing at $0.77. The company has a market capitalization of $42.79.
Hemispherx Biopharma Inc. (NYSEMKT: HEB) is a Philadelphia-based biopharmaceutical company that manufactures and develops treatment compounds for viral, sexually transmitted diseases like genital warts, and immune-based illnesses like chronic fatigue syndrome (CFS). The company’s flagship products are Alferon N Injection and Ampligen. The company is also engaged in clinical trials for CFS and HIV pipeline drugs, according to its website. Hemispherx’s shares closed at 0.3071 on Tuesday. Its shares trade between 0.19 and 0.55 over the last 52 weeks.
Another micro-cap biotech company that is also hot in the cellular and degenerative disorder arena is Amarantus Bioscience Holdings, Inc. (OTCQX: AMBS). The company is focused on orphan drug developments for the treatment of neurodegeneration and apoptosis (programmed cell death). The company banks on its lead diagnostic program NuroPro, which aims to detect apoptosis at an early stage. The company will further develop this program to target Parkinson’s disease. Amarantus stocks closed at 0.08 on Tuesday.
What Biotech Price Correction Meant for These Stocks
The recent price correction is deemed “good” by some industry analysts for adjusting stocks before a potential bubble. “It helped deflate biotech stocks before the bubble (yes that was a bubble) could do any enduring damage to a key industry,” noted Steven Syre of The Boston Globe.
“A biotech stock collapse from even greater heights could have shut off public funding to promising new companies and for a long time limited the ability of established biotechs to grow,” he added.
Some analysts like Forbes.com contributor John S. Tobey argue that there was no bubble in the first place.
“The ‘bubble’ is too-often improperly linked to the single measure, ‘high performance’,” Tobey noted in his article. “Missing are the key ingredients of time, performance pattern and, most importantly, psychological drivers. Biotechs, as a bubble, fail on all three,” he explained further.
Tobey noted that biotech’s rise and fall were within reason. According to him, investors and analysts have to also examine biotech’s past before dismissing the recent stock dip as a bubble burst. Current high returns don’t necessarily mean there’s a bubble; for him, the sector was only making up for its “two-year underperformance” between 2009 and 2011. The industry, he said, caught up in 2012. 2013 meanwhile was a period of “outperformance” for the sector.
So far, most biotech big-caps seem to be on an uptrend following the March selloff. On Tuesday, Biogen’s stocks were up by 5.97%; the same goes for Gilead, which saw share prices rise by 1.38%, and Vertex with 1.30%. If anything, this could mean that the worst is over for the sector, even if earnings have tapered off.