Biotechnology touches a broad swath of companies, spanning genomics and food production to biofuels and other niche industries. However, the vast majority of the time, the word “biotech” conjures up images of medicine and pharmaceuticals. Thus, biotech stocks generally center around those two areas.
That’s exactly where this article will focus as well. But it’s also necessary to understand what investing in the biotech sector entails. That, in a word, is risk — and with risk comes reward.
It’s no secret that the development of pharmaceuticals is a resource-intensive endeavor. It takes a significant amount of time to develop a new drug, not to mention the cost of research and development. One article citing the Journal of the American Medical Association put that cost at $1 billion, using data from U.S. pharma companies between 2009 and 2018.
But that’s not all — only about 14% of these drugs even reach the commercial stage, according to a recent study. Although this is a higher figure than in previous studies, it points to a reality for biotechs. When it comes down to it, failure is high. Thus, these investments are high risk, high reward.
Fortunately, though, many of the companies on this list have passed important milestones. So, they’re less risky as a result. In any case, here are several biotech stocks to buy for the rest of 2021.
- Johnson & Johnson (NYSE:JNJ)
- Exelixis (NASDAQ:EXEL)
- Agios Pharmaceuticals (NASDAQ:AGIO)
- Novavax (NASDAQ:NVAX)
- Moderna (NASDAQ:MRNA)
- Sage Therapeutics (NASDAQ:SAGE)
- Vertex (NASDAQ:VRTX)
Biotech Stocks to Buy: Johnson & Johnson
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To begin this list of biotech stocks, Johnson & Johnson is not risky by any means. In fact, it regularly pops up among lists of defensive stocks and performers in most-any economy. Plus, although it develops drugs, the company also encompasses a broad range of other products and services.
That said, JNJ’s pharmaceutical arm — Janssen — is among the most talked about biotechs today. Why? Well, its Covid-19 vaccine gained U.S. Food and Drug Administration (FDA) emergency use approval (EUA) back in February. Now, JNJ remains one of three vaccines with EUA in the States. That news alone makes JNJ stock worth considering, in addition to factors like its dividend and steady results.
But the surge in cases related to the Delta variant further bolsters the case for this investment. Back in early July, Johnson & Johnson released data indicating that its vaccine protected against the Delta variant.
Recipients of the Moderna and Pfizer (NYSE:PFE) vaccines will be able to receive a booster shot eight months after their initial doses. Johnson & Johnson has not received such approval. However, news is expected in coming weeks.
Next up on this list of biotech stocks, Exelixis is a highly rated, relatively cheap pick. Today, EXEL stock bears a consensus “overweight” rating, with 10 buy ratings among the 14 analysts covering it. The stock also currently trades for under $20 and carries an average target price of $31.69. Plus, if the high end of its price-target range is accurate, Exelixis shares have the potential to more than triple in price.
Exelixis isn’t in the pre-revenue stages of its life, either. The company currently boasts four commercial oncology products: Cabometyx, Cometriq, Cotellic and Minnebro. What’s more, EXEL’s recent earnings report explains precisely why investors should be interested in this name as an investment:
“Total revenues for the quarter ended June 30, 2021 included net product revenues of $284.2 million, compared to $178.7 million for the comparable period in 2020. The increase in net product revenues was primarily related to an increase in sales volume that was driven by strong uptake for the combination therapy of CABOMETYX (cabozantinib) and OPDIVO (nivolumab) following approval by the U.S. Food and Drug Administration (FDA).”
So, Cabometyx is this company’s strongest performing drug currently. But remember, EXEL also already has three other commercial drugs as well. It now anticipates between $1.3 billion and $1.4 billion in total revenues for 2021. That should entice investors.
Biotech Stocks to Buy: Agios Pharmaceuticals (AGIO)
Agios Pharmaceuticals is the most unproven biopharma company on this list so far. I say that because the company recently posted an $86.2 million net loss for the second quarter of 2021. Therefore, it is squarely among the biotechnology companies that lose money until reaching critical mass. However, that’s par for the course when it comes to biotech stocks.
Moreover, in the case of Agios Pharmaceuticals, that critical mass may be very near. On Aug. 17, the company announced that the FDA had accepted its New Drug Application (NDA) for Mitapivat, a treatment for adults with pyruvate kinase (PK) deficiency.
PK deficiency results in the increased breakdown of red blood cells, which can affect multiple organs in a big way. Now that the FDA has accepted Agios’ application and given it priority, though, the process will be expedited (the FDA acceptance means the review will be shortened to six months). Therefore, Agios has an “action date” for Mitapivat on Feb. 17, 2022. If all goes well, you can expect a spike in AGIO stock.
This next pick of the biotech stocks is primarily a Covid-19 vaccine play. Right now, Novavax is still in the process of seeking FDA emergency use approval for its vaccine, NVX-CoV2373. Earlier this year, the company reported late-stage success for the vaccine in a U.K. trial. That study showed nearly 90% efficacy for its vaccine. Another trial conducted in the United States and Mexico showed similar efficacy at 90.4%.
So, this company is essentially just waiting for good news. In 2020, NVAX received $1.6 billion from the U.S. government and in return will supply 100 million doses upon approval. Novavax also has deals in place in Australia, India, the U.K. and Canada.
Most investors believe that it’s nearly a foregone conclusion that Novavax will succeed in its vaccine endeavor. Moroever, the analysts covering NVAX stock believe that all of that pent-up demand will lead to a massive spike in revenues next year.
Analysts anticipate a record $1.98 billion in sales this year. However, they expect that figure to balloon to $5.49 billion in 2022 on average, with a potential high of $7.95 billion in revenue.
Biotech Stocks to Buy: Moderna (MRNA)
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By now, Moderna is a household name. To some investors, that could mean that it’s no longer worth investing in, as most of the gains have been had.
On the one hand, that’s probably true: the likelihood of MRNA stock multiplying in value by 10 times — as it has since the onset of the pandemic — is near zero. But make no mistake about it, Moderna is far from done.
For one, MRNA’s vaccine recently made headlines because it’s one of two vaccines now eligible as a booster shot beginning in September. This news should increase demand, thus increasing revenues.
However, there’s another reason to consider investing in this pick of the biotech stocks. This company essentially underwent the traditional growth path of a biopharmaceutical company within an accelerated time frame. So, for all intents and purposes, it’s now a mature biotech.
Analysts anticipate that Moderna will see roughly $20 billion in sales for 2021. They also anticipate that number to be similar in 2022. That means the company will be well-funded to advance its robust pipeline moving forward.
Sage Therapeutics (SAGE)
Next on this list of biotech stocks, Sage Therapeutics is focused on developing treatments for disorders of the central nervous system. When analyzing Sage Therapeutics, though, it’s best to get the financial status out the way first.
To me, it’s fair to characterize Sage as a well-funded biotech in no danger of going under soon. Yet, it’s also necessary to note that the company only has one commercial-stage, revenue-producing drug at present.
Sage recently reported a cash and liquid asset position of $1.9 billion as of Jun. 30. At the same time, its sole commercial drug — Zulresso — garnered $1.6 million in sales during the second quarter.
The reason to consider SAGE stock now is that it is arguably undervalued. Sage has more than halved in price since the beginning of the year and now carries a price-earnings (P/E) ratio of 3.39 over the trailing twelve months (TTM). Earnings per share (EPS) during that period hit $12.68.
Those value metrics, along with a pipeline of drugs that includes Zuranolone, make it worth considering. Zuranolone is currently in Phase 3 trials and is indicated for use against postpartum depression and major depressive disorder.
Plus, another one of Sage’s therapeutic candidates — SAGE-718 — is receiving attention in the battle against Parkinson’s, Alzheimer’s and Huntington’s diseases. Any pharmaceutical company that makes headway in treating any of those three diseases stands to reap great rewards.
Biotech Stocks to Buy: Vertex Pharmaceuticals (VRTX)
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Last up on this list of biotech stocks is VRTX stock. Vertex Pharmaceuticals has the might of Wall Street behind it. Well, it at least bears an “overweight” rating. Additionally, analysts have given it an average target price of $262.14. That’s well above its current $201 share price.
This company primarily focuses on cystic fibrosis (CF). That is where the majority of the $1.79 billion in revenue it recorded in Q2 derived from. Specifically, the company’s Trikafta/Kaftrio CF therapeutic accounted for $1.256 billion, or about 70%, of those quarterly revenues.
On top of this, Vertex has three additional commercial drug therapies. These, however, have shown less reliable growth. The company is developing other cystic fibrosis therapies as well.
For now, the future of VRTX stock looks secure. But it could get much brighter if Vertex Pharmaceuticals is successful in further developing its dominant position in the treatment of CF.
On the date of publication, Alex Sirois did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Alex Sirois is a freelance contributor to InvestorPlace whose personal stock investing style is focused on long-term, buy-and-hold, wealth-building stock picks. Having worked in several industries from e-commerce to translation to education and utilizing his MBA from George Washington University, he brings a diverse set of skills through which he filters his writing.
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