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The biotechnology industry includes companies that develop drugs and diagnostic technologies for the treatment of diseases and medical conditions. These products must go through rigorous, costly, and time-consuming trials before potentially obtaining approval from the U.S. Food and Drug Administration (FDA). This means that investors may wait for years before knowing whether a drug under development will pay off. The industry includes smaller start-up companies with recent traction as well as large, well-established corporations that aim to develop a range of drugs and technologies. Many biotech companies have shifted their focus entirely or added COVID-19 vaccine and treatments to their product pipeline.
During the past year, biotech stocks, as represented by the iShares Biotechnology ETF (IBB), have posted a total return of 27.0%, below the Russell 1000’s total return of 35.1% as of Sept. 16, 2021. All data below are as of Sept. 16, 2021.
Here are the top biotech stocks with the best value, the fastest earnings growth, and the most momentum.
These are the biotech stocks with the lowest 12-month trailing price-to-earnings (P/E) ratio. Because profits can be returned to shareholders in the form of dividends and buybacks, a low P/E ratio shows you’re paying less for each dollar of profit generated.
Source: YCharts
- Agios Pharmaceuticals Inc.: Agios is a pharmaceutical company developing drug treatments for genetically defined diseases such as hemolytic anemias and sickle cell disease. In mid-August, the company announced that the U.S. Food and Drug Administration (FDA) had accepted its New Drug Application (NDA) for mitapivat for the treatment of adults with pyruvate kinase deficiency, a chronic, lifelong hemolytic anemia.
- Sage Therapeutics Inc.: Sage Therapeutics develops treatments for central nervous system disorders including schizophrenia and major depressive disorder. On Sept. 15, Sage reported that the FDA had granted Fast Track Designation to its drug SAGE-718 for development as a potential treatment for Huntington’s disease, a genetic disorder that impacts the brain.
- uniQure NV: uniQure NV is a Netherlands-based gene therapy company. The company develops one-time administered treatments for patients with variety of genetic diseases including hemophilia B and Huntington’s disease.
These are the top biotech stocks as ranked by a growth model that scores companies based on a 50/50 weighting of their most recent quarterly YOY percentage revenue growth and their most recent quarterly YOY earnings-per-share (EPS) growth. Both sales and earnings are critical factors in the success of a company. Therefore ranking companies by only one growth metric makes a ranking susceptible to the accounting anomalies of that quarter (such as changes in tax law or restructuring costs) that may make one or the other figure unrepresentative of the business in general. Many early-stage biotech firms can go through periods of very little revenue, punctuated by large spikes in revenue when a license or patent is sold, a partnership agreement is signed, or a product is approved. Consequently, investors should look at extreme YOY growth percentages for biotech firms as less indicative of conventional business growth, and more reflective of the magnitude of the deal or product approval reached.
Source: YCharts
- Maravai LifeSciences Holdings Inc.: Maravai LifeSciences Holdings is a life sciences company. Through subsidiaries, the company develops drug therapies, diagnostics, and vaccines for the treatment of a variety of diseases. Net income attributable to Maravai LifeSciences Holdings grew 35-fold in Q2 2021 as revenue increased more than four-fold. The revenue increase was driven mainly by dramatic growth in the company’s Nucleic Acid Production business. The company’s EPS growth figure in the table above is due to EPS climbing from a fraction of a cent in Q2 2020 to $0.44 in Q2 2021.
- CRISPR Therapeutics AG: CRISPR Therapeutics AG is a Swiss company that develops gene-based medicines for diseases in the areas of oncology, regenerative medicine, and hemoglobinopathy. CRISPR’s meteoric revenue growth in Q2 2021 was fueled almost entirely by its collaboration with Vertex Pharmaceuticals Inc. (VRTX). Vertex made a $900 million upfront payment to CRISPR in June as part of the terms of the collaboration in developing CTX001, a gene-based therapy. CRISPR went from negative to positive EPS over the period in question, making an EPS growth calculation impossible.
- Royalty Pharma PLC: Royalty Pharma is a late-stage biopharmaceutical product investment company. The company collaborates with biotechnology companies of all sizes, research hospitals, academic institutions, research hospitals to develop treatments. Its profile of pharmaceutical investments includes commercial products and development-stage candidates. In addition to strong EPS growth, the company’s operating income climbed by 82.2% YOY in Q2 2021, driven mainly by newly acquired assets and strong performance of Royalty’s cystic fibrosis franchise, among other factors.
Biotech Stocks with the Most Momentum
These are the biotech stocks with the highest total return over the last 12 months.
Source: YCharts
- Ocugen Inc.: Ocugen is a biopharmaceutical company focusing on therapies for blindness and other retinal diseases. The company’s net loss widened dramatically as research and development expenses soared compared to the same quarter a year earlier. It posted no revenue. Despite this, partner Bharat Biotech of India posted positive Phase 3 clinical trial results for COVAXIN, the company’s COVID-19 vaccine. In those trials, the drug demonstrated 77.8% efficacy against overall COVID-19 disease, 93.4% efficacy against severe COVID-19 disease, and 65.2% efficacy against the Delta variant.
- Imugene Ltd.: Imugene is an Australia-based clinical-stage immuno-oncology company. The company develops immunotherapies seeking to activate the immune system of cancer patients to treat tumors. The company develops treatments for a variety of cancers.
- Aclaris Therapeutics Inc.: Aclaris Therapeutics is a clincial-stage biopharmaceutical company that aims to develop drugs for the treatment of immuno-inflammatory diseases. Products in the company’s pipeline include drugs for the treatment of rheumatoid arthritis, atopic dermatitis, and inflammatory bowel disease, among others.
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