Part of this underperformance can be blamed on the high number of small, early stage biotech companies that took advantage of the economic recovery and a red-hot initial public offering (IPO) market. In 2021, 96 biotech companies entered the public market, compared to just eight in 2011. Many of these companies had just a few patents and little to no revenue.
And while many biotech stocks fail due to a lack of product efficacy or safety, the industry continues to attract investors because the companies that are able to successfully develop effective treatments can see their stock prices skyrocket. Further, the biotech industry is constantly innovating and improving upon existing treatments.
So while it's no secret that investing in this industry is volatile and challenging, there is opportunity. But figuring out which biotech stocks to invest in can be tricky. One tool to help investors sift through the noise is the Stock News POWR Ratings system (opens in new tab), which utilizes 118 different factors to determine which stocks are most likely to outperform.
With this in mind, here are the seven of the best biotech stocks to add to your portfolio. Each is rated a Buy or Strong Buy in the POWR Ratings System due to their respective strength across a variety of measures, including valuation, sentiment and fundamentals.
Amgen (AMGN (opens in new tab), $252.17), founded in 1980, is a pioneer in biologics. Total product sales accounted for 93.5% of AMGN's 2021 revenues. The company's three top-selling drugs are Enbrel for inflammatory diseases, Prolia for osteoporosis and Otezla for plaque psoriasis. These three drugs made up more than 38% of AMGN's sales last year.
On the other hand, it's also an opportunity as AMGN's international sales have been steadily growing, with the company showing particularly strong growth in the Asia-Pacific region. The Dow Jones stock also has a proven record of making successful partnerships and acquisitions to ensure growth and keep its pipeline well-stocked.
Amgen has an overall rating of B (Buy) in the POWR Ratings system. B-rated stocks have posted an average annual performance of 20.1% since 1999, which outpaces the S&P 500's average 8% annual gain. AMGN is one of the best biotech stocks in terms of Quality, earning an A for its POWR Grade, due to its strong balance sheet, low debt and well-regarded management team. See the complete POWR Ratings for AMGN. (opens in new tab)
Biogen (BIIB (opens in new tab), $214.54) focuses on developing therapies and treatments for neurological and neurodegenerative diseases such as multiple sclerosis (MS), Alzheimer's, dementia, Parkinson's and spinal muscular atrophy. These include Tecfidera, Vumerity, Spinraza and Fumaderm to name a few.
Biogen also has a Quality Grade of B due to being one of the leading biotech stocks developing treatments for neurological diseases, even with its Aduhelm setback. It also has consistent royalty revenue for many of its franchises including MS drug Ocrevus, which saw a 29% increase in the last quarter. Plus, BIIB has a strong balance sheet with minimal debt and nearly $3 billion in cash. Get the full rundown of BIIB POWR Ratings analysis. (opens in new tab)
Bio-Techne (TECH (opens in new tab), $400.91) is a supplier and manufacturer of biological materials like high-quality purified proteins and reagents like cytokines, growth factors and antibodies. These are used by pharmaceutical and biotech companies for their drug development and testing processes, specifically for genetic and cellular-based therapies. In addition to this, TECH also provides instruments and custom manufacturing solutions.
Thus, TECH provides investors with exposure to the genomics industry which is expected to grow at a roughly 14% rate over the next decade, according to research firm Research and Markets. And as a supplier to the industry, it has less risk than other biotech stocks that use genomics to develop drugs and bring them to market.
Still, TECH is displaying strong momentum, as evidenced by its recent earnings report which showed a 17% year-over-year increase in revenue in the final three months of 2021. And adjusted earnings jumped 16% from the year prior to a record $1.88 per share. It also announced a $400 million share buyback and achieved a milestone with revenues exceeding $1 billion on a trailing twelve-month basis.
In 2022, analysts are forecasting $7.95 in EPS and $1.1 billion in revenue which would be year-over-year improvements of roughly 18% each. Margins are also expected to trend higher with increasing volume. Bio-Techne has a good mix of slow and steady expansion from its older reagent business with strong growth, albeit from a small base, in its genetic and cell therapy products.
Bio-Techne also has a Quality Grade of B. This is thanks to a strong balance sheet and returning cash to shareholders through dividends and buybacks while staying on a growth trajectory. Take a closer look at TECH's full POWR Ratings. (opens in new tab)
Harmony Biosciences Holdings (HRMY (opens in new tab), $50.03) develops and designs drugs for rare neurological disorders. The company was founded in 2017 and made its public debut in 2020 at a valuation of $1.5 billion. Since its IPO, HRMY is up nearly 30%.
Regeneron Pharmaceuticals (REGN (opens in new tab), $690.33) is one of the best biotech stocks in terms of technical performance. Shares are up roughly 40% in the last 12 months, compared to a 20% decline for the iShares Biotechnology ETF (IBB (opens in new tab)). A major factor is REGN's COVID-19 treatment, REGEN-COV, which contributed $6.2 billion in revenue in 2021.
It's likely that REGEN-COV could have a smaller impact on Regeneron's top line going forward, though, considering it failed to show efficacy in terms of dealing with the omicron variant. Another factor is Pfizer's (PFE (opens in new tab)) Paxlovid pill, which has shown strong evidence of reducing death and hospitalization and is effective against omicron.
Regeneron is another of the B-rated biotech stocks in the POWR Ratings universe, which equates to a Buy. Included in this score is a Quality Grade of B, due to the company's track record of successful drug development and patent protection for core products.
Corcept Therapeutics (CORT (opens in new tab), $22.76) researches and develops drugs to target severe disorders that are due to unstable cortisol levels. Cortisol is the body's stress hormone and it can create adverse effects on health if not properly modulated, specifically in areas like metabolism, mental health and cancer.
CORT is the first of the A-rated (Strong Buy) biotech stocks in the POWR Ratings universe featured here. A-rated stocks have posted an average annual performance of 31.1% since 1999, which compares favorably to the S&P 500's average annual 8% gain.
Part of the stock's overall rating is a Value Grade of B as it sports a low forward P/E ratio of 11.7x, has not debt and boasts above-average profit margins of 30%. Corcept Therapeutics also has a Quality Grade of A due to its well-regarded management team, strong balance sheet and stock buybacks to the tune of $200 million. Check out the full POWR Ratings for CORT. (opens in new tab)
Incyte (INCY (opens in new tab), $76.56) was founded in 2002 by a team of scientists to discover and develop small-molecule drugs, monoclonal antibodies and bispecific antibodies. So far, the company has developed a wide variety of drugs with applications in oncology, dermatology, autoimmune diseases and targeted therapies.
Not only is Incyte a top pick among billionaire investors, but it is also another of the A-rated (Strong Buy) biotech stocks in the POWR Ratings system. INCY has a Sentiment Grade of B as eight out of 14 Wall Street analysts have a Buy or Strong Buy rating on the stock, with only two deeming it a Sell.
Shares of Investor's Business Daily's biotech industry group hit a downward slope from February 2021 to June 2022. Recently, biotech stocks have been under pressure amid the banking crisis and as the Centers for Medicare and Medicaid Services plans to soon begin negotiating the prices of the costliest drugs. Today, the entire group has a Relative Strength Rating of 62, which puts them in the top 38% of all stocks in terms of 12-month performance, according to IBD Digital.
Catalyst recently added a second product to its lineup. Through a deal with Eisai (ESALY), Catalyst now sells anti-seizure medicine Fycompa in the U.S. Catalyst also sells Firdapse, a treatment for Lambert-Eaton myasthenic syndrome, or LEMS. LEMS is a rare autoimmune condition that saps muscle strength and often occurs in lung cancer patients.
Sales are growing, but Teva Pharmaceutical (TEVA) recently said it plans to launch a generic version of Firdapse. Teva says the patents covering Firdapse are invalid and not enforceable. Catalyst must now respond to Teva's filing.
Bullishly, CPRX shares have a best-possible Composite Rating of 99, according to IBD Digital. This puts the biotech stock in the top 1% of all stocks in terms of fundamental and technical measures. Its 12-month performance, measured by the Relative Strength Rating, is also in the top 3% of all stocks.
Vertex is one of the biggest biotech stocks in terms of market cap. It ranks fourth behind Amgen (AMGN), Gilead Sciences (GILD) and Regeneron Pharmaceuticals (REGN).
But it's now expanding into other efforts. Vertex is partnered with Crispr Therapeutics (CRSP) on a gene-editing approach to a pair of blood diseases. Further, Vertex also announced its $320 million plan to buy its partner in diabetes treatment, privately held ViaCyte. The companies are testing a cell replacement drug in type 1 diabetes.
The Food and Drug Administration has said it doesn't plan to hold an advisory committee meeting to discuss the treatment. The drug is known as Roctavian in Europe where it's already approved. Approval in the U.S. could be a boon for the biotech stock. The FDA is set to review the drug March 31. 59ce067264