- Vertex Pharmaceuticals (VRTX)
- Co-Diagnostics (CODX)
- Moderna (MRNA)
- Novavax (NVAX)
- iBioPharma (IBIO)
- Gilead Sciences (GILD)
- BioGen (BIIB)
- TG Therapeutics (TGTX)
- CRISPR Therapeutics (CRSP)
- Inovio (INO)
- The reasons to invest in biotech stocks
- Why you should be very careful when investing in biotech stocks
The COVID-19 pandemic has changed the World. The global economy is in recession, stock markets plunged into chaos. Investors are looking for a safe haven. Some say 2020 is not the best time to invest in stocks but we can’t agree with such a statement. This year we have a great opportunity to reevaluate our approach towards biotech stocks. We have decided to collect 10 biotech stocks that may be interesting to investors.
Vertex Pharmaceuticals (VRTX)
This is one of the leading biotech companies in the US. Vertex Pharmaceuticals’ HQ is located in Boston, Massachusetts. The company has great growth potential. It has some pipeline candidates that may become game-changers in the pharmaceutical branch. Vertex has enough money to invest in various growth opportunities.
Why should we watch for the stocks of the company? Vertex Pharmaceutical has four FDA approved medicines to treat the causes of cystic fibrosis. It is worth to mention that three of those four products are approved in Europe as well. There are no other competitors that have managed to accomplish such results.
The company’s new medicine, known as Trikafta, has received FDA approval five months earlier than it was scheduled. This is something that is beyond imagination. If the company manages to win European approval with this drug, it will significantly expand its customer base. Moreover, Vertex Pharmaceuticals has some other medicines to show, which is another sign of the eventual company growth.
The company has successful partnerships. They include cooperation with CRISPR Therapeutics. Together they have developed a gene-editing therapy targeting rare blood diseases.
As for cash, Vertex has 4.2 billion USD to invest in various projects. They have already put some cash in the acquisition of Semma Therapeutics in 2019. With this purchase, Vertex became one step closer to the development of a cure for type 1 diabetes. The company plans to start an early stage of testing in 2021.
If we look at the chart, we can see that the stock had strong growth in 2020. It is important to note that Vertex Pharmaceuticals is not even a participant in the race for the COVID-19 vaccine. Nonetheless, investors believe in the company purchasing its stocks in 2020.
The company has a near fair value according to the Yahoo finance fair price indicator. This is another good sign for those who want to add the stock to the watchlist.
- Market capitalization – 69.631 billion USD
- PE Ratio – 46.48
- EPS 5.68
- Current Ratio – 3.54
The name of the company tells us that we are dealing with something related to the fight with the COVID-19. If you think so, you are right as Co-Diagnostics is a medical company producing COVID test kits. This is one of the reasons Co-Diagnostics has shown impressive growth in 2020.
According to the WHO, testing COVID patients is currently the only way to prevent the expansion of the pandemic. Doctors have learned already that they can’t determine COVID-19 patients by their symptoms. The only way to identify them fast is accurate testing.
It is to worth to mention that right now the US is trying to abolish some restrictions. This means that testing becomes even of greater relevance as medical authorities are going to monitor the situation to prevent the second wave of the pandemic.
Co-Diagnostics is a great example of how a company may be at the right time in the right place. Its product is in great demand currently as the situation with the tests in the world is terrific. And we are not talking just about the US. There is no need to say that testing is not well arranged for the rest of the world. This means that Co-Diagnostics have a great opportunity to expand their sales covering different regions, including Europe. They have already produced six million test kits and have plans to increase their production to 20 million units.
If we look at the chart, the investors' trust in the company is significant. The price of the stock was far below 5 USD even at the beginning of this year. Later, the price of CODX reached almost 30 USD per share showing how investors have changed their bias and switched to the pharmaceutical niche. Co-Diagnostics is a good example of how an unknown company may grow in a very short period by choosing the right strategy.
The stocks of the company are considered overvalued by the Yahoo finance indicator. However, testing kits will be in great demand for a half a year. Co-Diagnostics is likely to increase its production as the company has great potential at the moment. However, is should be said that Co-Diagnostics can be treated as a one-product company, which success may be followed by going into the oblivion.
- Market capitalization – 427.507 million USD
- PE Ratio – N/A
- EPS – -0.32
- Current Ratio – 16.43
Moderna is another great example of how a company can get the investors’ trust by timely engaging in the race for the COVID-19 vaccine. MRNA was focused on mRNA therapy by modifying the body’s RNA to treat such diseases as cancer, various infections, and some cardiovascular disorders.
The company's mRNA-1273 is a great candidate to be a vaccine against the COVID-19. They have successfully conducted stage 1 testing of the vaccine in May 2020. The results were brilliant as the tested people have antibodies at the levels found in recovered COVID-19 patients. There are no clinically proven side effects as well, which is a very good sign for the vaccine against the COVID-19.
The price of the MRNA stock surged 29% in a single day and reached 80+ levels. Moderna’s stocks corrected later to 60+ levels, but it is also a very high result for the shares showing that investors have trust in the company.
The stock’s price is considered to be overvalued by the Yahoo finance indicator but it is a normal situation after this great uptrend and price gap. The vaccine against COVID-19 is currently a market driver. If Moderna’s next stages of testing are successful, the price is likely to surge again reaching new all-time highs.
- Market capitalization – 23.016 billion USD
- PE Ratio – N/A
- EPS – -1.50
- Current Ratio – 9.29
Novavax can be considered an ideal example of how you can become rich by investing in cheap stocks. The price of the company’s shares was below 20 USD per asset for a long time but in May 2020 it surged significantly and reached 45 USD. The ATH was even higher as the stocks tested 60 resistance areas.
What is the main secret of this uptrend? Novavax is neither a leading company on the market nor has a great amount of cash to invest. This small biotech company has no approved medicine on the market yet. Even so, it stays in the same line with such leaders as Vertex and Gilead in their race to find the vaccine against the COVID-19.
Novavax has announced that it had successfully tested its innovative NonaFlu drug. This vaccine is a direct competitor of Sanofi’s FluZone Quadrivalent. Even though Sanofi is a trusted and well-known company, Novavax can beat it as NonaFlu has shown better testing results than FluZone.
Currently, Novavax focuses on the COVID-19 vaccine together with competitors like Gilead. The company expects to start the early stages of clinical studies for its vaccine candidate called NVX-CoV2373 in the nearest future. As for the pre-clinical testing, the vaccine has already shown great results.
If approved, NanoFlu can be a true blockbuster in the world of anti-flu vaccines. According to the experts, the vaccine can reach 500 million USD annual sales volume. This means that the stock has great upside potential, which may be set in motion in 2020.
Yahoo Finance indicator shows that Novavax stocks are overvalued. Even so, we can see another great surge after a period of correction. At present, the COVID-19 vaccine is the number one market driver. The companies that are working on it are very interesting for the investors.
- Market capitalization – 2.673 billion USD
- PE Ratio – N/A
- EPS – -3.83
- Current Ratio – 13.45
This is another competitor for the companies working on the COVID-19 vaccine. They have announced the appearance of their IBIO-200 vaccine candidate on March 26. According to the company officials, the vaccine candidate's studies were conducted by the Texas A&M University System’s laboratories.
They have also announced that they can produce up to 500 million doses of the vaccine if it is approved. The price of the stocks of iBioPharma has broken out 1.00 resistance area on that news. The company stays in this cheap stocks group but has all chances to leave it if the testing of the vaccine is successful.
According to the Yahoo Finance indicator, the stock is currently overvalued. This is normal as IBIO shares had an impressive growth previously. Anyway, if IBIO is successful with its COVID-19 vaccine, the price of the stock may reach higher peaks.
- Market capitalization – 185.285 million USD
- PE Ratio – N/A
- EPS – -0.9750
- Current Ratio – 1.67
Gilead Sciences (GILD)
Gilead Sciences is not a monopolist like a Vertex, but it dominates the HIV niche. The company is one of the leaders of the hepatitis C virus market along with AbbVie.
Investors have focused their attention on Gilead in 2020 for its remdesivir drug, which was the first medicine used to treat the COVID-19. The drug was approved by the FDA. There is almost no doubt that remdesivir will become the medicine number in treating COVID-19.
Like other game-changer candidates, Filgotinib is awaiting for the US and European approval. This medicine was designed to treat rheumatoid arthritis.
The company has also designed a couple of drugs to treat HIV. As of right now, they are at the stage of clinical trials. The pipeline of the company includes some cancer therapies and medicine that can be used to treat a few rare diseases.
Gilead has money to invest. They have reported 24.3 billion USD in cash and assets on March 31, 2020. The price of the stock has reached 85 USD per share but corrected later. The increase in price shows investors' trust and interest in the company.
It is not surprising Yahoo Finance treats the price of the stock as overvalued after such significant growth in 2020. However, the company has greater potential as it is one of the participants of the COVID-19 vaccine's race. Moreover, its drug remdesivir is likely to become the number one medicine to treat COVID-19.
- Market capitalization – 91.82 billion USD
- PE Ratio – 18.39
- EPS – 3.90
- Current Ratio – 3.04
The company’s HQ is located in Cambridge, Massachusetts. The company has lost 29% of its stock price in March 2019 after they have announced that they have stopped their trials for Aducanumab medicine, which should be a blockbuster to treat Alzheimer's disorder.
However, this year the company has managed to gain back its positions by entering the race for the COVID-19 treatment. They are working on developing antibodies as a potential treatment for COVID-19 together with Vir Biotechnology Inc.
By the way, BIIB has announced that it is going to start its stage 4 studies of Aducanumab medicine, which means that the drug is back into play. This gives hope that the blockbuster will finally be approved and reach the market one day.
According to the Yahoo Finance indicator, the stock price of BIIB is undervalued. It means that there is a great growth potential of the stock in the future. If the company manages to find a reliable treatment for the COVID-19, the stock price may skyrocket.
- Market capitalization – 45.573 billion USD
- PE Ratio – 8.62
- EPS – 32.40
- Current Ratio – 1.73
TG Therapeutics (TGTX)
TG Therapeutics had great growth in the first quarter of 2020 and resumed the uptrend after a dep correction. They have successfully conducted stage 3 trials to examine the effectiveness of a combination of drugs to treat Chronic Lymphocytic leukemia.
According to the company, their combination including umbralisib plus ublituximab have already shown great results. The stock price growth has no connection to the COVID-19 treatment meaning that this growth has a strong fundamental basis.
The price of the stock is considered to be overvalued according to the Yahoo Finance fair price indicator. However, the stock price has even higher potential if TG Therapeutics launches all the products that are currently going through clinical studies.
- Market capitalization – 1.972 billion USD
- PE Ratio – N/A
- EPS – -2.00
- Current Ratio – 1.39
CRISPR Therapeutics (CRSP)
This company is one of the leaders in the gene-editing niche. The company works in close cooperation with the Vertex in the development of Regenerative Medicine Advanced Therapy designed to treat severe sickle cell disease.
The FDA has approved the Investigational New Drug application for CTX-130, the CAR-T cell therapy for the treatment of solid tumors. The company is neither in the race for the COVID-19 vaccine nor is looking for the therapy and drugs against the coronavirus.
The price of the stock is considered to be overvalued, according to the Yahoo Finance fair price indicator. However, the stock price has even higher potential if TG Therapeutics launches all the products that are already at the stage of clinical trials.
- Market capitalization – 1.972 billion USD
- PE Ratio – N/A
- EPS – -2.00
- Current Ratio – 1.39
This is the last, but not the least company in our Top 10 Biotech stocks to watch in 2020. Inovio was quick to respond to the most challenging moments. They have developed a treatment for Ebola in 15 months, for example. It took them nine months to get a solution for MERS and half a year to treat Zika.
Currently, Inovia’s main target is the coronavirus disease. Their drug is at the stage 1 of the clinical trial. They are expected to get the results by June 2020. Those studies are sponsored by the Department of Defense and The Bill and Melinda Gates Foundation.
The price of Inovio stocks is considered to be overvalued but it is not the reason to skip this offer. Inovio is in the race for the COVID-19 vaccine, which may support further price growth.
- Market capitalization – 2.058 billion USD
- PE Ratio – N/A
- EPS – -1.16
- Current Ratio – 8.53
The reasons to invest in biotech stocks
Biotech companies were always on demand but with the appearance of the coronavirus disease, their importance became evident to everybody and even for those who are far from the world of big money. We have put together here the key reasons for investing in this industry.
Plenty of options
When you invest in the biotech niche, you can not only purchase stocks on the stock markets but also buy various instruments including ETFs, commodities, and even bonds. Moreover, this industry is full of interesting choices as the number of companies is great. Currently, many companies have engaged in developing the COVID-19 therapy, drugs, or vaccines. The successful ones will be reunmerated by their growth.
Another great thing is that the majority of biotech company shares have low prices allowing investors to buy more of them. The biotech industry shows great results as the annual returns have reached 14% on average. This figure may be even greater in the upcoming decades.
The biotech industry has unconventional payoffs
The path of any drug or therapy towards approval and the first sales is long. The companies start with funding their research and then they work on their discoveries. The next step is clinical trials, which may take several stages. A company can develop the product until its final version or sell the technology to another company. Investors are following all those changes and making decisions according to the current situation. This is a unique niche, which may develop its growth even during the periods of recession as the demand for health products becomes even higher.
External factors having impact on the industry
The population in many countries is aging and the demand for medicines is growing. There is a direct relationship which is consistent as elderly people have more issues with their health. This relationship leads to another important conclusion – the biotech companies will increase their revenues in the future (certainly, not all of them). The investors pay a lot of attention to this industry buying stocks of the most successful players.
Why you should be very careful when investing in biotech stocks
Every rose has its thorns
This is the best saying about the biotech industry ever. Each biotech company has great chances to succeed especially given their focus on several therapies or drugs. You can invest 10,000 USD, for example, and collect ten times more in several months. However, this opportunity to get huge profits is accompanied with the risks of losing a significant amount of your investments.
The majority of companies in the industry are small and they have one to three drugs in their arsenal. The stocks of those companies react to all news releases, approval of the FDA, clinical testing, etc. Those events may give growth to a company and ruin it in one day.
Biogen is a good example of how a company can lose at first and then win later. The stocks plunged significantly in April 2019 after the news that they are going to stop their Aducanumab trials. However, later in 2020, the company engaged in finding the COVID-19 therapies and the stocks surged, reaching new tops.
Do not be confused by the story
There are plenty of investors that were confused by the story of those small biotech companies. They assure themselves that the drugs that the company produces or will produce will revolutionize the industry. They are so convinced that they are ready to put a significant amount of money in those companies.
Bad news for the majority of investors: they do not have enough education to understand what the company does. They look at all the names of future drugs, all those descriptions, and may be confused by the alerts of the announcements. For the investor who wants to start putting money in buying biotech stocks, it'm vital to do the homework by dive into the company’s data and understanding what the firm does exactly.
Do not ask big guys
To buy or not to buy? You may want to ask the big guys this question, but believe us, their knowledge is also limited. Why? The biotech industry is full of dark horses. The company may be small today with a small market capitalization and low funds. However, it is able to conduct research that will revolutionize the industry. This will lead to the growth of this company that will hit the sky.
Are biotech stocks worth your attention? This industry offers great opportunities for both value and growth investors. However, you should always be careful when investing in those stocks and consider your risks before buying shares of biotech companies.