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Biotech Stocks To Buy Now

Investors should also realize that many biotech stocks have been held down by factors outside of their control. Higher interest rates and persistently high inflation have been weighing on the entire market.

biotech stocks to buy now

Cranbury, New Jersey-based Rocket Pharma (NASDAQ:RCKT) is a late-stage clinical biotech developing gene therapies for rare childhood disorders with high unmet needs. Its clinical program consists of lentiviral vector (LLV)-based therapy for treating Fanconi anemia (FA), leukocyte adhesion deficiency-I (LAD-1), and pyruvate kinase deficiency (PKD).

But one Wall Street investor found his way to the red-and-white poster, attracted almost by some invisible animal scent. Richard Klemm worked at OrbiMed Advisors, a relatively large biotech hedge fund in New York. Reading the data presented, Klemm saw that this experimental drug owned by Pharmacyclics had generated two partial responses in chronic lymphocytic leukemia, or CLL. Partial responses in CLL, the most common form of adult leukemia, were a rare event, and there was little to help patients when they got sick.

There are also structural headwinds. The inflationary pressures broadly hitting the economy are also affecting biotech stocks. The cost of running trials has increased, as has the cost of hiring and retaining employees.

Biotech investors waiting for big pharma to come to the rescue may be disappointed. In the 2010s, large pharmaceutical companies tended to focus on big mergers, tax arbitrages, mitigating risk, and putting their massive marketing and sales forces to work. Smaller and more nimble biotechnology companies took the lead in innovation and could count on being bought by larger pharmaceutical firms if they showed meaningful drug development.

But after watching biotech companies win big for a decade, big pharma companies have now pivoted toward innovation themselves and are investing in their own pipelines. Pfizer, for example, shed its big consumer products, generics, and veterinary divisions, and is now focused on creating innovative medicines and vaccines. As a result, big pharma companies have become more discriminating when it comes to buying biotechs. Big pharma business development people now know to carefully check their internal pipelines before holding any serious discussions with biotechs.

Third, companies will find it easier to do trials, as people become more comfortable with visiting clinics and hospitals to receive experimental treatments. Companies that may get a boost from better trial enrollments in key drug development programs include: Incyte INCY, -0.14% in its programs to develop a treatment for the cancer myelofibrosis, and Intra-Cellular Therapies ITCI, -1.65% in its research on Lumateperone for major depressive disorder, according to RBC Capital Markets biotech analysts.

Biotech was in such a freefall that potential buyers just held off, waiting for better prices. Now that biotech stocks are stabilizing and product sales will start showing improvement, buyers will show more interest. Big Pharma certainly has the cash to buy, as you can see from this chart from Jefferies.

In contrast, large pharma wants de-risked, late-stage drug candidates well along in Phase III trials, says Bank of America biotech analyst Tazeen Ahmad. He singles out Alnylam Pharmaceuticals ALNY, -0.40% and Argenx ARGX, -1.76% as favorites for 2022, in part, because they have a lot of potential catalysts. But they also have promising late-stage candidates, which makes them possible buyout candidates.

Michael Brush is a columnist for MarketWatch. At the time of publication, he had no positions in any stocks mentioned in this column. Brush has suggested INCY, ITCI, ALNY, BMRN, MRTX and SAGE in his stock newsletter, Brush Up on Stocks. Follow him on Twitter @mbrushstocks.

This year the National Institutes of Health is set to request its biggest budget yet for 2024, on the heels of its previous biggest budget in 2023. As the COVID-19 pandemic fades from view, labs will switch back to other avenues of research, often funded by the NIH. This higher level of funding, coming on the heels of the COVID-19 pandemic and associated biotech boom, could be big money for the people who make and sell equipment. As the saying goes, in a gold rush, the best job is a shovel salesman.

Bio-Rad (NYSE:BIO) is the oldest company on this most promising biotech stocks list, founded in 1952 by a husband and wife team of Berkeley graduates. But despite its age, Bio-Rad has stayed ahead of the game through a long history of acquisitions. Because of this, it has consistently brought the latest and greatest technologies to add to its lineup.

The bottom line is that Bio-Rad is a company used by almost every American lab with NIH funding. It offers products for nearly every major molecular biology, biochemistry, and biotechnology application. Its deep roots in the scientific community make it the first stop for many labs with funding. And its business model ensures consistent revenue year after year.

Bruker (NASDAQ:BRKR) is a high-end seller of biotech equipment and services. It offers products on the cutting edge of modern research. Mass spectrometry, spectroscopy, NMR, X-ray diffraction, and many of the best techniques are available on Bruker machines.

Unlike other biotech companies, Bruker experienced very few headwinds from the decline of COVID-19. Its 2022 report shows revenue continuing to increase from 2021 and good earnings of $2.00 per share. That gives it a relatively high price-to-earnings ratio in the mid-30s at the time of writing. But with 10% year-over-year earnings growth expected to continue, that P/E will seem reasonable to many investors.

An investor is thus wise to spread their bets and be ready to bail at the first sign of failure. Many will be called to the throne of biotech riches. Few will be chosen. Young biotech scientists, like my own son, can expect to have long resumes years before they reach my age.

While PCs and biotech offer similar profit opportunities, the need for government involvement makes them very different. So does the nature of the work. There are opportunities in equipment, in the production of molecules, and in the results of basic research as well as drugs.

SPDR S&P Biotech ETF (NYSEARCA:XBI), the Invesco Dynamic Biotechnology & Genome ETF (NYSEARCA:PBE) and ALPS Medical Breakthroughs ETF (NYSEARCA:SBIO) are other examples of biotech ETFs you can buy with a few clicks.

Despite this, CRSP is down nearly 80% from its 2021 high as investors have abandoned development-stage biotech companies. Vertex Pharmaceuticals (NASDAQ:VRTX), with which CRISPR is partnering, plans to file this year for approval on drugs targeting sickle cell anemia and beta thalassemia. An investor day over the summer showed promise with drugs for diabetes and kidney cancer.

Merck (NYSE:MRK) is not technically a biotech, but it illustrates an important trend for biotech investors. That is, companies like CRISPR lack the resources to get drugs tested and past regulators. (Pioneering PC makers could just slap something together and sell them through ComputerLand.) Larger companies are often needed as partners, and this requirement offers incumbents with cash the opportunity to dominate.

Exelixis (NASDAQ:EXEL) is best known for cabozantinib, a kinase inhibitor used to treat some types of thyroid, kidney and liver cancers. Exelixis is a good example of a biotech seeking to capitalize and expand on a single big success.

The shares of Regeneron Pharmaceuticals Inc (NASDAQ:REGN) are lower today -- earlier touching a three-year low of $298.19 -- extending last week's slide sparked by partner Sanofi's (SNY) disappointing quarterly drug sales. Fellow pharma stock McKesson Corporation (NYSE:MCK), meanwhile, is modestly lower today, but fresh off a five-day winning streak and eyeing its best month in nearly a year. What's more, if history is any indicator, both REGN and MCK stocks could rally in May. 041b061a72


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