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Best biotech stocks: Which companies have growth potential?

By  Yoke Wong

Edited by Vanessa Kintu

18:12, 9 February 2022

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The Covid-19 pandemic and consequent global vaccination drive to combat the disease have propelled the biotechnology industry to the forefront of the global equity market. As the world continues to grapple with the evolving variants of the coronavirus and other life-threatening diseases, investment in biotech firms is expected to grow.

With the growing number of innovations and scientific breakthroughs over the past two years, many believe this decade is a golden age for the biotechnology industry.

Some of the most popular biotech stocks are companies that have had clinical successes, such as the four biotech and pharmaceutical companies – Pfizer, Moderna, AstraZeneca and Johnson and Johnson – that developed and manufactured the Covid-19 vaccines. Shares of these companies hit new highs last year. Since the end of 2021, however, biotech stock prices have mostly fallen.

According to industry publication Biopharma Dive, the XBI biotech stock index plunged over the past year to $90.79 on 4 February, down 44% compared to the same day in 2021.

Closing price of XBI biotech stock index, 1 Jan 2016 to 4 Feb 2022

With the global equity market weakening over the past month, some investors may question whether it is time to exit biotech investments. However, investment guide website The Motley Fool believes there are still investment opportunities in the industry:

“Don't let the current dismal environment for biotech stocks fool you. There are still plenty of opportunities to make money investing in the biotech industry.”

Are you interested to find out which are the best biotech stocks to buy? Read this article for the market outlook and analysis of some of the most promising biotech stocks.

Top biotech companies to invest in

Contributors at The Motley Fool identified three biotech stocks to watch in 2022. These are Adicet Bio (ACET), Amgen (AMGN) and AstraZeneca (AZN). 

Adicet Bio (ACET)

ACET stock price chart

US-based Adicet Bio is a company engaging in the development of off-the-shelf T cell therapies for cancer and other diseases.

In December, the company announced positive interim clinical data from its phase one study, which targets the potential treatment of B-cell non-Hodgkin lymphoma. Shortly after the announcement, Adicet closed its initial public offering (IPO) and raised $100.6m from its listing on the Nasdaq exchange on 10 December 2021. Keith Speights wrote on The Motley Fool:

“The downsides of the current T cell therapies in the market are that they are time-consuming and expensive.
“The holy grail of CAR-T is to develop an allogeneic ‘off-the-shelf’ therapy that uses T cells derived from the cells of healthy donors, and can be made in batches for use in multiple patients. And tiny Adicet Bio has a shot at being a big winner in this off-the-shelf CAR-T market.” 

Amgen (AMGN)

AMGN stock price chart

Amgen is an American biotech group established in 1980. The group claims to be one of the world’s leading biotechnology companies. It focuses on six therapeutic areas: cardiovascular disease, oncology, bone health, neuroscience, nephrology and inflammation.

The company’s revenue in the fourth quarter of the 2021 financial year increased to $6.8bn, up 3% compared to the same quarter in 2020. 

Sales volume and revenue of several of Amgen’s established products fell year-on-year, however, including Neulasta (pegfilgrastim), Neupogen (filgrastim), Epogen (epoetin alfa), Aranesp (darbepoetin alfa), Parsabiv (etelcalcetide) and Sensipar/Mimpara (cinacalcet). The group expects “additional net price and volume erosion across this portfolio of products”.

Despite the expected sales decline of some of Amgen’s products, The Motley Fool’s Prosper Junior Bakiny believes Amgen has the means to regain its momentum:

“Investors should expect Amgen’s revenue growth rates to improve in the coming quarters. And with more than two dozen programmes in its pipeline in clinical testing, the company should earn some label expansions for its current products – and approvals for brand new ones – that will further strengthen its line-up.”

AstraZeneca (AZN)

AZN stock price chart

UK-based AstraZeneca develops drugs and treatments across several therapy areas, including oncology, cardiovascular, renal and metabolism (CVRM), respiratory and immunology. It is the manufacturer of one of the Covid-19 vaccines, sales of which boosted the company’s revenue in the third quarter last year.

AstraZeneca’s revenue increased to $9.9bn in Q3, up 49% compared to the same quarter in 2020. Its Covid-19 vaccine generated $1.05bn of sales, accounting for 11% of total revenue in Q3. The revenue in the first nine months of 2021 rose to $25.4 billion, up 32% year on year. 

The group’s oncology segment grew by 19% year on year to $9.7 billion in the first nine months of 2021, followed by a 14% increase to $6bn in cardiovascular, renal and metabolism, and 16% growth to $4.5bn in respiratory and immunology. The Motley Fool’s David Jagielski wrote:

“The stock is down 7% over the past three months, a period during which the S&P 500 has declined by 2%. But the company reports earnings this month, and a solid performance could help the stock regain some traction.
One reason to expect AstraZeneca to deliver a strong result is that in early December, the Food and Drug Administration granted an Emergency Use Authorisation for its Covid-19 antibody cocktail, Evusheld.” 

Best performing biotech stocks

According to data from financial news and data publisher Investopedia, the fastest growing biotech stocks by sales growth are BioNTech (BNTX), Sere Therapeutics (MCRB) and 

Marinus Pharmaceuticals (MRNS).

However, Investopedia warned that some high growth biotech stocks do not necessarily reflect the strength of the business “because growing sales on money-losing businesses can be harmful if the company has no plan to reach profitability”.

BioNTech (BNTX)

BNTX stock price chart

BioNTech is a Germany-based clinical-stage biotechnology company that develops treatments and individualised cancer medicine. The company was founded in 2008 and offers services such as diagnostics, and cell and gene therapies. The company jointly developed and distributed the Covid-19 mRNA vaccine with US pharmaceutical group Pfizer in 2020. The vaccine has since been distributed globally, with a booster programme for the third dose approved in many countries.

BioNTech’s third-quarter financial results, released in November 2021, showed the company’s revenue in the first nine months of 2021 surged by nearly 100 times to €13.4bn ($15.3bn), compared with €136.9m in the same period of 2020. 

Sales of its Covid-19 vaccine were the main driver for the spike in revenue in 2021 and generated €7.13bn profit for the period, compared with a €351.7m loss in the previous year.

According to CompaniesMarketCap, BioNTech’s market capitalisation was $38.7bn at the time of writing on 9 February 2022, with the share price at $159.60. The company is listed on the Nasdaq exchange.

Seres Therapeutics (MCRB)

MCRB stock price chart

Seres Therapeutics is a US-based late-clinical stage microbiome therapeutics company, developing treatments for a wide range of diseases.

The company reported a net income of $68.2m in the third quarter of 2021, compared with a net loss of $30.3m in the same period of 2020. 

“The third-quarter net income was driven primarily by collaboration revenue recognised from the co-commercialisation licence agreement with Nestlé Health Science,” said Seres.

Seres’s market capitalisation was $681.37m at the time of writing. The company is listed on the Nasdaq exchange and the share was last traded at $7.42.

Marinus Pharmaceuticals (MRNS)

MRNS stock price chart

Marinus is a US-based company developing treatments and drugs for seizure disorders. Its drug Ganaxolone is under clinical trial in various stages for different such conditions.

The company’s revenue jumped to $13.8m in the nine months from January to September 2021, compared with $171,000 in the same period in 2020. However, the company remained at a net loss of $70.5m for the first nine months of 2021, compared with a $50m loss in the previous year. 

Marinus’s market capitalisation is $419.14m. The company is listed on the Nasdaq exchange and the share was last traded at $11.10 on 8 February.

When considering whether to invest in any biotech company’s stock, you should always do your own research, considering the outlook and relevant market conditions. A number of factors dictate whether stock prices rise or fall, including the company’s fundamentals and broader macro-economic factors. There are no guarantees. Markets are volatile. You should conduct your own analysis, taking into account such things as the environment in which it trades and your risk tolerance. And never invest money that you cannot afford to lose.

FAQs

Are biotechnology stocks a good investment?

Biotechnology stock prices have fallen from their peak last year, but several analysts expect the strong financial results and clinical successes of some companies to support their share values.

Whether biotechnology stocks are good investments for you or not depends on your investing goals and portfolio composition. You should do your own research and never invest what you cannot afford to lose.

Which biotech stocks should I buy?

In this article, analysts have identified Adicet Bio (ACET), Amgen (AMGN), AstraZeneca (AZN), BioNTech SE (BNTX), Sere Therapeutics (MCRB) and Marinus Pharmaceuticals (MRNS) as potentially good biotech stocks to buy.

But note that analysts’ forecasts can be wrong and have been inaccurate in the past. Forecasts shouldn’t be used as a substitute for your own research. Always conduct your own due diligence before investing. And never invest or trade money you cannot afford to lose.

Why has the biotech stock price been going down?

Biotech stock prices fell because of weaker demand for some pharmaceutical products and negative investor sentiment for global equities.

Will biotech stocks recover?

Some analysts believe biotech stocks with strong financial performance and clinical successes will recover, but forecasts can be wrong and have been inaccurate in the past. You should do your own research and never invest more than you can afford to lose.

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