Biotech stocks of all sizes are known to experience extreme volatility. One notable example in 2019 is Biogen, which disappointed investors with an announcement it will end a Phase 3 trial of its drug called aducanumab. Its share price consequently plunged 30 per cent – not in one year but in one single trading session.
However, investing in biotechnology stocks does offer an attractive opportunity to traders with a higher than average level of risk tolerance. Savvy investors can certainly profit from the following outperforming biotech stocks that you should keep an eye on.
Should I invest in biotech stocks? Try SPDR S&P Biotech ETF for a start
Investors looking for a diversified exposure to the biotech stock market without buying many individual stocks could do so through investing in one of the top biotech exchange traded funds. The SPDR S&P Biotech ETF is composed of a mix of small-cap, mid-cap, and large-cap biotech stocks.
Trade SPDR S&P Biotech ETF - XBI CFD
The purpose of the ETF is to offer investors a return that is approximately equal to the S&P Biotechnology Select Industry Index.
In total there are 118 different holdings in the ETF and the largest stock by weight is Seattle Genetics at 2.09 per cent, followed by AbbVie at 1.85 per cent. Over the past 10 years the ETF generated an annualised return of nearly 16 per cent (as of September 30, 2019) and a five-year annualised return of 8.3 per cent.
However, the returns pale in comparison to the biotechnology sector stocks mentioned below, but the ETF offers a safer investment as it is heavily diversified.
Best biotech stocks: Galapagos
Belgium-based Galapagos focuses on the discovery, development, and commercialisation of innovative medicines to treat multiple diseases. The stock entered 2019 below $100 per share and is poised to end the year north of $200 per share.
While the biotech stock’s outperformance started in January, momentum picked up in mid-July. Investors were pleased with the company’s announcement of a research and development partnership with industry behemoth Gilead. As part of the deal, Gilead paid Galapagos nearly $4bn upfront along with a supplemental equity investment worth $1.1bn. Gilead’s investment lifted its ownership stake in Galapagos from 12.3 per cent to 22 per cent.
The finer details of the partnership grants Gilead exclusive access to current and future compounds in Galapagos’ pipeline. In return, Galagpos receives much needed resources and support to expand its research activities and investment in its commercial infrastructure.
Investors hoping that Gilead buys the smaller Galapagos outright may have to wait a while. Gilead will not be able to increase its ownership beyond 29.9 per cent for another 10 years.
Top biotechnology stocks: Vertex Pharmaceuticals
Global biotechnology company Vertex Pharmaceuticals oversees four medicines which target the underlying cause of cystic fibrosis (CF). Shares of Vertex traded between $160 per share and $190 per share for most of 2019 before soaring higher in late October.
The momentum can be directly traced to the US Food and Drug Administration’s (FDA) approval of Vertex’s therapy called Trikafta. Vertex’s therapy is meant to treat cystic fibrosis in patients aged 12 and older who suffer from a mutation in the CFTR gene.
The company’s milestone is the culmination of more than two decades of research. Vertex was given the green light by the regulatory body to offer a potential treatment to nearly 90 per cent of all people who suffer from CF, including 6,000 in the US alone.
Vertex still has ongoing Phase 3 studies that can increase its total addressable market even more. The company is currently evaluating its drugs in people aged six to 11 and has plans to further expand to children age six and under.
Biotechnology stocks to watch: Biomarin
Biomarin focuses on addressing innovative therapies for serious and life-threatening rare and ultra-rare genetic diseases. 2019 has not been a kind year for the California-based stock as it peaked near $100 per share in early 2019 only to flirt with the $60 level in October.
However, sentiment quickly turned around for Biomarin after the company’s October 23 earnings report which was highlighted by overall revenue growth and increased profit. The stock’s momentum was further supported by a November 14 business update.
Management said during an industry conference in November that it is on track to submit marketing applications to US and European regulatory bodies for its investigational gene therapy called valoctocogene roxaparvovec. The encouraging update places the company one step closer to management’s pledge to generate $2bn of revenue in 2020.
Best biotech stocks to invest in: Catalent
New Jersey-based Catalent provides advanced delivery technologies, development, drug manufacturing, biologics, gene therapies and consumer health products to clients worldwide.
The company started attracting investor attention in early 2018 when it acquired Cook and Accucaps while simultaneously expanding its US biologics facility. Several Wall Street analysts were predicting a strong performance in 2019 and investors who paid attention were handsomely rewarded.
Below is a summary of some of the notable events which helped lift the stock higher.
On January 14 Catalent reported fiscal second quarter results in which the company earned 45 cents per share on revenue of $623m. Wall Street analysts were expecting EPS of 37 cents on revenue of $607.91m.
On April 1 the company confirmed a Phase 1 Clinical Trial of its B-Cell Lymphoma started with the dosing of the first patient. Two weeks later the company acquired Paragon Bioservices for $1.2bn to gain exposure to the gene therapy manufacturing market.
On June 19 the company acquired a Bristol-Myers Squibb manufacturing facility. Within three days, research firm Jefferies turned bullish on the stock. Within one month the good news continued as management announced it has expanded capacity for its global spray drying operations.
Most recently, Catalent announced a long-term supply agreement with BeiGene to manufacture a treatment for mantle cell lymphoma called BRUKINSA. Catalent commented at the time that it expects BRUKINSA to be the “first of many” approvals of its therapies to target hematologic cancers.
Best biotech stocks: Sartorius
Shares of Germany-based Sartorius AG are up more than six-fold over the past five years with a 100% return in 2019 alone. The Germany-based company supports and helps customers develop and produce drugs safely, timely, and economically.
Sartorius remains focused on driving growth for years to come. The company expects to grow sales from the growing and aging population which puts a strain on healthcare service providers to provide proper care. By 2025 the company expects consolidated sales revenue to be around 4 billion euros, two-thirds of which will be generated organically. By comparison, revenue for the first nine months of 2019 came in at just 1,1355.8 million euros.
Part of the growth will come from an expansion to new markets, including China, South Korea, and India. The expansion comes at a time when private household healthcare spending and government spending in these three countries are rising.
Trading Biotech stocks with CFDs
Although the sector has been considered a hot investment for most of this decade, the latest biotechnology stock outlook suggests biotech stocks are down 20% over the past year.
Does it mean you should hold back from trading biotech stocks? Not at all. Contracts for difference give you the flexibility to trade on both bearish and bullish markets. So, even if a market’s price takes a U-turn, you can still profit from trading biotech stocks with Capital.com.