3 Biotech Stocks That Make the Grade for Investors

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The happening but highly volatile biotech sector has been under immense pressure since the end of last year. Stressed balance sheets, growing political pressure on drug prices, and other broad-based factors had an impact on this sector, cutting short its phenomenal run.

But if we are to believe Alex Berenson who said "If only the human body could handle trauma as well as biotechnology stocks do" , the picture should not be as bad as it seems. The biotech stocks are still in favor and continue to intrigue investors.

With the Federal Reserve maintaining its dovish stance and Janet Yellen stating that they will "proceed cautiously" with interest rate hikes, the sector will continue to witness merger and acquisition (M&A) deals. Already, at the beginning of the year Shire plc SHPG announced that it will be combining with Baxalta Incorporated BXLT in a deal worth approximately $32 billion.

Meanwhile, in a bid to boost product portfolio and pipeline, we should continue to see partnerships among large cap and development-stage companies across different therapeutic areas like autoimmune, cardiovascular and central nervous system disorders, immuno-oncology and the hepatitis C virus (HCV).

In addition, commercialization and sales ramp up of products that gained approval last year like Imlygic, Ibrance, Strensiq, Praluent, Repatha and label expansion of existing drugs including Keytruda, regular pipeline updates should be flowing in from time to time.

Finally, who can forget that the first FDA-approved biosimilar, Zarxio - a biosimilar version of biotech major Amgen Inc.'s AMGN blockbuster drug, Neupogen - entered the market last year. Biosimilars are being touted as the next big thing and biotechs are eyeing an entry into this space.

But the crucial question is, which one of these biotech stocks actually makes the grade for investors? We have picked three stocks using our Zacks style score system . Not only do these stocks have a VGM score ('V' for Value, 'G' for Growth and 'M' for Momentum) of 'A' but they also have a Zacks Rank #1 (Strong Buy) or #2 (Buy).

The VGM score rates each stock on their combined weighted styles, helping to identify those with the most attractive value, best growth, and most promising momentum, across the board.

Here are the three biotech stocks that are making the grade at the moment:

Without a doubt, our first pick is Gilead Sciences Inc.GILD . This Zacks Rank #1 stock known for its revolutionary blockbuster HCV drugs, Sovaldi and Harvoni, is focusing on bringing to market chronic HCV treatment regardless of genotype. And it's not just HCV. Gilead also has a strong presence in the HIV market. Late last year, the company gained approval for another HIV treatment, Genvoya, in the U.S. and EU.

The company is not only working to expand its business into other therapeutic areas but also looking to boost its portfolio and pipeline through partnerships and strategic acquisitions. The stock of this Foster City, CA-based company has seen its current year earnings per share (EPS) estimate moving up by 2.98% over the past 60 days.

Next comes on our list Dublin, Ireland-based Horizon Pharma plcHZNP . The company is focused on developing and commercializing treatments in the areas of arthritis, pain, inflammatory and orphan diseases. Some key marketed products in the company's portfolio include Actimmune, Duexis and Vimovo among others.

Of late, Horizon Pharma has been quite active on pursuing strategic acquisitions to expand and diversify its portfolio. While the company acquired Crealta Holdings earlier this year and added Krystexxa (the first and only FDA-approved medicine for chronic refractory gout) and Migergot (vascular headache) to its portfolio, the May 2015 Hyperion Therapeutics acquisition added a couple of urea cycle disorder drugs too. The current year EPS estimate of this Zacks Rank #2 stock has increased by 5.46% over the past 60 days.

And things look even better with our final pick AMAG Pharmaceuticals, Inc.AMAG - a Waltham, MA-based company, carrying a Zacks Rank #1. The company is focused on the development and commercialization of drugs targeting maternal health, anemia and cancer supportive care. Currently, the primary sources of revenue at the company include sales from Feraheme, Makena (added following the Nov 2014 acquisition of Lumara Health) and the Cord Blood Registry/CBR Services (operated through CBR - an umbilical cord blood stem cell collection and storage company which AMAG acquired in Aug 2015).

AMAG is working on label expansion of its drugs in an attempt to increase its market share. The current year EPS estimate of the stock has increased substantially by 117.2% over the past 60 days.

Bottom Line

Constant M&As, clinical data, regulatory reviews and upcoming scientific conferences should continue to add to the excitement in the biotech sector. In the meantime, investors should not forget to bet on these top-ranked biotech stocks that also have superb Style Score.

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days . Click to get this free report >>

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

AMAG PHARMA INC (AMAG): Free Stock Analysis Report

GILEAD SCIENCES (GILD): Free Stock Analysis Report

AMGEN INC (AMGN): Free Stock Analysis Report

HORIZON PHARMA (HZNP): Free Stock Analysis Report

SHIRE PLC-ADR (SHPG): Free Stock Analysis Report

BAXALTA INC (BXLT): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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