3 Hot Biotech Stocks to Buy in June

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The biotech sector, which started the year on a strong note, has been witnessing a decline especially from March -- year-to-date (YTD), the Zacks-categorized Medical-Biomedical/Genetics industry is down 1.1% while the overall market is up 8.2%. A key concern for the sector remains the drug pricing issue which remains an overhang. Given the intense political and media focus on this issue, investors remain jittery about putting their money in this corner of the market.

With the industry currently ranked among the bottom 40% of the 256 Zacks-ranked industries, should one avoid stocks in this segment of the market? Not really -- while we admit that the sector is facing challenges like declining sales of legacy products, biosimilar competition, mixed earnings results, high profile pipeline setbacks and slower-than-expected new product launches, there are some factors that provide upside potential.

The industry will continue to witness demand for its products given an aging population and the increasing prevalence of a wide variety of diseases. Strong late-stage pipelines, innovative treatments, impressive results, and increased health care spending should support growth. According to a report issued by the QuintilesIMS Institute, medicine spending through 2021 is expected to grow in mid-single digits. Trump's pro-business stand is also expected to benefit the sector. A faster drug approval process and the proposed removal of outdated regulations that drive up costs and slow down innovation should also work in favor of the sector.

While drug pricing will remain a headline risk until some plan is announced by the administration, here are a few biotech stocks that have performed well YTD and look well-positioned.

First on our list is Tarrytown, NY-based Regeneron Pharmaceuticals, Inc. REGN . While eye drug, Eylea, the company's key growth driver continues to perform well, Regeneron has been working on diversifying its portfolio and gained FDA approval for two drugs this year -- Dupixent (moderate-to-severe atopic dermatitis) and Kevzara (moderately to severely active rheumatoid arthritis). Both drugs have blockbuster potential with Dupixent already off to a strong start. The company also has a strong pipeline comprising 16 candidates including for cancer. Regeneron, a Zacks Rank #2 (Buy) stock, has outperformed the Zacks-categorized Medical-Biomedical/Genetics industry with shares gaining 25% YTD. Estimated earnings growth for the current year is 27.4%.

Next on the list is Richmond, CA-based Sangamo Therapeutics, Inc. SGMO . Sangamo got a shot in the arm last month with Pfizer collaborating with the company for the development and commercialization of gene therapy programs for hemophilia A. The agreement covers SB-525, one of Sangamo's four lead pipeline candidates, and will see Sangamo getting an upfront payment of $70 million. Sangamo could also get milestone payments of up to $475 million, including up to $300 million related to SB-525 and up to $175 million for additional hemophilia A gene therapy candidates that may be developed under the collaboration. Tiered double-digit royalties on net sales also form a part of the deal. This deal bodes well for the long-term prospects of the company. Shares of this Zacks Rank #2 stock are up a whopping 123.9% YTD.

Another Zacks Rank #2 biotech stock that has had a strong run so far this year is Puma Biotechnology, Inc. PBYI . Puma's shares are up 149.4% YTD with the company receiving a huge boost with an FDA advisory panel voting in favor of its experimental breast cancer treatment, neratinib. The FDA's Oncologic Drugs Advisory Committee voted 12 - 4 in favor of approving neratinib for the extended adjuvant treatment of HER2-positive early stage breast cancer based on a favorable risk-benefit profile. Given the favorable vote, chances of gaining approval look pretty high. FDA approval would be a major boost for Puma which currently has no marketed products in its portfolio.

While all three stocks mentioned above are Zacks Rank #2 stocks, you can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here .

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Regeneron Pharmaceuticals, Inc. (REGN): Free Stock Analysis Report

Sangamo BioSciences, Inc. (SGMO): Free Stock Analysis Report

Puma Biotechnology Inc (PBYI): 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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