Biotech stocks haven't been at their best of late. The SPDR S&P Biotech Exchange Traded Fund (NYSEMKT: XBI) has lost more than 30% of its value over the prior 12 months. The XBI is thus bumping up against its 52-week low as of this writing.
Investors have been backing away from biotech stocks over the past year for many reasons, including inflationary pressures, the risk of rising interest rates, the threat of fundamental drug pricing reform in the U.S., and the appeal of other high-growth asset classes like cryptocurrency.
All isn't lost, however. Biotech, as a whole, is still going through an unprecedented period of innovation. As a result, scores of untapped, high-value therapeutic markets are starting to open up, a fact that bodes well for the industry's long-term fortunes. Savvy investors, in turn, would be wise to take advantage of this broad selloff in biotech.
Which biotech stocks are the most attractive buys amid this turmoil? Here are my top three biotech stock picks for 2022.
Growth, income, and stability galore
Even though Amgen's (NASDAQ: AMGN) shares are down modestly year over year at the moment, the biotech giant has been bucking the broader downward trend in the space since Dec. 1. Thanks to a hefty increase to its dividend and a marketwide pivot to large-cap stocks among investors, Amgen's stock has gained a noteworthy 13.2% since the start of December. This upward trend ought to continue for the remainder of the year.
Amgen's stock should be a top performer this year for three key reasons. First and foremost, the biotech's above-average annualized dividend yield of 3.41% should appeal to the risk-averse crowd, as well as those seeking a reliable hedge against inflationary pressures. Second, Amgen is forecast to post a respectable 4.1% rise in annual sales in 2022. That's not a game-changing level of growth, to be sure, but the biotech's top line is at least headed in the right direction. Third, Amgen appears to now have its next flagship medicine in hand, with the Food and Drug Administration's (FDA) approval of lung cancer treatment Lumakras last May.
All things considered, Amgen seems poised for healthy rebound in 2022.
A deeply undervalued gene-editing stock
Beam Therapeutics (NASDAQ: BEAM) was the apple of Wall Street's eye not that long ago. As the broader biotech industry lost favor with investors during the second half of 2021, however, this once highflying stock lost an eye-popping 47% of its value within a matter of months.
The silver lining is that Beam's core value proposition remains completely intact, despite this U-turn in investor sentiment. In brief, Beam is on track to unveil the first human trial data for its novel base-editing tech in patients with sickle cell disease, possibly before the end of this year.
While this first indication has already attracted numerous competitors, the real issue at hand is proof that Beam's base-editing tech works as designed. If it does, the company might be among the first next-generation gene-editing companies to get bought out.
That's not a slam-dunk proposition by any means. But there is a growing desire in the world of big pharma to own a piece of this gene-editing tech lock, stock, and barrel.
Beam, for its part, could transform into a red-hot buyout candidate if the preliminary human data is up to code.
A top C-19 antibody play
Vir Biotechnology (NASDAQ: VIR) is a potential home-run play. Wall Street's current consensus price target suggests that this mid-cap biotech stock could appreciate by a handsome 172% this year.
What's all the fuss about? Vir and GlaxoSmithKline's co-developed antibody, sotrovimab, might be the only one on the market effective against the omicron variant of COVID-19. That possibility implies that sotrovimab's sales could skyrocket in 2022 and beyond.
As things stand now, Wall Street's high-end estimate has the drug generating more than $1.5 billion in sales for Vir this year alone. What's more, if the pandemic turns into an endemic situation, the demand for antibodies effective against a wide array of variants like sotrovimab will undoubtedly increase over time.
Vir, in short, might have a bona fide franchise level drug on its hands with sotrovimab. Aggressive investors, in turn, may want to scoop up some shares soon.
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