If you're looking for a way to beat the market over the long run, biotech stocks look like a pretty good option. Over the last 10 years, the SPDR S&P Biotech ETF (NYSEMKT: XBI), which holds positions in more than 100 biotech stocks, has nearly doubled the performance of the S&P 500 Index.
Some investors are leery of biotech stocks, though. That mindset stems at least in part from the fact that hundreds of small biotechs are unprofitable and have no approved products. Still, there are quite a few large-cap biotech stocks that generate significant profits and claim multiple drugs on the market.
The 10 biggest biotech stocks together generate more than $50 billion in annual earnings and well over $200 billion in annual sales. Here's what you need to know about these biggest biotech stocks on the market right now.
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What exactly is a biotech?
Technically speaking, a biotech is a company that develops biologic drugs. These biologic drugs are large, complex molecules that are manufactured within a living organism.
Any drugmaker that develops biologic drugs could be referred to as a biotech. Because biologic drugs have proven to be highly effective at treating lots of diseases, most big pharmaceutical companies now include biologic drugs in their product lineups and pipelines. But, at least in most cases, these big pharma companies aren't called biotechs.
Johnson & Johnson (NYSE: JNJ), for example, markets multiple biologic drugs, including the company's top two best-selling drugs, Remicade and Stelara. However, J&J usually isn't referred to as a biotech because it makes the majority of its revenue from sources other than biologic drugs.
On the other hand, Gilead Sciences (NASDAQ: GILD) usually is categorized as a biotech stock. However, Gilead makes most of its revenue from non-biologic drugs. So, why is Gilead called a biotech stock while J&J isn't? The word "biotech" has also been frequently used in the past to describe any small drugmaker that wasn't a big pharma company. And for much of its existence, Gilead was a relatively small drugmaker.
As you can see, identifying exactly which drug stocks are biotech stocks and which aren't isn't a straightforward task. For this ranking of the biggest biotech stocks, we'll use two criteria. First, any stock that's included in the holdings of the SPDR S&P Biotech ETF will be counted as a biotech stock. Second, any big pharma stock that isn't in the ETF's holdings but derives more than half of its total revenue from biologic drugs will be considered to be a biotech stock.
Biggest biotech stocks
The 10 biggest biotech stocks on the market range from healthcare giants that have been in business for more than a century to companies that have grown rapidly in just the last few years. These biotechs focus on a wide range of therapeutic areas, from relatively common inflammatory diseases to rare genetic diseases.
|Company||Market Cap||Key Therapeutic Areas of Focus|
|1. Roche Holdings (NASDAQOTH: RHHBY)||$237 billion||Cancer, rare diseases|
|2. Novo Nordisk (NYSE: NVO)||$119 billion||Diabetes, rare diseases|
|3. AbbVie (NYSE: ABBV)||$116 billion||Cancer, immunology|
|4. Amgen (NASDAQ: AMGN)||$113 billion||Bone disease, migraine|
|5. Eli Lilly (NYSE: LLY)||$107 billion||Cancer, diabetes|
|6. Gilead Sciences (NASDAQ: GILD)||$88 billion||Cancer, antivirals|
|7. Celgene (NASDAQ: CELG)||$66 billion||Cancer, immunology|
|8. Vertex Pharmaceuticals (NASDAQ: VRTX)||$47 billion||Rare diseases|
|9. Biogen (NASDAQ: BIIB)||$46 billion||Rare diseases|
|10. Regeneron Pharmaceuticals (NASDAQ: REGN)||$34 billion||Eye diseases|
Data source: Yahoo! Finance. Market caps as of June 24, 2019.
Here are some highlights for each of these big biotech stocks.
1. Roche Holdings
Roche's majority stake in Genentech made the Swiss healthcare giant a leader in the biotech world long before it finally acquired all of Genentech in 2009. In 2017, four of the world's top 10 best-selling biologics were marketed by Roche. Sales are slipping for a couple of those blockbuster drugs now, though, as they face competition from biosimilars -- which are similar enough to the original drug that there isn't a clinically meaningful difference.
However, Roche claims several biologic drugs for which sales are soaring. These include breast cancer drug Perjeta, multiple sclerosis drug Ocrevus, and cancer immunotherapy Tecentriq.
The big biotech has a robust late-stage pipeline. Roche hopes to pick up approvals for additional indications for several of its existing drugs, especially Tecentriq. Its pipeline also includes several promising new drugs targeting the treatment of cancer, inflammatory diseases, and rare diseases.
2. Novo Nordisk
Novo Nordisk makes most of its revenue from its strong diabetes franchise. The company's products include top-selling insulin products such as Tresiba and NovoRapid. Novo Nordisk's fastest-rising product is type 2 diabetes drug Ozempic, which ranked as one of the top new drugs launched in 2018.
The drugmaker has also enjoyed success on a couple of other fronts. Obesity drug Saxenda is picking up strong sales momentum. Novo Nordisk's hemophilia and growth disorders drugs contribute significantly to its top line.
Novo Nordisk's late-stage pipeline doesn't appear to be overly impressive, though. The company only has two late-stage candidates, with Ozempic being evaluated for treating diabetes, and somapacitan in phase 3 clinical testing for treating growth disorders. However, Novo Nordisk's early and mid-stage pipeline could be more promising, with several new diabetes, obesity, and rare disease drugs in development.
AbbVie is another big pharma that qualifies as a biotech thanks primarily to its biologic immunology drug Humira. In 2018, Humira ranked as the top-selling drug in the world and generated 61% of AbbVie's total revenue. However, sales for the drug have begun to slip as Humira faces biosimilar competition in Europe.
The good news for AbbVie is that it has several potential products to offset the declining sales for Humira. Imbruvica is at the top of that list. EvaluatePharma projects that AbbVie's cancer drug will be one of the five biggest blockbuster drugs of the future, with sales of $9.5 billion by 2024. Endometriosis drug Orilissa and new psoriasis drug Skyrizi are also expected to be big winners.
AbbVie's pipeline claims what could be the second-biggest new drug launched in 2019: upadacitinib. The big biotech thinks the drug could achieve peak annual sales of $6.5 billion. In addition, AbbVie has late-stage clinical studies in progress in hopes of picking up additional approvals for Orilissa in treating uterine fibroids and for Imbruvica and Venclexta in treating other types of cancer.
Amgen's lineup currently includes seven blockbuster drugs. The problem for the big biotech, though, is that sales are under pressure for four of these drugs -- Enbrel, Neulasta, Epogen, and Aranesp -- with intense competition from newer rivals.
However, sales continue to soar for osteoporosis drug Prolia. Multiple myeloma drug Kyprolis could be on track to become Amgen's next blockbuster. The company also has high hopes for cholesterol drug Repatha, leukemia drug Blincyto, and migraine drug Aimovig, which Amgen is co-marketing with Novartis (NYSE: NVS).
Amgen doesn't have a particularly deep late-stage pipeline with only six programs, three of which target new indications for existing drugs. Another of the biotech's late-stage candidates is an experimental Alzheimer's disease drug that uses a similar approach taken by several other drugs that have already flopped in clinical testing. However, Amgen's early-stage pipeline looks promising, with several immunotherapies targeting various types of cancer in development.
5. Eli Lilly
You might not think of Eli Lilly as a biotech stock. But with the company's top-selling diabetes, cancer, and immunology therapies, well over half of Lilly's total revenue comes from biologic drugs, making it a biotech stock according to the criteria used for this ranking.
Lilly's rising stars right now include diabetes drug Trulicity, insulin product Basaglar, breast cancer drug Verzenio, and psoriasis drug Taltz. Increasing sales for these and some of the company's other products have enabled Lilly to more than make up for falling sales for several of its older drugs. New migraine drug Emgality should be another big winner for Lilly.
The drugmaker also claims a solid pipeline with 18 late-stage programs. These programs include new immunology drug mirikizumab and pain drug tanezumab as well as existing drugs such as Jardiance and Trulicity targeting additional indications.
6. Gilead Sciences
Gilead Sciences pioneered the treatment of HIV, and the biotech remains the market leader with six blockbuster HIV drugs in 2018. Gilead's latest success story, Biktarvy, appears likely to become the best-selling HIV drug of all time.
But Gilead isn't only focused on HIV. The company's hepatitis C virus (HCV) franchise continues to generate billions of dollars in revenue annually, although sales have dropped as Gilead and its main rival AbbVie battle each other for fewer new patients. Gilead also is a leader in cell therapy with Yescarta, a drug it gained with its 2017 acquisition of Kite Pharma.
The company's top late-stage pipeline candidate, filgotinib, could make Gilead a winner in yet another therapeutic category -- immunology. It's also hoping to add new approved indications for Descovy as a pre-exposure prophylaxis (PrEP) therapy for HIV and for Yescarta as a treatment for previously treated diffuse large B-cell lymphoma (DLBCL).
Celgene's flagship product right now is Revlimid. This blood cancer drug currently accounts for over 60% of the biotech's total revenue. However, Revlimid faces generic competition beginning in 2022.
In addition to Revlimid, though, Celgene claims several other big winners: multiple myeloma drug Pomalyst, immunology drug Otezla, and cancer drug Abraxane. Celgene's pipeline is loaded with potential blockbusters, including multiple sclerosis drug ozanimod, cancer cell therapies bb2121 and liso-cel, blood disorder drug luspatercept, and myelofibrosis drug fedratinib.
However, Celgene won't be a big biotech stock for very long. The company is being acquired by Bristol-Myers Squibb (NYSE: BMY).
8. Vertex Pharmaceuticals
Vertex Pharmaceuticals dominates the market for treating cystic fibrosis (CF), a rare disease that can cause serious damage to the lungs and other organs. The biotech's currently approved CF drugs -- Kalydeco, Orkambi, and Symdeko -- combined to deliver sales of over $3 billion in 2018.
Another successful CF drug could be on the way for Vertex. The company expects to win U.S. and European approvals for a triple-drug combination in 2020. This combo, if approved, should expand the number of patients eligible for treatment with Vertex's drugs by 75%.
Vertex is also seeking to expand into diseases beyond CF. The biotech teamed up with CRISPR Therapeutics (NASDAQ: CRSP) to develop gene therapies targeting rare blood disorders beta-thalassemia and sickle cell disease. Vertex acquired Exonics Therapeutics and expanded its relationship with CRISPR Therapeutics to focus on gene therapies for treating rare genetic diseases Duchenne Muscular Dystrophy (DMD) and Myotonic Dystrophy Type 1 (DM1). Vertex's pipeline also includes a promising pain drug.
Biogen rose to become a top biotech based on the strength of its multiple sclerosis (MS) franchise. However, sales for its interferon products Avonex and Plegridy have slipped. Tysabri also faces tough competition from Roche's Ocrevus, which Biogen initially developed but licensed to the Swiss drugmaker several years ago.
The biggest growth driver for Biogen now is its spinal muscular atrophy (SMA) drug Spinraza. However, that growth could be in jeopardy with the U.S. Food and Drug Administration's (FDA) approval for Novartis' SMA gene therapy Zolgensma.
Biogen had hoped to launch a game-changing Alzheimer's disease drug with aducanumab, but the once-promising drug failed in late-stage clinical studies. That leaves Biogen with four late-stage pipeline candidates, one of which also targets Alzheimer's disease.
10. Regeneron Pharmaceuticals
Regeneron Pharmaceuticals' eye-disease drug Eylea fueled the biotech's early success. Eylea continues to generate more than 60% of Regeneron's total revenue.
The company's partnership with Sanofi (NASDAQ: SNY) has also provided several winners for Regeneron. Eczema drug Dupixent has been the most successful of these drugs so far. Cancer immunotherapy Libtayo is also expected to become a blockbuster drug from the collaboration between Regeneron and Sanofi.
Regeneron's pipeline includes seven late-stage programs. Four of these late-stage programs are evaluating existing drugs in treating new indications. The three new drug candidates include promising pain drug fasinumab, which Regeneron is developing with Teva Pharmaceutical (NYSE: TEVA).
Risks for these big biotech stocks
Each of these 10 big biotech stocks face risks. There's always the possibility of clinical failures. Most of the companies' products compete against rival drugs that are already on the market and potentially new rival drugs on the way. Several of the biotechs, including AbbVie, Celgene, and Roche, either are already battling biosimilar or generic competition or will do so in the not-too-distant future.
There's also the possibility that healthcare reform in the U.S. could hurt some of these stocks. Politicians from both major parties have focused on ways to address high prescription drug costs. Some of the proposed solutions to these problems could negatively affect the growth prospects for these biotechs.
However, these 10 biotech stocks aren't as risky as most small-cap biotech stocks. They all generate significant revenue and profits that can be used to invest in developing new drugs or to make strategic acquisitions to fuel growth. Over the long run, big biotechs tend to get even bigger.
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Keith Speights owns shares of AbbVie, Celgene, Gilead Sciences, SPDR S&P Biotech, and Vertex Pharmaceuticals. The Motley Fool owns shares of and recommends Biogen, Celgene, and Gilead Sciences. The Motley Fool owns shares of CRISPR Therapeutics. The Motley Fool recommends Amgen, Johnson & Johnson, Novo Nordisk, and Vertex Pharmaceuticals. The Motley Fool has a disclosure policy.