August 18, 2017
By Mark Terry, BioSpace.com Breaking News Staff
Biotech stocks can be a great investment, at least for people with strong stomachs. Although top stocks over the years, like Gilead Sciences, which gained more than 4,930 percent over the last 15 years, can be fantastic, they are well known for their volatility as well. Using the criteria of best growth prospects with least risk, Keith Speights, writing for The Motley Fool, takes a look at the three best healthcare stocks.
Headquartered in San Jose, Calif., Align Technology is a medical device company that manufactures 3D digital scanners and the Invisalign clear aligners used in orthodontics. Speights refers to it as the “Tesla of teeth.”
He writes, “Align stock has soared in recent years, along with the company’s sales and earnings. Wall Street analysts project the company will grow earnings by more than 25 percent over the next five years.”
In terms of risk, it is facing the loss of patent protection for Invisalign, but Speights feels the company is so far ahead of any competition that it’s minimal. It also has a competitive advantage because of its customized manufacturing infrastructure.
is currently trading for $168.89.
Speights choice of Celgene isn’t a huge surprise. Analysts have been noting it as the fastest growing biotech stock since at least March 2016. Although it’s clearly a dominant player in the biotech market, investors have had something of a bumpy ride. Shares traded on July 23, 2015 for $139.01, dropped on Sept. 28 to $104.79, rose back to $127.20 on Nov. 2, and dropped against to $107.49 on Nov. 13. That kind of rockin’-and-rollin’ continued through 2016 and into 2017 as well. are currently trading at $128.29.
Celgene’s dominance has to do with its top drug, Revlimid, which is on pace to be the top-selling oncology drug in the world by 2022, with projected sales of more than $14 billion. The company’s adjusted annual earnings forecasts for the next couple years is 22 percent.
Speights writes, “I expect the biotech will deliver this strong growth with its current lineup and several promising new drugs on the way. In addition to Revlimid, Celgene claims two other blockbusters in Pomalyst and Otezia and a near-blockbuster drug with Abraxane. The company also thinks it will win regulatory approval by 2022 for 10 more candidates that have the potential to generate annual sales of at least $1 billion.”
The risk, of course, is that not all those drugs will be approved and that some company will come out with a better drug than Revlimid to eat away at its dominance. But Speights thinks it’s still a strong company and is likely to make deals with smaller biotechs that will bolster its bottom line even more.
Based in Boston, Mass., Vertex’s strength is Kalydeco for cystic fibrosis (CF). In addition, it has more than a dozen research programs for other rare diseases. The company’s stock has more than doubled so far this year, based on positive clinical data for its experimental CF drugs and for sales of Kalydeco and Orkambi, both for CF.
Speights writes, “Wall Street thinks Vertex will be able to grow earnings by a whopping 68 percent annually over the next five years. That might seem a tough trick to pull off, but I agree that Vertex should be able to do it.”
That will depend on whether its tezacaftor-Kalydeco combo therapy for CF gets approved. If it does, the company’s potential market will increase by about 50 percent. And the company has other drug combos in the pipeline, and if those are successful, could expand the market by 40 percent or more.
Speights does note that if they don’t get approved, the company will be hurt pretty badly, but the chances of success seem pretty good.
is currently trading for $149.12.
