In our last column we looked at some favorite stocks in the medical diagnostics and life sciences sector. We now turn to six MoneyShow.com contributors for their best ideas in biotechnology, a sector with both high risk and the potential for high rewards.
John McCamant, The Medical Technology Stock Letter
Myovant Sciences (MYOV) is an emerging biotech leader focused on developing and commercializing innovative therapies for women's health and endocrine diseases.
Its lead drug development candidate, Relugolix, is an oral gonadotropin-releasing hormone (GnRH) receptor antagonist that rapidly lowers estrogen and progesterone in women and testosterone levels in men when administered once daily.
In our view, the drug candidate has the potential to a best-in-class molecule with superior efficacy, an improved safety profile and more convenient oral-dosing options. The compound is currently being tested in three Phase III trials, two in women's health and one in prostate cancer.
One of the company's key strengths is its experienced leadership team, highlighted by the demonstrated success of CEO Dr. Lynn Seely. Dr. Seely was chief medical officer at Medivation (MDVN) from 2005-2015.
Adding to her stellar resume, she is board-certified in internal medicine and endocrinology and metabolism, and completed a clinical fellowship in endocrinology and metabolism at UC San Diego.
In our view, the company has an excellent combination of an attractive Phase III asset and an experienced management team assembled to maximize shareholder value through astute drug development. We are initiating coverage of Myovant as a Buy.
Crista Huff, Cabot Undervalued Stocks Advisor
Alexion Pharmaceuticals (ALXN) is a biopharmaceutical company that researches and manufactures treatments of severe and rare health disorders.
Alexion installed Ludwig Hantson as CEO in March 2017, who proceeded to cut costs, discard weak prospective drugs and partnerships, and brought on new board directors with scientific experience.
ALXN is an undervalued aggressive growth stock. Unlike some biotech companies that chalk up annual net losses, Alexion is solidly profitable. Its blockbuster product Soliris is a medication used to treat paroxysmal nocturnal hemoglobinuria (PNH) and atypical hemolytic uremic syndrome (aHUS).
Earnings per share were $4.62 in 2016, and analysts are expecting $5.64 in 2017 and $7.08 in 2018, representing EPS growth rates of 22.1% and 25.5%, respectively. Alexion also differs from the typical high-priced biotech stock with a 2018 P/E of just 16.3.
We caution that this is a volatile stock. However, the drop in the share price during 2017 has been significant, which in turn presents investors with a significant capital gain opportunity as the stock potentially rebounds to its April 2016 high at $160.
We're just a few weeks away from the close of the tax-loss selling season, at which time the pressure should lift from the share price. As such, I rate the stock a Strong Buy.
Tom Bishop, BI Research
Anavex Life Sciences (AVXL) is a biopharmaceutical company dedicated to the development of novel drug candidates to treat central nervous system diseases.
Its lead candidate, Anavex 2-73 (A2-73) is currently in a Phase 2a clinical trial. A2-73 is an orally available drug candidate that targets sigma-1 and muscarinic receptors (rather than amyloid plaques).
The drug has a clean safety profile that shows promise to halt and/or possibly even reverse the course of Alzheimer's. On Nov. 4, the company made a presentation at the 2017 Clinical Trials on Alzheimer's Disease meeting.
This time the company had results for two years. A2-73 continued to show favorable safety and tolerability through 109 weeks.
Best of all, the drug continued to work through two years on this cohort. Existing medication only slowed the decline for six months before the disease resumed its usual decline.
A2-73 is also in preclinical testing on Parkinson's (results should be forthcoming soon) with complete funding from the Michael J. Fox Foundation.
A2-73 has also shown promising preclinical results for the treatment of epilepsy, Rett Syndrome (a clinical trial may start fairly soon with funding secured recently from the Rett Syndrome Foundation), and infantile spasms (both of which have received orphan drug designation).
All of the above at some point will make Anavex a tasty acquisition treat, if things continue to progress well. Nonetheless, the stock seems to be oblivious to all this news and is just marking time around $4 a share, perhaps impacted by year-end tax loss selling. I continue to rate the stock a Buy.
John Buckingham, The Prudent Speculator
Despite reporting third-quarter revenue and adjusted EPS that topped consensus analyst estimates, shares of Biogen (BIIB) fell as investors seemed to project negative forward trends on the firm's results.
The biotech firm said its adjusted EPS came in at $6.31, versus forecasts of $5.73, on revenue of $3.08 billion, versus estimates of $3.05 billion.
While we thought the quarter was solid, and we were glad to see the spinal muscular atrophy therapy Spinraza, with reported sales of $271 million (versus expectations of $253 million), there were multiple reports that analysts had "whisper" sales numbers of up to $300 million.
Additionally, its MS drug sales lost a little ground to the competitive drug, Ocrevus. While we never like to see things like this, we note that Biogen receives royalties for every dollar of Ocrevus sold. So, while it is not dollar for dollar, any ground lost to Ocrevus is not a total disaster.
Some may not be that excited about Biogen's third quarter, yet we were encouraged to see another solid quarter and continue to be attracted to its strong free cash flow generation and its willingness to aggressively buy back shares while investing in the future.
With cash and marketable securities of $6.5 billion, Biogen also has the ability to grow via acquisition, or continue to heavily invest in its promising drug pipeline. The shares trade at just slightly more than 13 times next-twelve-month earnings projections. Our target price has been inched higher to $439.
Stephen Leeb, The Complete Investor
While Bioverative shares dropped sharply, the approval wasn't surprising. It will be at least six to nine months before the market sees how competitive the Roche entry will be.
Meanwhile, the market has overlooked likely approval fairly soon of a new Bioverativ drug that will be the only treatment for "cold agglutinin" disease (CAD). This devastating autoimmune blood disease results in a so-far untreatable type of anemia in which antibodies overwhelm red blood cells.
Symptoms can range from chronic weakness to life-threatening conditions. We expect any erosion in Bioverativ's hemophilia franchise will be more than made up for its being the sole provider of a CAD treatment.
Regeneron Pharmaceuticals (REGN) , in my opinion, has the best technology of any biotech company in the world.
For one thing, a remarkable 100 percent of the drugs it markets, along with those now in its pipeline, have been developed in-house. That's testimony to the strength of the company's proprietary technologies.
Regeneron, with growth in the high teens achievable, is trading at a price-to-earnings growth multiple of 1.4, a number that is way out of whack. At its current price, the stock remains our favorite biotech idea.
Bob Ciura, Daily Profit
Amgen (AMGN) is making big bets on biotechnology and paying significant dividends along the way. The firm focuses on serious illnesses under-served in the market, including cardiovascular disease, oncology, bone health, neuroscience, nephrology and inflammation.
Amgen is struggling through declining sales of some key products, due to patent expirations. Two of the company's largest products, Enbrel and Neulasta, saw revenue decline 1% and 5% last quarter, respectively.
Fortunately, Amgen is making up for this with growth from new products. Aranesp revenue increased 6% to $535 million, while Prolia grew by 14% to $505 million.
These new products will allow Amgen to continue increasing its dividend. Amgen has a 3% dividend yield, and the company increases its dividend at high rates. In 2017 the company raised its dividend by 15%.
Healthcare stocks have unique risks that investors should consider. Most importantly, they face the dreaded "patent cliff," which can have a devastating effect on earnings as drug patents expire.
The good news is that the best big pharmaceutical stocks invest heavily in R&D to restore growth after patent losses. Amgen has restocked its pipeline, and generates billions in cash flow and will use this use excess cash flow to reward shareholders with buybacks and dividends.