Beat the Market with These 3 High-Potential Biopharma Stocks

Biopharmaceutical stocks have been tearing up the market this year, rewarding shareholders’ faith and savvy investments. Though thrill-seekers in biotech should always balance the potential for substantial rewards with the inherent risks of the sector, several stocks still have significant momentum and potential left to capitalize on.

The biopharmaceutical industry is experiencing a surge, driven by relentless innovations and market dynamics that forecast robust growth. According to industry research firm IMARC, the global biopharmaceutical market is projected to reach $166 billion by 2017. This projection, which anticipates double-digit annual growth, underscores the sector’s explosive potential.

Particularly intriguing are boutique drugs that target rare yet life-threatening conditions, which can become billion-dollar blockbusters for companies that successfully navigate the complex regulatory landscape. Moreover, large pharmaceutical companies like Eli Lilly, Merck, and Bristol-Myers Squibb are increasingly turning to biopharmaceutical mergers and acquisitions to rejuvenate their maturing product pipelines.

For investors, it’s crucial to remember that the biotech sector is inherently volatile. Statistically, only three out of every ten drugs that enter clinical trials will ever see the light of day. Thus, while the gains can be monumental, the risks are equally high. To mitigate risk, some conservative investors might consider exchange-traded funds like the iShares Nasdaq Biotechnology Index ETF (IBB), which boasts over $2.6 billion in assets and has gained 28% since the beginning of the year.

However, for those willing to venture into individual stocks, here are three promising biopharma companies, ranging from large cap to small cap, positioned to take advantage of the booming market.

Editor's Note: Analysis and insight for this article were originally sourced sourced from our friends at InvestorPlace

Gilead Sciences (GILD)

The Powerhouse

Gilead Sciences stands out as a formidable player in the biopharmaceutical industry with a market cap of $86.8 billion. Recently, GILD reached a new all-time high following the announcement of its Phase 2 study results for idelalisib, an oral drug for chronic lymphocytic leukemia (CLL). The study revealed a staggering 97% response rate, with 93% of trial patients surviving progression-free at the end of two years. CLL, the second most common form of leukemia in the U.S., could have a new potent treatment thanks to Gilead’s advancements.

Additionally, Gilead’s oral hepatitis C drug sofosbuvir is currently under formal review by the European Medicines Agency and the FDA. Combined with a strong HIV drug franchise, including the four-drug therapy Stribild, Gilead is making significant strides in major areas of health.

Market and Financial Strength

Despite having more than doubled in value over the past year, GILD‘s valuation remains reasonable with a forward price-to-earnings ratio of 19.5 and a price/earnings-to-growth ratio of 1.1. Gilead’s solid financial position and robust product pipeline make it an attractive option for conservative investors seeking a stable, high-growth opportunity within the biopharma sector.

Analyst Ratings and Overview

Consensus Rating	Average Price Target	Current Price	Potential Gain	Number of Ratings
Buy	$77.82	$67.82	13.42%	52

Summary of Analyst Outlook:

• GILD has an average brokerage recommendation (ABR) of 2.20, indicating a “Hold” rating from the market.
• Analysts predict a 12-month average price target of $77.82.
• The current stock price is $67.82, indicating about 13.42% upside potential based on the analysts’ price target.
• According to Tipranks, GILD received 31 Buy, 32 Hold, and 0 Sell ratings in the current month.

Sources:

1. WSJ: Detailed analyst estimates and ratings for Gilead Sciences Inc. (GILD).
2. Barron’s: Gilead Sciences Inc. research and ratings.
3. Zacks: Brokerage ratings and price targets for Gilead Sciences (GILD).
4. Nasdaq: Analyst research and ratings consensus for Gilead Sciences Inc. (GILD).
5. Tipranks: Stock forecast, analyst price target predictions, and rating trends for Gilead Sciences (GILD).

Alkermes (ALKS)

The Innovator

Alkermes, with a market cap of $4.3 billion, has carved a niche for itself with a diverse portfolio of 20 commercial products targeting major diseases such as multiple sclerosis, schizophrenia, and type 2 diabetes. Prominent drugs in its pipeline include 5461, a treatment for major depression by modulating opioid receptors, and 3831, an investigational medicine for schizophrenia that also targets opioid receptors to mitigate traditional side effects like weight gain.

Financial and Market Dynamics

Trading at a forward P/E ratio of 28, Alkermes might seem overvalued, yet its PEG ratio of 0.37 suggests significant growth potential. With $209 million in cash against $370 million in debt and an 8% year-over-year quarterly revenue growth, Alkermes maintains a strong financial footing. For midcap investors willing to endure more volatility for growth, Alkermes offers a promising, albeit risky, opportunity.

Analyst Ratings and Overview

Consensus Rating	Average Price Target	Current Price	Potential Gain	Number of Ratings
Buy	$36.50	$24.02	51.99%	10

Summary of Analyst Outlook:

• ALKS‘s Analyst Rating Consensus: The stock has an OUTPERFORM rating based on 12 analysts’ ratings. Another source indicates a Moderate Buy consensus based on the ratings of 12 Wall Street analysts.
• Potential Gain: The stock has a potential gain of between 42.68% to 51.99%, depending on the source and the average price target provided.
• Revenue and Earnings Forecasts: Analysts expect next quarter’s sales to be around $392.91M with a range of $372.98M to $404.50M. The previous quarter’s sales were $350.37M. Analysts also forecast next quarter’s earnings at $0.67 with a range of $0.44 to $0.85.

Sources:

1. Yahoo Finance – Alkermes plc (ALKS) Analyst Ratings, Estimates & Forecasts.
2. Yahoo – Alkermes plc (ALKS) Stock Price, News, Quote & History.
3. Marketscreener – Alkermes plc: Target Price Consensus and Analysts.
4. Tipranks – Alkermes (ALKS) Stock Forecast & Price Target.
5. Stock Analysis – Alkermes plc (ALKS) Stock Forecast & Price Targets.

Novavax (NVAX)

The Trailblazer

Novavax, a small-cap company with a market cap of $305.4 million, is making waves with its innovative approach to vaccine development. Rather than using traditional methods, Novavax employs recombinant DNA molecules to craft tailored solutions for emerging viral threats. This method enables rapid responses to pandemics, potentially bringing vaccines to market within weeks.

Currently, Novavax is developing vaccines for H5N1 influenza and respiratory syncytial virus (RSV) and has secured contracts with the U.S. Office of Biomedical Advanced Research and Development Authority and the Department of Homeland Security.

High Risk, High Reward

Trading just over $2 a share, Novavax has gained 79% over the past year, propelled by progress in clinical trials for RSV, seasonal influenza, and pandemic influenza. This stock represents a high-stakes gamble for risk-tolerant investors betting on a breakthrough in pandemic vaccines. If even one of Novavax’s projects hits the mark, the stock could skyrocket, offering exhilarating returns.

Analyst Ratings and Overview

Rating	Average Price Target	Current Price	Potential Gain	Number of Ratings
Moderate Buy	$19.33	$12.66	52.69%	5

Summary of Analysts’ Outlook:

Analysts have a Moderate Buy consensus opinion on NVAX stock, based on the ratings from 5 Wall Street analysts. The average price target is $19.33, indicating a potential gain of 52.69% from the current price of $12.66. The highest price target is $29.00, and the lowest is $10.00.

Sources:

1. Novavax Wikipedia
2. Nasdaq Analyst Research
3. Tipranks Novavax Forecasts
4. MarketWatch Analyst Estimates

Biopharma investing isn’t just about securing financial gains; it’s about contributing to a sector poised to make profound impacts on global health. As these companies continue to push the boundaries of medical science, they offer investors the chance to be part of a transformative journey with the potential for both high rewards and significant risks.