3 Biotech Stocks You Can Buy in 2013


Santa may have gone back to the North Pole until next year, but I'm always making lists and checking them twice to find out which companies have been naughty and nice. With our calendars having rolled over to the new year, it's time we take a closer look at the biotech sector.

The biotech sector is never short of drama, with 137,949 studies currently under way according to ClinicalTrials.gov, a National Institutes of Health database. Today, I want to look at three biotech companies that I feel have what it takes to outperform in 2013.

Gilead Sciences
I raise the white flag and surrender my underperform position on Gilead as probably the worst move I made over the past year. Gilead has monster potential in 2013 with its newly approved four-in-one oral HIV medication, Stribild, and the potential approval of sofosbuvir for the treatment of hepatitis C.

Stribild, which will phase out Truvada and Atripla for the treatment of HIV not too long before their patents expire, has been estimated by Deutsche Bank analysts to bring in $746 million in 2013. Considering it was just approved in August, that's ridiculous growth!

Sofosbuvir, a life-changing clinical-stage drug that I recently profiled, could also add billions in long-term sales to Gilead's bottom line. The drug, acquired when Gilead purchased Pharmasset in late 2011, has breezed through clinical trials and has shown very high or perfect levels of efficacy as a stand-alone therapy and in combination with GS-5885, as well as Bristol-Myers Squibb's daclatasvir.

This selection really shouldn't surprise you since I singled-out Exelixis as my one biotech to watch in 2013 just a few weeks earlier.

Exelixis recently received its first FDA-approval for its metastatic medullary thyroid cancer, or MTC, drug Cometriq. For many investors, the approval was a relative non-event since this ailment only affects 2,250 people within the U.S. annually. What makes Cometriq far from a pushover drug is the fact that it halted progression-free survival by 11.2 months versus just four months for the placebo. In the health-care community, that's a big deal, and it should handily push AstraZeneca's Caprelsa, which was approved in 2011 to treat MTC, easily out of the way.

Given the effectiveness of Cometriq in treating MTC, I'd be shocked if Exelixis didn't hit pay dirt on at least a few additional indications for the drug. I do understand that cancer drugs can respond completely different to different types of tumors and cancers, but the sheer effectiveness of Cometriq's studies thus far should push Exelixis much higher.

Yes, the same Dendreon whose advanced stage prostate cancer therapy known as Provenge has delivered nothing but disappointment since approval. But, as I've stated, this is the year that Dendreon gets its act together.

Dendreon recently laid off 600 employees and sold its Morris Plains manufacturing facility in New Jersey to Novartis for $43 million in a bid to cut costs and boost its cash on hand. At the same time, the company is working on gaining approval in Europe for Provenge -- a move that would likely double sales in a matter of months. In additional ongoing studies, Provenge's efficacy continues to suggest that it could find success in the future as a combination therapy.

Perhaps most importantly, Aetna has been a willing insurer of the $93,000 cellular immunotherapy treatment, and expanded its coverage of the treatment last year. I strongly suspect that additional insurers will follow suit in 2013 and begin covering Provenge for at least some of their plan members.

The other side of the coin
Check out the second half of this article to see which three biotech companies I wouldn't touch with a 10-foot pole in 2013.

The article 3 Biotech Stocks You Can Buy in 2013 originally appeared on Fool.com.

Fool contributor Sean Williams has no material interest in any companies mentioned in this article. You can follow him on CAPS under the screen name TMFUltraLong, track every pick he makes under the screen name TrackUltraLong, and check him out on Twitter, where he goes by the handle @TMFUltraLong.The Motley Fool owns shares of Dendreon. Motley Fool newsletter services have recommended buying shares of Gilead Sciences and Exelixis. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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