7 Best Biotech Stocks To Add to Your Portfolio in 2022
Biotech stocks have a reputation as a moderate- to high-risk investment. That’s because many of these companies spend a fortune on research and development with no guarantee their products will ever reach the market.
Many biotech stocks tend to underperform compared to the rest of the Nasdaq Composite Index, a market cap-weighted index predominantly focused on technology.
However, if you have a fairly high risk-tolerance, a bear market represents a good time to take a chance on some stocks in the biotech industry. Stock prices are low, which means a potential for higher returns if you choose the right companies.
Which might lead you to the question of: What are the best biotech stocks to buy?
What Are Biotechnology Stocks?
Biotechnology combines biology and engineering to manufacture products or technology — most often, pharmaceuticals, lab equipment or diagnostic tools — designed to prolong human life while, ideally, improving its quality.
Biotechnology stocks are the stock options that help fund biotech companies. Many biotech companies fly under the radar of consumers or retail investors. That’s because once they develop new drug technology, they sell it to a pharmaceutical company who can mass produce the medicine or treatments. One notable exception is the biotech firm Moderna, which played an instrumental role in the development of one of the first Covid-19 vaccines.
What Are the Best Biotech Stocks To Buy?
Some of the biotech stocks on this list are not household names. But most have tremendous revenue potential with strong drug developments in various stages of development and successful drugs already available today.
Biogen
As the first biotech stock that Warren Buffett ever invested in back in 2019, Biogen holds promise today for investors with a buy-and-hold mentality and high risk tolerance.
There is a lot of volatility in the company recently, with its Alzheimer’s drug Aduhelm showing great promise but is only being prescribed in specific approved trials. The Centers for Medicare & Medicaid Services essentially cut off access to the drug to Medicare beneficiaries, even after the Food and Drug Administration rushed approval of the treatment.
However, bad news surrounding Aduhelm may have been baked into the stock’s value, which is why the stock didn’t plummet upon release of the news.
In mid-July 2022, the stock sits at $214, down nearly 40% in the past year and closer to its 52-week low of $187 than its one-year high of $358.
Pros:
Solid fundamentals
Trading near its one-year low
Promising Alzheimer’s treatment received quick FDA approval
Cons:
Highly volatile
Aduhelm not approved for Medicare patients
BioMarin
BioMarin has recently had a string of good news resulting in predictions of 15% revenue growth this year and 30% for 2023. The $15 billion company specializes in pioneering treatments for rare genetic disorders and already has many drugs on the market.
MarketBeat gives BioMarin a moderate “buy” rating, with 11 Wall Street analysts issuing a “buy” rating and 3 issuing a “hold.”
Pros:
Outperforming S&P 500 all year
30% growth rate predicted for 2023
Cons:
Niche products without a large market
Not a short-term investment
Amgen
Amgen is best known for Neulasta, a drug that reduces infection risk in chemotherapy patients, Enbrel for inflammatory diseases and Prolia for osteoporosis. With this trilogy of successful drugs already on the market, the $26 billion biopharmaceutical company has solid fundamentals and steady income. In early June 2022, The FDA approved Amgen’s rheumatoid arthritis treatment, RIABNI.
10 out of 25 Wall Street analysts covering Amgen give it a “buy” or “strong buy” rating, according to StockNews.com. However, MarketBeat analysts are giving it a hold rating, believing this stock hasn’t seen its peak yet.
Pros:
Successful drugs for common diseases already on the market
New R.A. treatment just gained FDA approval
Pays dividend of 3.1%
Cons:
Price hovering near 52-week high
Many analysts give it a hold rating
CRISPR Therapeutics
CRISPR Therapeutics takes a unique approach to drug development for the treatment of serious diseases through gene editing. The company is developing promising treatments for diseases such as cystic fibrosis, Alzheimer’s, Parkinson’s, hemophilia, Tay-Sachs and more.
The biotech firms financial future is also promising, according to investors and analysts. MarketBeat gives CRISPR stock a “moderate buy” rating. In June 2022, U.S. News & World Report listed CRISPR as one of seven gene-editing stocks to buy this summer.
Pros:
Promising treatments for common hereditary diseases
Closer to 52-week high than 52-week low
Cons:
Not a good buy for risk-averse investors
Not a short-term buy
Exelixis
Exelixis is a company focused on cancer treatments or, as its website states, a company that strives “to develop effective, tolerable and durable treatments to help patients with cancer thrive. To date, the company has medicines available to treat kidney, liver and thyroid cancers along with advanced melanoma treatments.
10 Wall Street analysts are calling Exelixis a “buy” or a “strong buy” for 2022, according to WallStreetZen.com. No analysts have given it a “hold” or “sell” rating. The company shows an annual earnings growth rate forecast of more than 18% through 2024, more than double the biotech industry’s projected earnings growth rate and also slightly higher than the U.S. market average earnings growth rate.
At a current price of just over $21 per share, Exelixis is at a very attainable entry point for new investors and shows a lot of growth potential. However, it’s worth noting that the price dropped recently when a Phase 3 trial for the company’s renal cell carcinoma treatment was not shown to be as effective as the company hoped.
Pros:
Affordable stock
Strong buy rating from analysts
Cons:
Recent drug showed poor results in Phase 3 trial
Not a short-term buy
Bio-Techne
Bio-Techne is a bit different from the other firms on this list. Rather than developing drug treatments, it supplies biological materials to other pharmaceutical and biotech firms for drug development and testing. It is also one of just a few companies on this list to offer a dividend.
The company has a projected earnings growth of 17.32%, according to MarketBeat, whose analysts give it a “moderate buy” rating. 4 out of 5 Wall Street analysts rated Bio-Techne a “buy,” with one giving it a “sell” rating.
Likewise, Zacks.com predicts an above average return from the stock relative to the market in the coming months and that it is fairly valued right now.
Pros:
Pays a dividend of 0.3%
Strong buy rating from analysts
Cons:
Expensive entry point at just under $350
Regeneron Pharmaceuticals
Regeneron Pharmaceuticals is probably best known for its COVID-19 treatment, REGEN-COV, which was granted an Emergency Use Authorization by the FDA. That EUA was later retracted, however, when the treatment was found to be ineffective against the Omicron variant.
However, the company stock maintains high ratings, with Kiplinger.com calling it “one of the best biotech stocks in terms of technical performance.” The stock outperformed the iShares Biotechnology ETF by a wide margin between April 2021 and April 2022, and the stock continues its upward climb.
MarketBeat gave the stock a “moderate buy” rating, with 12 Wall Street analysts rating it a “buy,” 5 giving it a “hold,” and 2 saying it is a “sell” now to cash in on the company’s profitability from the past year. The stock has a projected earnings growth of 5.59%, according to MarketBeat.
Pros:
Analysts give it a buy rating
Solid projected earnings growth
Cons:
Expensive entry point of $600 or higher
No dividends
Final Take
Biotech stocks, especially in a bear market, can represent a tremendous value to investors with a moderate to high risk-tolerance. To mitigate risk, you might consider investing in a biotech ETF instead, like the iShares Biotechnology ETF (IBB) or the SPDR S&P Biotech ETF (XBI).
Biotech Stocks FAQ
Here are some commonly asked questions regarding investing in biotech stocks.
Is it worth investing in biotech?
Biotech stocks carry risks, as with any investments, but they can show tremendous returns over time. Experts say that biotech stocks may be excellent long-term investments, in part because of the lengthy time-to-market for many drugs. If you want to diversify your risk, consider investing in a biotech ETF, which is a balanced collection of biotech stocks.
What biotech stock did Warren Buffett buy?
In 2019, Warren Buffett's investment firm Berkshire Hathaway purchased biotech stocks for the first time. The firm purchased more than 648,000 shares of Biogen stock, worth $192.4 million. It was the first biotech company Buffett chose to invest in through his decades long history as the Oracle of Omaha. However, in an uncharacteristic move for the investor, he sold those shares in the second quarter of 2021, following the FDA's controversial approval of Biogen's promising Alzheimer's drug. At the time, the stock may have been worth as much as $267 million, or a 39% return-on-investment if Buffett sold at the stock's high point. In terms of biotech stock that Warren Buffett owns or has owned, Berkshire Hathaway has also held positions in Merck, AbbVie, Pfizer and Bristol Myers Squibb.
Information is accurate as of July 13, 2022.
This article originally appeared on GOBankingRates.com: 7 Best Biotech Stocks To Add to Your Portfolio in 2022
