Biotech stocks experienced a notable resurgence, reaching a two-year high in February, only to plateau despite a flurry of mergers and positive clinical news. This trend has left investors pondering the sector’s next moves.
During the height of the pandemic in 2020, biotech companies were thrust into the spotlight as firms like Pfizer (PFE), BioNTech (BNTX), Moderna (MRNA), and Johnson & Johnson (JNJ) delivered COVID-19 vaccines. However, as the global focus shifted away from the pandemic to economic and political concerns, biotech stocks lost their luster.
Investor interest revived in late 2023 and early 2024, driven by significant acquisitions in the sector. Despite this, both acquisition momentum and biotech stock performance have slowed. The industry’s benchmark index hit 3,039.79 on February 28, marking a two-year high. However, by April 25, it dropped to an intraday low of 2,556.05, a 16% decrease. Since then, the index has rebounded by about 15%, trading at these improved levels as of July 19.
The biotech sector now boasts a Relative Strength Rating (RS) of 90, up from 85 a week ago, placing it in the top 10% of all industry groups tracked by IBD Digital in terms of 12-month performance. However, challenges remain, notably with some companies pushing back against Medicare’s plans to negotiate prices for the most expensive drugs.
Currently, the biotech sector ranks 17th out of 197 industry groups, while the broader pharmaceutical sector ranks 142nd. For investors, it’s crucial to focus on specific metrics when evaluating biotech stocks. Key performers currently trading above $10 include Halozyme Therapeutics (HALO), United Therapeutics (UTHR), Vertex Pharmaceuticals (VRTX), Ligand Pharmaceuticals (LGND), and ADMA Biologics (ADMA).
Halozyme Therapeutics: A Leader in Drug Delivery
Halozyme Therapeutics, known for its Enhanze technology, facilitates drug delivery via subcutaneous injection. This technology underpins major medicines like Johnson & Johnson’s Darzalex Faspro and Roche’s (RHHBY) Herceptin. In Q1, Halozyme reported adjusted earnings of 79 cents per share on $196 million in sales, with earnings surpassing expectations despite sales falling short.
On June 6, Halozyme’s stock surged nearly 13% following an upward revision of its full-year guidance and an enhanced five-year outlook, bolstered by a new European patent for its Enhanze technology, valid in 37 countries until March 2029. The company anticipates full-year sales between $935 million and $1.02 billion, with adjusted earnings projected at $3.65 to $4.05 per share.
Halozyme boasts a perfect Composite Rating of 99 and a robust RS Rating of 93. The stock broke out of a cup-with-handle base with a buy point at 42.64 on May 8, reaching the profit-taking zone by June 6, and continuing to trade above this level in mid-July. Investors are advised to take profits when a stock rises 20% to 25% above its entry point. Halozyme remains well above its 50-day and 200-day moving averages and is listed as a Tech Leader.
United Therapeutics: Focused on PAH Treatments
United Therapeutics specializes in drugs for chronic diseases, with its leading product being Tyvaso for pulmonary arterial hypertension (PAH). In the March quarter, Tyvaso sales jumped 56% to $372.5 million, surpassing forecasts. Its second-largest product, Remodulin, generated $128 million in sales, also beating expectations.
Analysts are closely monitoring United Therapeutics’ pipeline, with final-phase PAH study results now expected in 2026. The stock hit a record high intraday on July 17, holding a perfect Composite Rating of 99 and an RS Rating of 93. It is also featured on the Tech Leaders and IBD 50 lists.
Vertex Pharmaceuticals: Dominating the Cystic Fibrosis Market
Vertex Pharmaceuticals is a market leader in cystic fibrosis treatments, trailing only Amgen (AMGN) in market cap within the biotech sector. In Q1, Vertex reported a 13% increase in sales to $2.69 billion and a 56% surge in adjusted earnings to $4.76 per share, both surpassing expectations. Vertex’s gene-editing treatment for sickle cell disease and beta thalassemia, developed with Crispr Therapeutics (CRSP), recently received FDA approval.
Vertex is also working on innovative pain treatments, showing promising results in recent trials. The stock broke out of a cup base with a buy point at 448.40 on May 22, and despite minor slips, it remains above its buy zone. Vertex maintains a strong Composite Rating of 98 and an RS Rating of 86, securing its place as a Tech Leader.
Ligand Pharmaceuticals: Strategic Investments and Expansions
Ligand Pharmaceuticals has recently joined the ranks of top biotech stocks through strategic royalty deals and partnerships. Notably, Merck (MRK) received FDA approval for its pneumococcal vaccine, Capvaxie, and Ligand acquired Apeiron Biologics for $100 million. Ligand also benefits from royalties on Verona Pharma’s (VRNA) COPD treatment, Ohtuvayre.
In Q1, Ligand reported adjusted earnings of $1.20 per share on $31 million in sales, both beating expectations. The stock has a strong Composite Rating of 94 and an RS Rating, breaking out of a cup-with-handle base with an entry at 88.73 on July 8.
ADMA Biologics: A Rising Star
ADMA Biologics, known for its human immune globulin products, saw its stock soar over 27% on May 10 after reporting adjusted earnings of 9 cents per share on $81.9 million in sales. The company turned a profit from a year-earlier loss, with sales increasing by 44%.
ADMA stock has continued to climb, reaching its highest level since January 2015. With a perfect RS Rating of 99 and a matching Composite Rating, ADMA is also listed as a Tech Leader.
Key Takeaways
- Halozyme Therapeutics: Strong performance driven by innovative drug delivery technology.
- United Therapeutics: Robust sales of PAH treatments and a promising pipeline.
- Vertex Pharmaceuticals: Market leader in cystic fibrosis and advancing in gene-editing therapies.
- Ligand Pharmaceuticals: Strategic acquisitions and royalty deals driving growth.
- ADMA Biologics: Significant sales growth and profitability in immune globulin products.
Conclusion
The biotech sector, while experiencing some volatility, remains a fertile ground for strategic investments. Companies like Halozyme, United Therapeutics, Vertex, Ligand, and ADMA Biologics are leading the charge with strong financials, innovative technologies, and promising pipelines. Investors should keep a close watch on these top performers as they navigate the evolving landscape of the biotech industry.
