3 Innovative Biotech Stocks to Watch in 2014

The biotech industry exploded higher in 2013, but these three companies promise to keep the party going in 2014.

Jan 21, 2014 at 10:49AM

Biotech investors were treated to a tremendous year in 2013, which may have been the industry's best year ever. If you stack the performance of any major biotechnology index against the S&P 500 or Nasdaq, you can bet it won't be close. See for yourself:

IBB Total Return Price Chart

IBB Total Return Price data by YCharts.

Investors shouldn't necessarily expect an encore in 2014, but that doesn't mean great investing opportunities don't exist. You may want to keep an eye on Alnylam Pharmaceuticals (NASDAQ:ALNY)Incyte (NASDAQ:INCY), and Isis Pharmaceuticals (NASDAQ:ISIS). Here's why.

Alnylam Pharmaceuticals

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^SPXTR data by YCharts.

In case you missed it, Alnylam soared on news of two separate deals last week: a $700 million development deal with longtime partner Genzyme, a Sanofi company, and an acquisition of Sirna Therapeutics from Merck. Alnylam is developing novel therapies for rare diseases using RNA interference, or RNAi, which regulates gene expression. In other words, the company can turn on genes needed for proper bodily function (genes making vital proteins) and/or turn off genes at the root of a disease (genes making faulty versions of critical proteins).

Aside from the megadeal announced with Genzyme, Alnylam enters 2014 with the expectation of having up to seven RNAi therapeutic programs in clinical development by the end of 2015. That includes two in phase 3 and up to six in proof-of-concept studies, which could expand further in the next two years. It certainly appears that the RNAi approach to gene therapy is picking up steam throughout the pharmaceutical industry -- it didn't win the 2006 Nobel Prize for Physiology or Medicine for nothing -- and Alnylam would be your best bet to ride the wave in innovation.

Isis Pharmaceuticals

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^SPXTR data by YCharts.

Isis has leveraged its pioneer status in developing RNA-targeted therapeutics to build an incredibly diverse pipeline based on antisense technology. While antisense is not the same as RNAi, it is similar as both target RNA (rather than proteins) to affect gene expression. In fact, Isis earned $7.5 million from the most recent deal between Alnylam and Genzyme, which has roots in Isis' deep intellectual property portfolio that covers various RNA-targeted technologies.

The company's leadership position in RNA technologies has landed it partnerships with Genzyme, Biogen Idec, GlaxoSmithKline, Pfizer, and more for disease areas ranging from cancer to inflammation, cardiovascular, and rare genetic disorders. Isis enters 2014 with more than 20 ongoing clinical trials, sporting a strong balance sheet with more than $600 million in cash, and coming off its best year ever generating more than $150 million in revenue from product sales, collaborations, and milestone payments. Given the disruptive potential of the company's technology platform, a market cap under $6 billion should be a steal for long-term investors -- even after a giant 2013.


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^SPXTR data by YCharts.

I've been writing about the JAK inhibitor portfolio of Incyte for quite some time now. Despite a massive run-up in shares in 2013, there could still be plenty of profit left for investors. Incyte just boosted its balance sheet and paid down its immediate debt, hired former Novartis President of Oncology Names Herve Hoppenot as CEO, and continues to release positive data from trials. Not only does the company have a growing myelofibrosis drug named Jakafi already on the market, but with more than 15 ongoing clinical programs being funded in part by Novartis and Eli Lilly, it also has one of the most enviable pipelines in the industry.

What's the big deal about JAK inhibitors? Whereas some cancer drugs and most, if not all, current biologics are injected, JAK inhibitors are taking orally, significantly boosting the convenience factor for the drug class. They can also be manufactured at a lower cost compared to biologics, which would boost margins or lower prices -- or both -- for patients. Incyte could have multiple blockbusters on its hands as long as the drugs prove to be safe and effective.

Incyte's oncology pipeline may be led by the JAK 1/2 inhibitor Jakafi, but it also includes two more selective JAK 1 inhibitors (presumably safer) as well as three compounds not included under the JAK inhibitor umbrella. Meanwhile, the company's lead anti-inflammatory drug baricitinib, also a JAK 1/2 inhibitor, could easily have blockbuster potential for treating rheumatoid arthritis and psoriasis. Simply put, it's rare to find so much potential in one pipeline. So while a market cap of $10 billion sounds expensive, you can bet any number of Big Pharma companies would write a check for considerably more if Incyte succeeds.

Foolish bottom line
The biotech industry can create overnight multibaggers just as easily as it can make crater-sized holes in your portfolio. However, if you research accordingly, catch trends among the larger companies and invest in developing companies with diverse portfolios and competitive advantages, then you have a great shot at success. Don't get caught on the sidelines just because Alnylam, Isis, and Incyte are coming off spectacular years -- the growth stories are far from over.

Growth stocks aren't limited to biotech
I believe these three biotech companies offer impressive growth opportunities, but you don't have to invest in the biotech industry to see big gains. While opportunities to get wealthy from a single investment don't come around often, they do exist, and our chief technology officer believes he's found one. In this free report, Jeremy Phillips shares the single company that he believes could transform not only your portfolio but your entire life. To learn the identity of this stock for free and see why Jeremy is putting more than $100,000 of his own money into it, all you have to do is click here now.

Fool contributor Maxx Chatsko has no position in any stocks mentioned. Check out his personal portfolio, his CAPS pagehis previous writing for The Motley Fool, or his work for the SynBioBeta Blog to keep up with developments in the synthetic biology industry.

The Motley Fool recommends Alnylam Pharmaceuticals and Isis Pharmaceuticals. Try any of our Foolish newsletter services free for 30 days. We Fools may not 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.

4 in 5 Americans Are Ignoring Buffett's Warning

Don't be one of them.

Jun 12, 2015 at 5:01PM

Admitting fear is difficult.

So you can imagine how shocked I was to find out Warren Buffett recently told a select number of investors about the cutting-edge technology that's keeping him awake at night.

This past May, The Motley Fool sent 8 of its best stock analysts to Omaha, Nebraska to attend the Berkshire Hathaway annual shareholder meeting. CEO Warren Buffett and Vice Chairman Charlie Munger fielded questions for nearly 6 hours.
The catch was: Attendees weren't allowed to record any of it. No audio. No video. 

Our team of analysts wrote down every single word Buffett and Munger uttered. Over 16,000 words. But only two words stood out to me as I read the detailed transcript of the event: "Real threat."

That's how Buffett responded when asked about this emerging market that is already expected to be worth more than $2 trillion in the U.S. alone. Google has already put some of its best engineers behind the technology powering this trend. 

The amazing thing is, while Buffett may be nervous, the rest of us can invest in this new industry BEFORE the old money realizes what hit them.

KPMG advises we're "on the cusp of revolutionary change" coming much "sooner than you think."

Even one legendary MIT professor had to recant his position that the technology was "beyond the capability of computer science." (He recently confessed to The Wall Street Journal that he's now a believer and amazed "how quickly this technology caught on.")

Yet according to one J.D. Power and Associates survey, only 1 in 5 Americans are even interested in this technology, much less ready to invest in it. Needless to say, you haven't missed your window of opportunity. 

Think about how many amazing technologies you've watched soar to new heights while you kick yourself thinking, "I knew about that technology before everyone was talking about it, but I just sat on my hands." 

Don't let that happen again. This time, it should be your family telling you, "I can't believe you knew about and invested in that technology so early on."

That's why I hope you take just a few minutes to access the exclusive research our team of analysts has put together on this industry and the one stock positioned to capitalize on this major shift.

Click here to learn about this incredible technology before Buffett stops being scared and starts buying!

David Hanson owns shares of Berkshire Hathaway and American Express. The Motley Fool recommends and owns shares of Berkshire Hathaway, Google, and Coca-Cola.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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