Source: Celgene Corp.
Picking biotech stocks that have a better shot at success than failure isn't easy. After all, there are hundreds of institutional-quality biotech stocks to choose from and any number of risks that can derail them and their stock. However, three biotech all-stars stand out among the crowd. These three companies already market billion-dollar blockbuster therapies, maintain rock-solid balance sheets, and are developing exciting future medicines that make them among the best in the industry. Let's learn more about them.
No. 1: Celgene Corp. (CELG)
Celgene is an industry Goliath that markets two of the best-selling medicines used in the treatment of multiple myeloma, a blood cancer that is diagnosed in around 24,000 Americans every year.
Celgene's top-selling drug is Revlimid, the market-leading second-line therapy for multiple myeloma patients. Last year, Revlimid sales eclipsed $4.9 billion, thanks to FDA approval in February for use as a first-line therapy, Celgene expects Revlimid sales to total between $5.6 billion and $5.7 billion this year. Celgene also markets Pomalyst, a third-line multiple myeloma drug that saw sales grow 123% to $680 million last year.
Celgene also sells the pancreatic cancer drug Abraxane, which is expected to post sales north of $1 billion this year, and the newly launched psoriasis drug Otezla, which Celgene thinks will eventually eclipse the $1 billion blockbuster mark, too.
Thanks to that lineup, Celgene has one of the best balance sheets in the business. The company's cash jumped to $7.54 billion in 2014 from $5.69 billion in 2013, which gives it a current ratio of 4.6. Thus, Celgene has plenty of financial firepower to handle its short-term financial obligations, along with plenty of money to reinvest into the company's next generation of drugs.
Among the drugs Celgene is developing are therapies for various cancers and autoimmune disorders. One intriguing drug in Celgene's pipeline is GED-0301, which could improve the lives of hundreds of thousands of people who suffer from Crohn's disease.
Celgene is one of my favorite biotech stocks for all of those reasons, but perhaps the biggest reason I'm such a fan is the company's growth forecast. In January, management released guidance for sales of $20 billion and earnings per share of at least $12.50 in 2020. If it can deliver on that forecast, it will have more than doubled sales and earnings from what it expects to deliver this year.
No. 2: Biogen Inc. (BIIB 6.01%)
Biogen is another biotechnology blue chip that long-term investors should consider for their portfolios.
The company is a leader in the $17 billion annual market for multiple sclerosis drugs with three notable blockbusters in the indication: Avonex, Tysabri, and Tecfidera. Avonex is the oldest of the three, but it still notched $3 billion in sales last year. Tysabri sales are no slouch, either, totaling nearly $2 billion in 2014. But arguably the best is Tecfidera, an oral MS drug that won approval in 2013 and has already become a multibillion-dollar seller. Last year, thanks to ongoing market share wins in the U.S. and additional launches abroad, sales of Tecfidera jumped 232% to $2.9 billion.
Biogen's MS drugs will remain the key drivers of its financial results over the coming years, but it also launched Eloctate and Alprolix for hemophilia last year. With combined sales of $77 million in the fourth quarter, those two drugs are off to a fast start, but their opportunity could be much bigger given that the market for hemophilia drugs is worth $7 billion per year.
Additionally, Biogen also offers investors a sleep-well-at-night balance sheet that includes $1.85 billion in cash and a current ratio of 2.11. Even more intriguing to investors could be Biogen's pipeline, which includes BIIB-037, a therapy for Alzheimer's disease that put up impressive enough results in phase 1 that Biogen is skipping phase 2 to kick off a phase 3 study later this year. If that study succeeds, BIIB-037 could have blockbuster potential.
No. 3: Gilead Sciences (GILD -0.45%)
It's probably not too surprising to see Gilead Sciences make my short list of the best biotech investments. After all, the company has been the market share leader in treating HIV for more than a decade, and its two new hepatitis C drugs have become instant blockbusters.
Last year's launch of the HCV drugs Sovaldi and Harvoni catapulted Gilead Sciences revenue by 122% to $24.9 billion, allowing the company to deliver earnings per share of $8.09 in 2014, which was well above the $2.04 it notched in 2013.
Sovaldi, with $10.3 billion in sales in 2014, and Harvoni, with $2.1 billion in sales during the fourth quarter, have captured most of the media attention lately, but Gilead Sciences' HIV drug lineup is nothing to ignore. Five separate Gilead HIV drugs could eclipse the blockbuster level in 2015. Since HIV patients take these drugs throughout their lifetime, and these drugs are allowing patients to live longer, it's unlikely that Gilead's success in this indication will falter anytime soon.
Thanks to surging sales from its HCV drugs and steady growth for its HIV therapies, Gilead Sciences' cash swelled from $2.1 billion exiting 2013 to $10 billion exiting 2014. That jump prompted the company to announce in January that it will begin paying dividends this year. But that payout doesn't mean that it isn't still innovating new drugs. The company has a slate of intriguing therapies under development that could solidify its HIV and hepatitis C leadership. Additionally, it is studying a host of potential drug candidates that could one day make it a big player in cancer treatment.
Tying it together
Biotechnology investing isn't for everyone. The industry is prone to significant pops and drops, and, due to a massive move this past year, there is considerable debate over whether a biotech bubble is forming. While those risks make the industry best suited for relatively speculative portfolios, investors willing to accept the risks are likely to have a hard time finding better names than Celgene Corp, Biogen, and Gilead Sciences for the long run.
