What investor doesn't like growth? The biotech industry is one area where you can find tremendous growth prospects.
We asked three of our healthcare specialists to name their favorite biotech growth stocks. Here's why they picked Omeros Corporation (OMER 10.15%), Ionis Pharmaceuticals (IONS 0.06%), and Celgene (CELG).
Cory Renauer (Omeros Corporation): Sales of this biotech's pupil-dilating solution are growing so fast, I could hardly believe my eyes when I saw its latest earnings report. Last year Omidria sales jumped 212% higher than 2015 levels -- and they could keep climbing.
Omidria assists eye surgeons performing cataract removal and lens replacement surgeries, procedures performed about 4 million times each year in the U.S. alone. Omeros booked $41.4 million in product sales last year, but at a list price of about $465 per vial, it looks like Omidria's climb is just beginning.
The fun part about this stock is that Omidria might not be the biggest growth driver in the next couple years. Atypical hemolytic-uremic syndrome (aHUS) leads to kidney-damaging blood clots, and there is currently just one approved treatment, Soliris, for the life-threatening condition.
Alexion Pharmaceuticals recorded about $2.8 billion in Soliris sales last year, but it looks like Omeros' lead clinical-stage program, OMS721, could challenge its position. The company just released top-line data that showed a significant benefit for aHUS patients treated with OMS721, and a larger trial that could support a new drug application for this condition is underway.
Although OMS721's potential in aHUS alone makes Omeros a growth stock to keep your eyes on, the candidate is also in clinical-stage studies for related conditions that lack effective treatments options. Best of all, you probably won't need to worry about value-diluting share offerings to find its development, because sales of Omidria should be sufficient to maintain positive cash flows on the road ahead.
A biotech growth stock with two dozen chances to hit a home run
Sean Williams (Ionis Pharmaceuticals): Sometimes the top growth stocks in biotech are those that haven't crossed the boundary into recurring profitability yet. That's why I believe growth-seeking investors are going to want to take a closer look at Ionis Pharmaceuticals.
The beauty of Ionis Pharmaceuticals is its proprietary antisense drug development platform. The company can use the performance of its therapies in the lab, preclinical, and clinical settings to fairly accurately predict how they'll perform in treating specific ailments. The result is that Ionis can bring in the neighborhood of five new drugs into the clinical-testing stage each and every year, which is impressive.
At the moment, Ionis Pharmaceuticals has two dozen drugs currently in clinical studies, many of which are being developed with one of the company's nearly one dozen licensing partners. Ionis' strategy to partner up a majority of its portfolio is a smart one since it allows the company to generate somewhat regular milestone payment revenue, which fuels its ongoing preclinical and discovery-stage research. Though Ionis' costs are high for a predominantly clinical-stage company, its milestone revenue helps assuage a good chunk of its cash usage. In other words, Ionis has a lot of chances to potentially hit a home run with its pipeline.
Ionis and partner Biogen also received great news in December when Spinraza was approved by the Food and Drug Administration as a treatment for spinal muscular atrophy in adults and children. The drug, which can cost as much as $750,000 in the first year and $375,000 for every year thereafter, could easily become a blockbuster for Ionis and Biogen, and it stands to be Ionis' first real profit-generating drug.
Even more recently, shareholders got the intriguing news that Ionis' lipid disorder subsidiary Akcea Therapeutics had filed for a $100 million IPO. With a $50 million funding commitment from Novartis, Akcea now has the funding to run a number of late-stage trials, with Ionis standing to benefit from Akcea's success in the form of milestone payments, royalties, and a yet undisclosed stake in Akcea.
With profitability expected by 2020 and Ionis capable of growing its top line by 10% to 20% per year through 2020, this is a biotech growth stock worth your while.
Growth in the past, growth in the future
Keith Speights (Celgene): Over the last five years, Celgene has grown earnings by an average annual rate of 23% with revenue growth of 25% during the period. The biotech's top-selling blood cancer drug, Revlimid, powered much of that growth.
Looking ahead, Celgene projects average annual earnings growth of 22% with revenue growth of 17% through 2020. Revlimid should continue to be a prime driver behind the biotech's growth, with the potential for several new approved indications. Another blood cancer drug, Pomalyst, is also experiencing solid sales growth.
However, Celgene's fastest growth is currently coming from autoimmune disease drug Otezla. The company anticipates sales for Otezla to keep on climbing. That should especially be the case if late-stage clinical studies evaluating the drug in treating ankylosing spondylitis and Behcet's disease prove successful.
The biotech's pipeline potential is also tremendous. Celgene expects to announce 19 late-stage data readouts over the next three years, including those for existing drugs like Revlimid and Otezla. Nine other mid-stage programs should advance into pivotal trials.
By 2020, Celgene hopes to have seven new blockbuster drugs on the market. Inflammation and immunology candidates ozanimod and GED-0301 are especially promising. Celgene also intends to expand its leadership position in the blood cancer space with several other potentially big winners, including JCAR017, luspatercept, and durvalumab, all of which are partnered programs.
Even if the biotech encounters a clinical setback along the way, Celgene has plenty of other experimental drugs advancing through the pipeline. If you're looking for a biotech stock with demonstrated growth in the past and a high probability of growth in the future, Celgene is it.