After a dreadful 2016, biotech stocks have rebounded nicely this year for a variety of reasons. Most importantly, though, the specter of government-mandated price caps on specialty medicines appears to have faded into the background -- at least for the time being.

So, to take advantage of this more favorable climate, we asked three of our contributors which biotech stocks they think are worth buying in May. They suggested Galapagos NV (NASDAQ:GLPG)Insys Therapeutics (NASDAQ:INCY), and Portola Pharmaceuticals (NASDAQ:PTLA). Here's why. 


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This clinical-stage biotech is firing on all cylinders

George Budwell (Galapagos NV): I think the clinical-stage biotech Galapagos NV is worth potentially buying this month because of comments made by its partner Gilead Sciences (NASDAQ:GILD) during its first-quarter earnings call. The crux of the situation is that Gilead and Galapagos are developing a JAK-1 selective inhibitor called filgotinib for a range of high-value anti-inflammatory conditions, and this drug has rapidly emerged as a key clinical asset in Gilead's quest to return to growth. 

Getting to the point, Gilead's CEO John Milligan noted on the call that the company is considering whether to accelerate filgotinib's development in the wake of the FDA rejecting Incyte's once-daily rheumatoid arthritis pill, baricitinib, earlier this year. What an accelerated development timeline means exactly isn't altogether clear, but the drug is already in late-stage trials for rheumatoid arthritis, ulcerative colitis, and Crohn's disease.

Taken together, these three disease markets are currently worth around $28 billion in annual sales, and Galapagos is also planning additional proof-of-concepts studies for filgotinib for other anti-inflammatory conditions. Put simply, this drug definitely has megablockbuster sales potential, especially with the backing of a seasoned biotech like Gilead.  

In all, Gilead appears primed to put the full weight of its clinical expertise to work to bring filgotinib to market as soon as possible. And that should mean that good things are in store for its partner Galapagos. 

This biotech stock could have investors seeing "green"

Sean Williams (Insys Therapeutics): If you're an investor that has a long-term time horizon and a stomach for above-average risk, then Insys Therapeutics is the biotech stock you'll want to consider adding to your portfolio this May.

Insys, which is often lumped in as a marijuana stock for reasons we'll get to in a moment, has seen its share price cut by three-quarters over the past two years. This pessimism stems from allegations and lawsuits surrounding its leading portfolio product Subsys, which is a sublingual breakthrough cancer pain medication. Allegations suggest that Subsys was being used off-label for about 80% of scripts written, and that Insys didn't market the drug solely for its approved indications. This ongoing litigation has crushed sales of Subsys (sales are expected to be halved in 2017 from what was generated in 2015) and caused Wall Street to project a $0.34 per share loss this year for the company.

However, two prime catalysts could have Insys generating serious cash flow and profits before the decade is over for patient investors.

First, the U.S. Food and Drug Administration approved Insys' Syndros in July 2016 as a treatment for chemotherapy-induced nausea and vomiting, and as a treatment for anorexia associated with AIDS. Syndros is an oral dronabinol solution, meaning it's a pharmaceutical version of the psychoactive component of cannabis, tetrahydrocannabinol. This is why Insys gets lumped in with marijuana stocks.

Insys had been waiting for the Drug Enforcement Agency to schedule Syndros, and that finally happened earlier this year (schedule II), which allows Insys to prepare for a second-half of 2017 launch. Syndros has the potential to hit $400 million in peak annual sales, which would more than replace the lost revenue from slumping Subsys sales.

The second catalyst would be a resolution to the litigation surrounding Subsys and Insys' marketing tactics. If Insys can find a middle ground and stabilize sales of Subsys, it could be generating more than a half-billion dollars in annual revenue and greater than $100 million in annual free cash flow.

If the chips fall Insys' way and investors remain patient, they could get quite a bargain with this biotech stock.

This red-hot biotech offers investors multiple shots on goal

The first event for shareholders to look forward to is the upcoming FDA ruling on its factor Xa anticoagulant betrixaban. This drug is designed to prevent blood clots from forming in at-risk patients. While there is a plenty of competition in the anticoagulant space, betrixaban promises to be the first extended duration drug that can be used both in the hospital and at home. That advantage is a big reason why management believes that its total addressable market exceeds $3 billion. If the FDA gives this drug the thumbs up on June 24th then Portola's stock could soar.
Next, Portola is also poised to resubmit its anticoagulant reversal agent AndexXa to the FDA later this quarter. This drug is designed to counter the effects of several next-generation anticoagulants that are currently on the market in case a patient has an uncontrollable bleeding event. The demand for this drug is expected to be strong right out of the gate, so getting it back into regulators hands for review will be a big win for shareholders.

While success if still far from guaranteed, Portola promises risk-loving investors multiple catalysts over the next year that could meaningfully drive its share price higher. That makes this a great stock for biotech investors to get to know.  

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.