There are fewer true biotherapeutics available than you might think. Biotherapeutics, also known as biologics, include any type of medical treatment that is either produced by or involves living cells. In 2017, the U.S. Food and Drug Administration approved 22 biotherapeutics, and that was an increase from the 15 biotherapeutics approved in the previous year.
But many companies are in the process of developing biotherapeutics that could reach the market over the next few years. As of June 2017, there were more than 2,700 biotherapeutics in development targeting treatment of eight major therapeutic categories.
Many of the biotechs developing these drugs are publicly traded, but their stocks are highly speculative because of the inherent risks associated with clinical studies and regulatory approval. However, there are also several of these stocks that appear to be great picks for investors. Here's why I think AbbVie (ABBV -0.47%), Celgene (CELG), and Gilead Sciences (GILD 0.90%) are top biotherapeutics stocks to buy right now.
There's no more successful biotherapeutic on the market than AbbVie's Humira. In fact, there's no more successful drug of any kind on the market than Humira. Last year, Humira generated sales of $18.4 billion, making it once again the top-selling drug in the world.
Humira will face competition from biosimilars in Europe starting later this year. However, AbbVie expects to fend off potential rivals in the U.S. for several more years, thanks in large part to a deal struck with Amgen last year that delays the U.S. launch of the first FDA-approved Humira biosimilar, Amjevita, until early 2023.
In the meantime, AbbVie is developing another biotherapeutic that could take the baton from Humira. Risankizumab is being evaluated a late-stage clinical study for treatment of psoriasis and in two phase 2 studies targeting treatment of Crohn's disease and psoriatic arthritis. AbbVie also plans to announce data from two pivotal studies of upadacitinib in 2018 and file for regulatory approval. Upadacitinib, however, is a JAK1 inhibitor but not a biotherapeutic drug.
AbbVie also has a lot of activity going on in oncology. While the company's top approved cancer drug, Imbruvica, isn't a biotherapeutic, Empliciti is. In addition, AbbVie's pipeline includes a couple of very promising biotherapeutic cancer treatments. Rova-T is being evaluated in multiple late-stage studies for treatment of non-small cell lung cancer. Depatuxizumab mafodotin -- a name that would be a great tongue twister -- is also in late-stage testing for treating glioblastoma, a common type of brain cancer.
Investors have a lot to like in AbbVie. The stock soared over 54% last year. AbbVie expects solid earnings growth over the next several years, with Humira and Imbruvica leading the way. The company also pays a nice dividend, which currently yields close to 2.5%.
Celgene lays claim to the No. 2 drug in the world after Humira: Revlimid. However, the blood cancer drug isn't a biotherapeutic. Neither is Celgene's fast-growing multiple myeloma drug Pomalyst. What about the company's other blockbuster drug, Otezla? Nope.
You have to look to Celgene's pipeline to find biotherapeutics. Luspatercept, which Celgene is developing with Acceleron Pharma, is being evaluated in late-stage studies for treating beta-thalassemia and myelodysplastic syndromes (MDS). If approved, the drug could generate peak annual sales in the ballpark of $2 billion and perhaps even more.
But the biotherapeutics in Celgene's pipeline that are getting the most attention are chimeric antigen receptor T cell (CAR-T) therapies. Celgene licensed commercialization rights to CAR-T therapy JCAR017 for outside of North America and China from Juno Therapeutics (JUNO), but decided it wanted the whole enchilada and announced an acquisition of Juno a few weeks ago. JCAR017 is currently in a pivotal phase 2 study. If that study is successful, Celgene could potentially win FDA approval by 2019. The biotech thinks JCAR017 could generate peak annual sales of around $3 billion.
Celgene also has a partnership with bluebird bio (BLUE -2.39%) on a couple of CAR-T candidates targeting B-cell maturation antigen (BCMA) -- bb2121 and bb21217. The two biotherapeutics are currently in early-stage clinical studies targeting treatment of multiple myeloma.
Why buy Celgene stock? Value and growth. Celgene trades at less than 10 times expected earnings. That makes the stock one of the most attractively valued biotechs on the market right now. The company also expects to grow adjusted earnings per share by nearly 20% over the next few years. Celgene's great combination of attractive valuation and high growth potential make the stock one that investors don't want to overlook.
Gilead Sciences' product lineup includes a laundry list of blockbusters. Among them are hepatitis C drugs Epclusa, Harvoni, and Sovaldi. Gilead has even more HIV drugs with greater than $1 billion annual sales: Genvoya, Truvada, Atripla, Complera/Eviplera, and Stribild. Two other newer HIV drugs, Descovey and Odefsey, should join the blockbuster club when Gilead reports its full-year 2017 results.
How many of these drugs are biotherapeutics? Nada. Gilead does have an approved biotherapeutic, though, thanks to its acquisition of Kite Pharma. Yescarta became the second CAR-T therapy to win FDA approval in October. Although the ramp-up for the cancer drug is expected to be a slow one, Yescarta has blockbuster potential.
The Kite acquisition also brought a couple of other biotherapeutics into Gilead's pipeline. KITE-585 is an anti-BCMA drug in early-stage testing for treatment of multiple myeloma. KITE-718 is a MAGE A3 T cell receptor (TCR) engineered T-cell therapy being evaluated in an early-stage study for treatment of solid tumors.
Gilead's fortunes for now hinge on its hep C and HIV franchises. The problem for the company is that revenue and earnings have been dragged down by sinking hep C sales. However, this problem has also made Gilead stock cheap. Shares currently trade at 12.5 times expected earnings.
Over the long run, Gilead should become a winner again. The company's CEO, John Milligan, predicted that Gilead could see the "beginning of a growth phase" in 2018. Gilead's pipeline, particularly its cancer biotherapeutics and promising non-alchoholic steatohepatitis (NASH) drugs, could pay off in a major way over the next few years.
I like -- and own -- all three of these biotherapeutics stocks. But my favorite right now is AbbVie. While Celgene is the better bargain, AbbVie is still cheap, with shares trading at 13 times expected earnings. AbbVie is one of an elite group of stocks that are great picks for growth, income, and value investors. I think the stock will continue to be a winner in the future.