You can get rich quickly by buying shares of the right clinical-stage biotech. The problem is that you can also become poor quickly if you pick the wrong one. That's why I think that most investors are better off limiting their focus only to the stocks of drugmakers with products already on the market.
The kinds of biotechs best for investors who aren't huge risk-takers are those that generate solid revenue growth, are profitable (or soon will be), and have promising pipelines. Here are three top biotech stocks to buy in April that check off all of these boxes.
Vertex Pharmaceuticals (VRTX 1.08%) markets four drugs that treat the underlying cause of cystic fibrosis (CF). The company's CF franchise has been super-successful, with Vertex's revenue soaring 49% last year to $6.2 billion and its profits more than doubling to $2.7 billion.
To be sure, Vertex's sizzling growth will taper off quite a bit. Those impressive 2020 numbers stemmed from the fantastic U.S. launch of its newest CF drug, Trikafta. However, the company is rolling out the drug in European markets and should continue to enjoy solid growth.
The biotech's pipeline could also deliver new winners. Vertex expects to announce results within the next couple of months from a phase 2 study of VX-864 in treating the rare genetic disease alpha-1 antitrypsin deficiency (AATD). The company should report results from a phase 2 study of VX-147 in treating APOL1-mediated focal segmental glomerulosclerosis, a serious kidney disease, later this year.
Vertex could have a game-changer on its hands with VX-880, a cell therapy that holds the potential to effectively cure type 1 diabetes. The experimental drug is now in phase 1 testing. The company is also likely to use its hefty cash stockpile of $6.7 billion to scoop up additional candidates to bolster its pipeline. Vertex looks to continue its winning ways over the long run.
Regeneron Pharmaceuticals (REGN 1.88%) is another big biotech that has achieved considerable success so far. The company's partnership with Sanofi has produced several drugs with fast-growing sales, notably including anti-inflammatory therapy Dupixent. Regeneron's top-seller, though, is eye-disease drug Eylea, which is marketed by Bayer outside the U.S.
Last year, Regeneron generated revenue of nearly $8.5 billion, up nearly 30% year over year. Its profit jumped 66% to $3.5 billion. This performance helped boost the company's cash position to $6.7 billion.
The biotech's prospects appear to be quite good. Regeneron recently gained another approved indication in the U.S. for immunotherapy Libtayo as a first-line treatment for advanced non-small cell lung cancer. The U.S. Food and Drug Administration (FDA) is scheduled to make an approval decision for Dupixent in treating children ages six to 11 with asthma by Oct. 21 of this year.
In addition, Regeneron has become a key player in the fight against the pandemic. The company's antibody cocktail REGEN-COV already won U.S. Emergency Use Authorization (EUA) for treating patients with COVID-19 who are at high risk of severe disease. Regeneron announced results in March from a late-stage study showing that REGEN-COV reduced the risk of hospitalization or death by 70% in non-hospitalized COVID-19 patients.
Moderna's (MRNA -1.66%) market cap of close to $52 billion puts it at roughly the same size as Vertex and Regeneron. However, Moderna technically doesn't have an FDA-approved product on the market yet and it isn't profitable. That's almost certainly going to change in the near future.
The biotech's messenger RNA (mRNA) coronavirus vaccine mRNA-1273 won U.S. EUA in December 2020. Moderna expects to generate at least $18.4 billion in sales of the vaccine in 2021 -- a lot more money than either Vertex or Regeneron will make this year. Eventual FDA full approval should be pretty much a slam dunk.
Moderna is developing a next-generation COVID-19 vaccine that could be even better than mRNA-1273. This new vaccine, which is currently in phase 1 testing, could provide the company a refrigerator-stable, single-dose alternative.
What comes next for Moderna after the pandemic? The company plans to advance its cytomegalovirus vaccine candidate into late-stage testing this year. It anticipates that if approved, this vaccine could rake in peak sales of between $2 billion and $5 billion.
Moderna is also ramping up its pipeline, with plans to have as many as 50 mRNA candidates in clinical development. If just a few of those candidates are successful and annual COVID-19 booster shots are needed (as many expect), Moderna should be able to grow much larger than it is right now.