Many biotech stocks have choked in 2021. The biggest exchange-traded funds that track the biotech industry are in negative territory year to date. But that doesn't mean that some individual stocks aren't poised to deliver strong returns going forward.
We asked three Motley Fool contributors which biotech stocks they think could make investors richer in December (and beyond). Here's why they chose Moderna (MRNA 1.55%), Seagen (SGEN 0.36%), and Vertex Pharmaceuticals (VRTX 3.14%).
Shooting for the moon
Prosper Junior Bakiny (Moderna): Until about two years ago, Moderna was a little-known company with no products on the market. Now, it is one of the largest biotechs in the world by market cap -- even surpassing well-established giants such as Gilead Sciences and Vertex Pharmaceuticals. Some may argue that Moderna rose too far too fast, and that a lot would have to go right for the company to justify its current market cap.
While I somewhat agree with this sentiment, I still think Moderna has the tools to remain one of the big players in the biotech industry for many years to come. For one, the company is still profiting from its successful coronavirus-related efforts. Authorities have authorized booster doses of Moderna's COVID-19 vaccine, mRNA-1273. The booster market is likely to extend well into next year, at the very least.
Viruses are tricky things. We're now dealing with omicron, yet another variant of the virus that causes COVID-19. This more recent strain seems even more contagious than delta, which was more virulent than the original strain of the virus. The lesson? COVID-19 isn't going anywhere yet. Given that vaccine immunity seems to wane over time, regular vaccines against this potentially deadly disease may well become the norm.
Moderna expects mRNA-1273 to generate between $15 billion and $18 billion in sales this year, and revenue of between $17 billion and $22 billion in 2022. The company's prospects beyond next year aren't as certain, though. I think that investors should expect Moderna to routinely deliver upwards of $15 billion per year from this vaccine. However, this tailwind will eventually subside -- and once it does, the vaccine stock may suffer.
But the company now has plenty of cash on hand to advance its very long list of pipeline candidates. Moderna boasts more than 30 pipeline programs, including about half a dozen that are at least in phase 2 studies. It isn't stopping there. Moderna is increasingly looking to partner with biotechs specializing in gene-editing therapies, another promising market. In short, Moderna is setting itself up to develop and market effective vaccines and therapies beyond mRNA-1273. In the long run, the company's efforts will reward investors well.
Buy this top growth stock on the dip
David Jagielski (Seagen): Investing in a growing business where demand is likely to remain strong for the foreseeable future is a great way to maximize the odds you get rich, whether it's in one month, one year, or longer. Seagen has many cancer-fighting drugs in its portfolio and pipeline that should give its business some long-term stability and growth.
The company has been a growth machine, consistently generating strong year-over-year sales numbers. In the third quarter (ending Sept. 30), Seagen's net product sales of $366.5 million rose 37% from the prior-year period. In the second quarter, its sales rose at a rate of 44% year over year and jumped 52% in the period before that.
What's promising is that these numbers could potentially get even stronger. The coronavirus pandemic has led to many people not going to the doctor's office, which has led to delays in cancer screenings and diagnoses. With a return to normal, there could be an uptick in prescriptions, leading to stronger numbers for Seagen in the future. Plus, the U.S. Food and Drug Administration granted accelerated approval for the company's cervical cancer drug, Tivdak, in September to treat recurring or metastatic cervical cancer. At its peak, the drug could generate over $1 billion in annual revenue.
Shares of Seagen were trading at over $190 in early November. If there's a rally in the markets before the end of the year (perhaps if the omicron variant doesn't prove to be as scary as first feared), this could be among the growth stocks to jump. That could set the stage for some positive returns before the month is over and make up for its recent losses.
But even if that doesn't happen, the long-term trajectory for Seagen looks strong. The global oncology drug market should rise by a compound annual growth rate of 9.1% until 2028, according to estimates from Fortune Business Insights.
Another monopoly could be on the way
Keith Speights (Vertex Pharmaceuticals): Vertex is best known for its cystic fibrosis (CF) drugs. The company commands a monopoly in the CF market with the only approved therapies that treat the underlying genetic cause of the disease. CF should remain a solid growth opportunity for Vertex, but the big biotech could also have another monopoly on the way.
Earlier this month, Vertex announced great results from a phase 1 study evaluating VX-147 in treating a rare genetic kidney disease called APOL1-mediated focal segmental glomerulosclerosis (FSGS). The company now plans to advance VX-147 into pivotal clinical testing in the first quarter of 2022. The clinical study will target the broader group of APOL1-mediated kidney disease and not just FSGS.
Over 100,000 people in the U.S. and Europe have APOL1-mediated kidney disease. That's a larger addressable market than Vertex has in CF. Sure, Vertex has more hoops to jump. However, it's quite possible that a huge growth opportunity isn't far around the corner.
Vertex could have another growth driver on its hands even sooner. The company and CRISPR Therapeutics expect to file for regulatory approvals of CTX-001 in treating genetic blood disorders beta-thalassemia and sickle cell disease by the end of 2022.
Then there's the real game-changer. Vertex announced positive results in October from a phase 1/2 study of VX-880, its stem cell-derived therapy targeting type 1 diabetes. The biotech is moving forward with additional testing of VX-880. It's also planning to file an Investigational New Drug application next year to begin clinical testing of a related therapy that doesn't require immunosuppressants. Vertex just might be on the path to having an effective cure for type 1 diabetes.