Time is one of an investor's greatest weapons. While there is no telling how the stock market will behave on a particular day or week, those companies that consistently produce outstanding financial results will typically be rewarded in the long term, along with their shareholders.
That's why it's essential to ignore short-term volatility and instead focus on companies' long-term prospects. With that said, let's look at two biotech stocks that have the tools to produce above-average returns over the next decade: Moderna (MRNA -1.39%) and Regeneron (REGN -0.80%).
1. Moderna
Moderna was founded in 2010, and it took the company roughly 10 years to finally launch its first product on the market. The wait may have been worth it -- Moderna's COVID-19 vaccine, mRNA-1273, had a fantastic first year on the market. The final numbers aren't in yet, but Moderna said it expects sales of mRNA-1273 to land between $15 billion and $18 billion for the fiscal year 2021.
As of Sept. 30, the company had recorded $11.3 billion in total revenue and $7.3 billion in net income. The company has already signed about $17 billion worth of advanced purchase agreements for mRNA-1273 for 2022, and it thinks it could generate revenue between $17 billion and $22 billion for the year.
Moderna won't let all this money go to waste, and it is advancing several exciting candidates. The company's pipeline features other vaccines targeting newer variants of the coronavirus, a combined flu and COVID-19 vaccine, and vaccines against viruses for which there are currently none, including the Zika virus and the cytomegalovirus.
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That's not all. Last year, management expressed its desire to jump into the promising gene-editing space. The company is looking to set up license agreements with gene-editing companies, and perhaps it could even acquire a smaller biotech that focuses on gene editing. With $15.3 billion in cash and cash equivalents as of Sept. 30, Moderna has a lot of flexibility to expand its already-exciting pipeline.
Although Moderna's shares skyrocketed in the past couple of years, it remains reasonably valued, at least when going by traditional valuation metrics. The company's forward price to earnings (P/E) ratio of 7.9 looks a lot better than the biotech's industry average of 11.2.
While the company's stock may see tougher times once its coronavirus tailwind ends -- which won't happen anytime soon -- Moderna's long-term prospects look bright.
2. Regeneron
Regeneron is yet another company benefiting from its coronavirus-related work. In the third quarter, the biotech's revenue increased by 51% year over year to $3.4 billion. The company had its antibody cocktail for the treatment and prevention of COVID-19, REGEN-COV, to thank for this performance. Sales of this product came in at $804 million for the quarter.
Regeneron will continue to benefit from this tailwind, at least for a bit longer. True, there is now more competition in the market for COVID-19 therapies; both Merck and Pfizer recently earned authorization for their respective products in this space.
However, given the recent surge in cases, combined with the fact that REGEN-COV recently earned approval in the European Union, sales of the coronavirus therapy won't drop off a cliff. Indeed, management has high hopes for the product.
To quote Regeneron's CEO, Leonard Schleifer: "Given the anticipation of new COVID infections over time, increased utilization of REGEN-COV in appropriate cases and the need for prophylaxis in immunocompromised individuals, we anticipate an ongoing role for REGEN-COV."
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But Regeneron isn't just a coronavirus play. In Q3, the company's revenue excluding REGEN-COV came in at $2.6 billion, 15.3% higher than the year-ago period.
For a biotech company of this size, that's still an excellent performance. Products such as Eylea, which treats a chronic eye disorder called wet age-related macular degeneration, continue to perform well. Regeneron markets Eylea in the U.S., while Bayer markets it outside the U.S. The two entities share the profits and losses associated with the medicine in international markets.
Regeneron's sales of Eylea in Q3 increased by 12% to $1.5 billion. Add that to other medicines, including Dupixent and Libtayo, not to mention the more than 30 clinical programs the company boasts (including 10 in phase 3 studies), Regeneron's future looks great. With a reasonable forward P/E of 12.8, now is as good a time as any to add shares of this biotech stock to your portfolio.
