It can be scary to put your hard-earned money into a bear market. But it is the right time for growth-oriented investors with a long-term horizon to pounce. Interestingly, there are some stocks, such as biotech companies Exelixis (EXEL 0.23%) and Bristol-Myers Squibb (BMY 1.47%), that are in the limelight by defying the bear market.
While the S&P 500 has plunged 13% so far this year, the shares of Exelixis and Bristol-Myers have surged 15% and 23%, respectively. Let's dive into what these two biotechs have going for them that is attracting investors.
This biotech company's attempt to address hard-to-treat cancers -- by using gene therapies -- is what's driving growth. Exelixis' star drug product is Cabometyx (cabozantinib), which treats advanced renal cell carcinoma (RCC), a type of kidney cancer, and some forms of liver cancer. The drug is also used in combination with Bristol-Myers' drug Opdivo (nivolumab) to treat advanced RCC in patients who haven't received any prior treatment for the disease.
Cabometyx brought in $1 billion of revenue in 2021. In its recent second quarter, it contributed the highest amount (around $339 million) to total revenue. Another formulation of cabozantinib, Cometriq, used for the treatment of thyroid cancer, also contributed around $7.9 million in the quarter. Total revenue for the quarter jumped to $419 million versus $385 million in Q2 2021. Adjusted net income, however, fell to $90 million from $118 million in the prior quarter.
What's more, Cabometyx is undergoing many other clinical trials to be used as a stand-alone therapy or a potential combination treatment that could continue to drive revenue for the company.
Despite the success of its star drug, Exelixis' management understands the risks of relying on just one product for success. In the second half of the year, the company says it expects positive results from its "growing pipeline of clinical compounds, including XL092, XB002, XL102, and XL114." For 2022, the company expects revenue to be in the range of $1.5 billion to $1.6 billion.
I believe the company's current products and future drugs in the pipeline will reap huge rewards over the long term. Exelixis ended the quarter with cash, cash equivalents, restricted cash equivalents, and investments of $2 billion, plenty to support its pipeline progress.
In November 2019, Bristol-Myers closed on its acquisition of biotech powerhouse Celgene, which specializes in cancer therapies and treatments for autoimmune diseases. The move has boosted its portfolio by adding quality drugs, including cancer treatments Revlimid, Pomalyst/Imnovid, Abraxane, and Reblozyl as well as bone marrow disorder treatment Inrebic.
Besides these, Bristol-Myers has its own impressive set of products that drove its Q2 revenue. Its anticoagulant drug Eliquis saw an impressive 17% jump in sales to $6.4 billion, while Revlimid, which treats multiple myeloma, contributed the second-highest amount with $5.2 billion in sales. Orencia, which treats moderate to severe rheumatoid arthritis, saw a sales increase of 8% from the year-ago period, to $1.6 billion.
Total revenue in Q2 jumped 6% to $23 billion from the prior-year period. Meanwhile, adjusted earnings per share (EPS) jumped 18% to $1.90 per share.
Bristol-Myers faces the challenge of patent expirations for most of its strongest products, like Eliquis, Opdivo, Pomalyst, Revlimid, and Yervoy, in the next few years. It might also concern investors that management slashed its 2022 guidance, expecting EPS in the range of $2.71 to $3.01 compared to the prior estimate of $2.92 to $3.22.
But a sound pipeline of new quality drugs should keep it strong going forward, even during a choppy market. Management believes its new portfolio of drugs has the "potential to generate greater than $25 billion in revenue on a non-risk-adjusted basis in 2029."
An added perk is that the company is also a dividend stock, yielding 3%, double the S&P 500's yield of 1.5%.
The long-term perks of investing in healthcare
Healthcare is one sector that will never run out of demand. Biotech companies in particular, whose businesses rely solely on manufacturing drugs for various chronic and deadly diseases, will keep driving revenue and profits. Oncology is a competitive sector, but it is also the fastest-growing one. According to Precedence Research, the oncology market could grow at a compound annual rate of 8% to $536 billion by 2029. This is why I believe investing in these two biotech stocks now will be highly rewarding over the long haul.