Investors are beginning the new year staring at a market that is already down significantly. And predictions for further losses in 2023 are plastered across a lot of headlines. The downturn has hit most industries. And biotech has been no exception. The SPDR S&P Biotech ETF is down 20% over the past year. That's slightly worse than the total return of the S&P 500 index.
But at least two stocks are bucking the trend. In fact, BioMarin Pharmaceuticals (BMRN 2.87%) and Novo Nordisk (NVO 2.70%) are at their highest levels in a year. Here's how these two biotechs are taking very different approaches to deliver for shareholders.
BMRN Total Return Level data by YCharts
1. BioMarin Pharmaceuticals
BioMarin is relatively unique in the biotech industry. The company was founded in 1997 to develop treatments for extremely rare genetic diseases. The conditions it addresses -- such as disorders related to bone growth and enzymes -- mostly affect children. Because the diseases are so rare, the treatments are expensive. Many are hundreds of thousands of dollars per year. It's the only way the company can cover the cost of development.
It's raising the bar with Roctavian, its one-time infusion for severe hemophilia. Reports have the company pricing it between $2 million and $3 million. A watchdog group that monitors drug pricing found that could still be a bargain for insurers that were paying about $25 million over a lifetime of treatments. It has been approved for conditional use in the European Union -- where it charges about $1.5 million -- and the U.S. Food and Drug Administration (FDA) may act on the company's application by the end of the first quarter.
The decision could get pushed out a few months while the agency completes its review. Still, it's clear that Wall Street is betting on approval. The stock is at its highest level since mid-2020. That's when the FDA issued a stunning rejection of Roctavian's accelerated approval. With three years of data, any lingering questions should finally be answered.
2. Novo Nordisk
On the other end of the spectrum is a company making drugs to combat some of the most common chronic diseases faced by the developed world. Novo Nordisk is one of the three companies -- along with Eli Lilly and Sanofi -- that account for roughly 90% of global insulin production. As the prevalence of diabetes has grown, so have shareholder returns. A mere $100 invested in the stock 30 years ago is worth more than $15,500 today. And it isn't done yet.
The company's weight-loss drug Wegovy was approved in 2021 and demand for it has outstripped supply so far. That's due to a combination of so many patients wanting the drug and some manufacturing issues. Ozempic, another of the company's diabetes treatments that produces a similar weight loss effect, has been used in the meantime.
Overall, the company's obesity care segment grew sales (in euros) by 75% for the first nine months of 2022. Wall Street expects that to continue. Analysts from Morgan Stanley have pegged the potential market for obesity drugs at $50 billion by 2030 -- that's more than 20 times greater than it is today. Although there is plenty of competition, that kind of opportunity likely means Novo Nordisk stock will continue climbing in the years ahead.
With obesity rates having more than doubled since the 1980s, and the pandemic only accelerating the trend, Novo Nordisk stock may offer one of the few reliable investments regardless of economic backdrop.
