Patience is one of the qualities long-term investors have to cultivate, but doing so isn't easy. Equity markets are entirely unpredictable in the short run. Their ups and down can sometimes rattle even seasoned investors. But it helps to keep a cool head and to know that the companies you have invested in have the fortitude to survive even the most challenging market or economic downturn.
The biotech industry is a great place to look for stocks that can survive down markets and be successful over long periods since the drugs these companies develop are so critical to their customers' lives. Let's look at two biotech stocks to buy today and hold on to for a while: Amgen (AMGN 0.42%) and Moderna (MRNA -1.37%).
1. Amgen
Amgen is a longtime leader in the biotech industry, with a broad and diversified lineup of drugs in multiple areas, as some of the company's most recent approvals indicate. They include Tezspire for treating asthma and Lumakras, a cancer therapy. This is merely the tip of the iceberg; the company boasts many other medicines and a rich pipeline. Although it is in the business of developing its own brand-new drugs, Amgen is also in the biosimilar market.
Biosimilars are, in a sense, knock-offs for biologic drugs. Biosimilars are cheaper because their research, testing, and approval process tends to be less expensive, shorter, and less risky. Amgen emphasizes giving patients more affordable drug options since most in the U.S. find medicines too costly, according to Kaiser Family Foundation polling. Amgen is currently working on various biosimilar products.
One is ABP 654, a potential biosimilar for Johnson & Johnson's blockbuster immunology drug Stelara. Amgen is also targeting biosimilar versions of Eylea, which treats an eye disorder called wet macular degeneration, and Soliris, for a rare disease named paroxysmal nocturnal hemoglobinuria. Biosimilars help patients and the entire healthcare system save billions of dollars, so there is likely a bright future for this industry.
Amgen is positioning itself to profit from it for a while. Here's another reason to buy Amgen's stock: the dividend. The company currently offers a yield of 3.24%, well above the S&P 500's average of 1.74%. In December, the drugmaker announced a 10% dividend increase for the first quarter of 2023. Amgen has boosted its payouts by 61% in the past five years.
The company also has a cash payout ratio of about 44%. That leaves ample room for dividend increases. Dividend growth investors will find what they are looking for with Amgen. And so will long-term investors looking for a solid and relatively safe stock that can deliver excellent returns for a while.
2. Moderna
Moderna has been a leader in the coronavirus vaccine market. In 2022, the company generated about $18.4 billion in sales from its crown jewel, Spikevax. However, that number is set to drop precipitously this year. The vaccine maker expects about $5 billion in sales in 2023 although that number could increase if it signs more deals with various governments worldwide.
Is this a reason to worry? In my view, the answer is no. Moderna's immense success during the worst of the pandemic was never going to last forever since the conditions that made that possible were so unique. However, what transpired during the coronavirus outbreak helped propel Moderna to a new status. The company had never had a single approved product until the pandemic.
Now, it has a coronavirus lineup that can likely continue generating above $1 billion in revenue, the funds to push additional candidates through the pipeline, and plenty of exciting programs in the works. Here's a great example of Moderna's promising candidates. In December, Moderna announced positive results from a phase 2 clinical trial for an investigational personalized cancer vaccine, MRNA-4157/V940, in combination with Merck's famous cancer drug, Keytruda.
The combination of Keytruda and MRNA-4157/V940 reduced the risk of recurrence or death in stage 3 or 4 melanoma patients versus Keytruda alone. The two companies plan to start a phase 3 clinical trial this year. So MRNA-4157/V940 will join the ranks of Moderna's non-coronavirus programs in late-stage studies. This group includes vaccines against the flu, cytomegalovirus (CMV), and respiratory syncytial virus (RSV).
Flu vaccines are typically only 40% to 60% effective. In the 2021 to 2022 season, it was even lower than that at 36%. Further, there are no approved RSV or CMV vaccines. Moderna's RSV candidate recently proved effective in a phase 3 study. A regulatory submission should follow soon. In other words, Moderna isn't shooting in the dark. There is a real need for the kind of products it is developing.
Moderna's mRNA platform is looking very likely to deliver solid breakthroughs in the future. That's what makes the stock worth sticking with for years.
