The global pandemic only re-emphasized the significance of healthcare and biotech firms. Some biotech companies that treat serious or life-threatening diseases are still red hot. After all, the average age of the world's population continues to rise, and diseases cannot be stopped -- at least, not yet. These factors make the healthcare industry a defensive sector -- no matter the state of the economy, there will always be a demand.
Let's take a look at three biotech stocks that are currently defying the bear market thanks to their innovative therapies.
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1. Vertex Pharmaceuticals
Vertex Pharmaceuticals (VRTX -0.79%) has made quite a name for itself in the market with its cystic fibrosis drugs. Its best-selling treatment in that category right now is the triple-drug combination therapy Trikafta. In 2022, Trikafta alone brought in $7.6 billion in revenue out of Vertex's total product revenue of $8.9 billion. The company's net profits increased 53% to $3.8 billion in 2022.
Vertex had a strong start to 2023 as well, with Trikafta contributing $2.09 billion to total product revenue of $2.3 billion in the first quarter. Management anticipates a strong finish to 2023, with total product revenue from cystic fibrosis products ranging from $9.5 billion to $9.7 billion.
The company has a chance to keep dominating in this indication for years as there are few rivals attempting to dislodge it. Recently, peer AbbVie announced the discontinuance of its cystic fibrosis R&D program after its candidate therapy didn't perform well enough in clinical trials.
However, Vertex management is wary of relying too heavily on a single product. Recently, Vertex and its partner, CRISPR Therapeutics, completed regulatory submissions for exa-cel, a gene therapy that is designed to be a one-time treatment for both beta-thalassemia and sickle cell disease. Vertex also has a licensing agreement to develop a product that would provide a functional cure for type 1 diabetes using CRISPR's advanced gene-editing technology (CRISPR-Cas9).
Assuming these treatments are approved and commercialized, Vertex should soon have a few more successful products on the market. That more diverse portfolio could help it make it a bigger, better company in the next several years.
And Vertex had a healthy cash balance of $11.5 billion as of the end of the first quarter, which it could use to fund further new product development.
2. Viking Therapeutics
Clinical-stage biotech Viking Therapeutics (VKTX 0.67%) focuses on therapies for endocrine and metabolic disorders. The company currently has no approved products.
But investor excitement around its pipeline candidates has propelled the stock upward by about 350% in the past year. And the stock has the potential to keep growing in the next few years.
Many of its candidates are in phase 1 or phase 2 clinical trials. It recently announced positive findings from a phase 2b clinical trial of VK2809 as a treatment for non-alcoholic steatohepatitis (NASH); after 12 weeks of treatment, up to 85% of patients receiving it had lowered their liver fat by at least 30%.
VK2735, its anti-obesity candidate, has also piqued the market's interest. The results of its phase 1 clinical trial revealed a mean weight loss of up to 18 pounds from baseline after 28 days. The company has now begun a phase 1 trial for an oral formulation of VK2735, with results expected in the second half of 2023.
Viking ended the quarter with $406 million in cash, equivalents, and short-term investments on its books, which should be enough to fund the company's current pipeline development. It also has no long-term debt, allowing it to borrow money if necessary to commercialize its upcoming products.
The future appears bright for this biotech, but one should tread carefully as it may be years before it has drugs on the market that generate consistent profits. Investors who are willing to take this type of risk should consider opening only a modest stake in Viking.
3. Reata Pharmaceuticals
Reata Pharmaceuticals (RETA) stock has skyrocketed by as much as 175% this year following the FDA's approval of the company's first drug in February. Skyclarys (omaveloxolone) is the first and only approved drug for the treatment of Friedreich's ataxia, an ultra-rare inherited neurodegenerative disorder. This disease impairs a patient's mobility, requiring them to use a wheelchair as early as their 20s.
The once-daily oral capsule reached the market in the second quarter, according to the company. Because this is Reata's first approved product, no revenue was reported in the company's first-quarter results, which were released in May. However, the company stated it had received 500 patient start forms for Skyclarys.
Following the completion of a phase 3 trial of bardoxolone for chronic kidney disease, the company announced it was discontinuing that program. Reata had $321 million in cash, cash equivalents, and marketable securities at the end of the quarter. The company has also taken out a $275 million non-dilutive debt facility, which it believes has set up its short-term path.
Wall Street analysts recommend a strong buy for this biotech in anticipation of high revenue from Skyclaris.
This is a possibility, but keep in mind that Reata is still a risky investment since Skyclaris is the company's first approved product, and while there are forecasts suggesting its peak annual revenue in the U.S. alone will be in the $800 million to $1 billion range, it has a long way to go to become a blockbuster drug. To become a successful biotech company, Reata must also work on diversifying its product pipeline.
