Biotech stocks are prone more to pops-and-drops than those in other industries; however, our top Motley Fool healthcare contributors think these three biotech companies have what it takes to be considered best-in-breed investments. Read on for the details.
Todd Campbell: The "best" buy isn't always the cheapest buy, but it might be in this case. Following the FDA's approval in December of AbbVie's hepatitis C therapy Viekira Pak, shares of rival Gilead Sciences(NASDAQ:GILD) shares have fallen on fear that sales will slump.
However, these worries might prove overblown. Gilead Sciences' Harvoni is arguably a better treatment than Viekira Pak. It offers once-daily dosing, rather than Viekira Pak's minimum of four pills daily, and it delivers up to 99% functional cure rates without the co-administration of side effect-laden ribavirin -- something AbbVie can't claim.
Although AbbVie inked an exclusivity deal with pharmacy benefits manager Express Scripts for Viekira Pak, plans relying on Express Scripts' formularly likely represent less than 200,000 of the 3 million people diagnosed with hepatitis C in the United States. That leaves plenty of room for Harvoni since, for comparison, Gilead Sciences' first-generation hepatitis C drug Sovaldi generated $8.5 billion in sales by being used in treating just 117,000 patients through the first nine months of 2014.
Gilead Sciences also cut its own exclusivity deals with both CVS Health and Anthem that should up its market share. Sovaldi should remain a top seller this year given that neither Harvoni nor Viekira Pak are likely to be used to treat non-genotype 1 or genotype 4 patients. Throw in $10 billion in sales for Gilead Sciences' HIV drugs, along with potential growth in oncology, and this company's forward sub-10 times P/E ratio could make it the best buy in biotech.
Cheryl Swanson: For investors interested in sustainable and growing dividends, Amgen (NASDAQ:AMGN) takes the blue ribbon in the "best buy" competition. As fellow Fool Sean Williams pointed out, Amgen is one of the few biotechs that could meet the stringent criteria of savvy income investors.
While Amgen's dividend yields less than 2%, the company recently announced a 30% increase in its quarterly payout, with further increases planned. Four new drugs should juice its performance in 2015, including cholesterol drug evolocumab, which has a peak sales estimate north of $2 billion.
Amgen's recent deal with Kite Pharma will land it right in the middle of the hot CAR-T field, which has shown tremendous potential in early cancer studies. Amgen also recently added to its impressive cancer portfolio via FDA approval for Blincyto.
With sales of its older legacy products mostly flat, Amgen in recent years has looked more like a Big Pharma than a Big Biotech. Will Amgen mirror the largely successful move of Abbott Laboratories, and split into an slow-growing product group and a fast-growing "genuine" biotech? I wouldn't hold my breath for that, but I would certainly put this stock on my shopping list, and wait for a pullback.
Keith Speights: While Biogen Idec (NASDAQ:BIIB) underperformed both Amgen and Gilead over the past 12 months, its prospects for the future appear to be in the same league as its fellow big biotechs'. The primary reason behind the positive outlook for Biogen continues to be its powerhouse multiple sclerosis franchise.
Biogen claims three blockbuster drugs for treating multiple sclerosis: Avonex, Tecfidera, and Tysabri. Tecfidera has emerged as the new star, racking up more than $787 million in sales during the third quarter of 2014 alone. Biogen should continue to experience strong earnings growth from its MS drugs.
Meanwhile, a wild card in Biogen's pipeline could change the dynamics for the company in a ginormous way. In December, the biotech announced very promising results from an early stage clinical trial of BIIB037 in treating Alzheimer's disease. Biogen plans to bump the drug straight into a phase 3 study. That late-stage study probably won't complete until 2017 at the earliest, though.
Biogen presents an opportunity to buy a steadily growing well-established biotech, along with a lottery ticket for a potentially huge payout with its Alzheimer's drug. That's a combination many investors could find alluring.