Big bucks are being made in biotech. That's clear from the sizzling performance of the industry. If five years ago you had invested $1,000 each in the current 10 biggest biotechs in terms of market cap, you would now have over $92,000. Which companies make up this top 10 list by market cap? Here are the biotechs that stand atop the industry.
|1||Gilead Sciences (NASDAQ:GILD)||$145.4 billion|
|2||Amgen (NASDAQ:AMGN)||$118.3 billion|
|3||Biogen (NASDAQ:BIIB)||$97.3 billion|
|4||Celgene Corporation (NASDAQ:CELG)||$91.1 billion|
|5||Regeneron Pharmaceuticals (NASDAQ:REGN)||$45.1 billion|
|6||Alexion Pharmaceuticals (NASDAQ:ALXN)||$34.3 billion|
|7||Vertex Pharmaceuticals Incorporated (NASDAQ:VRTX)||$28.6 billion|
|8||Pharmacyclics (UNKNOWN:PCYC.DL)||$19.5 billion|
|9||BioMarin Pharmaceutical (NASDAQ:BMRN)||$18.9 billion|
|10||Incyte Corporation (NASDAQ:INCY)||$15.3 billion|
Similar but different
These biotechs are certainly quite different, but they share at least one thing in common. Each company derives a big chunk of its revenue from only one or two drugs.
Hepatitis C drugs Sovaldi and Harvoni together generated more than half of Gilead Sciences' sales last quarter. The same was true for Amgen with Neupogen/Neulasta and Enbrel. Multiple sclerosis drugs Tecfidera and Avonex raked in more than 70% of Biogen's total sales last quarter. Celgene pulled in over 64% of its revenue from Revlimid. BioMarin's Naglazyme and Kuvan accounted for nearly 63% of total sales in the fourth quarter of 2014.
Other biotechs are pretty much one-drug wonders -- at least for now. Regeneron's Eylea, Alexion's Soliris, and Vertex's Kalydeco all account for nearly all of each company's total product sales. The same is true for Pharmacyclics' Imbruvica and Incyte's Jakafi.
The trajectories for these biotechs and their main products vary, however. Gilead's hepatitis C drugs and Pharmacyclics' Imbruvica, for example, are still relatively new to the market and growing sales quickly. Amgen, on the other hand, experienced a year-over-year decline in revenue from its Neupogen/Neulasta franchise and relatively anemic sales growth for Enbrel.
Pipeline strength also differs considerably among the top 10 biotechs. Biogen's experimental Alzheimer's disease drug could become a huge winner for the company down the road. Incyte claims a couple of JAK-inhibiting cancer drugs in pivotal clinical trials that investors are anxiously watching. Meanwhile, Gilead and Celgene boast of 20 or more mid-stage and late-stage trials under way.
Changes in the air
One thing seems certain. The current ranking of the biggest biotechs won't remain the same for much longer.
AbbVie (NYSE:ABBV) announced plans in March to acquire Pharmacyclics for around $21 billion in large part to add Imbruvica to its lineup. Assuming all goes well, Pharmacyclics will drop off the list in mid-2015. Meanwhile, rumors continue to swirl about BioMarin as a potential takeover target. Analysts at UBS add Alexion and Incyte to the list of biotechs that larger companies could be interested in scooping up.
The order at the top appears likely to change as well. Celgene seems poised to move past both Amgen and Biogen in market cap over the next couple of years or so based on earnings growth projections. And there's always the possibility that one or more of the big biotechs use their cash to make a purchase that changes the map. Gilead, for example, has over $10 billion in cash, while Amgen claims a cash stockpile of more than $27 billion.
Best of the biggies?
Which is the best of the big biotechs? It depends.
Over the last five years, Pharmacyclics enjoyed the biggest stock gains by far, climbing more than 3700%. Keep in mind, though, that the biotech's starting point was also the lowest back then. If you're looking for which of these biotechs has the greatest chance of a ginormous breakout, go with a relatively smaller one like Incyte.
However, if you're wanting to go with the company that appears to have the highest probability of maintaining sustained success over the long term, my picks would be Gilead and Celgene. Gilead has two juggernaut franchises -- one in hepatitis C and another in HIV/AIDS. Celgene continues to expand the strength of its portfolio with up-and-coming drugs including Abraxane and Otezla. I think Gilead gets the nod due to a lower valuation, but either of these biotechs could be good selections for investors hoping to make their own big bucks in biotech.
Keith Speights owns shares of Celgene and Gilead Sciences. The Motley Fool recommends BioMarin Pharmaceutical, Celgene, Gilead Sciences, and Vertex Pharmaceuticals. The Motley Fool owns shares of Gilead Sciences. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.