I've been digging through the healthcare sector hunting for intriguing new ideas and I've uncovered a few biopharma companies that I think are particularly deserving of investors' attention. These three biopharma stocks already market at least one profit-friendly FDA-approved therapy, and each has catalysts that could move shares higher in the coming year. Without further ado, here are three moneymaking biotech stocks to consider owning in portfolios.
No 1: Depomed (NASDAQ:ASRT)Depomed acquires under-performing drugs at a fraction of their development cost and then relaunches them with a bigger sales force and higher prices.
The company has successfully employed this strategy with both the pain therapy Lazanda and the migraine drug Cambia, and now it's taking lessons learned from relaunching those medicines and applying them to Nucynta, an opioid pain reliever that it acquired from Johnson & Johnson earlier this year.
The Nucynta acquisition could be transformative for Depomed because its sales are expected to help Depomed's revenue triple to between $310 million and $335 million this year. If Depomed hits that sales target and revenue growth is leveraged against fixed costs, EPS could head significantly higher over the coming year. Industry watchers believe that Depomed's EPS will grow from $0.26 last year, to $0.29 this year, to $1.20 next year.
Although there's no guarantee that Nucynta's relaunch will go off without a hitch, Nucynta's potential sales growth and a reasonable forward P/E ratio south of 20 suggests that Depomed could be a stock worth buying.
No. 2: Eagle Pharmaceuticals (NASDAQ:EGRX)Like Depomed, Eagle Pharmaceuticals' success hinges on previously-approved therapies. However, in Eagle Pharmaceuticals' case, its revenue opportunity comes from reformulating drugs that have lost patent protection to make them more effective and/or easier to use.
Last year, Eagle Pharmaceuticals launched Ryanodex, a less-concentrated version of the long-standing malignant hypothermia drug dantrolene. Ryanodex can be administered more quickly than dantrolene, and that dosing advantage led to Ryanodex sales jumping 200% to $1.6 million in the first quarter. In April, Ryanodex's un-audited sales increased further, reaching $600,000.
Ryanodex sales could continue growing given that hospitals are required to keep dantrolene in stock, but investors are arguably even more excited about two other drugs that are under FDA consideration for approval.
In April, the company reported that the FDA had accepted its filing for approval of a rapid infusion formulation for bendamustine, a treatment for chronic lymphocytic leukemia and indolent B-cell non-Hodgkin lymphoma that has progressed during or within six months of treatment with Rituxan or a Rituxan-containing regimen.
The FDA will make its decision on whether to approve Eagle Pharmaceutical's bendamustine in December, and if it gets the green-light, Eagle Pharmaceuticals could earn up to $90 million in milestones and receive double-digit royalties on sales from its partner Teva Pharmaceutical.
In February, Teva Pharmaceutical paid Eagle Pharmaceutical $30 million upfront to lock up rights to this new bendamustine formulation, ostensibly to protect Treanda, its own bendamustine drug. Treanda had sales of $767 million last year, so its probably not a stretch to assume that Teva Pharmaceutical will be able to successfully commercialize Eagle Pharmaceutical's variation, too.
Eagle Pharmaceuticals is also awaiting an FDA approval for its ready-to-use version of bivalirudin, a drug that racks up $600 million per year in sales. If approved, Eagle Pharmaceuticals believes that its formulation can win away substantial share from prior generation bivalirudin, which must be reconstituted in a cath lab prior to being administered.
With Eagle Pharmaceuticals' Ryanodex sales growing and the potential for two additional moneymakers coming in the next year, industry analysts think that the company can deliver EPS of $6.13 next year. That gives this company a forward P/E ratio of just 13.6, making it one of the least pricey stocks in biotech.
No. 3: Horizon Pharmaceuticals (NASDAQ:HZNP)Previously, Horizon Pharmaceuticals' growth has been tied to the drug Vimovo, a therapy that limits ulcers in arthritis patients. The company acquired Vimovo from AstraZeneca in 2013 for just $35 million, and sales of Vimovo totaled $163 million last year, up from just $20 million in 2013.
Last fall, the acquisition of Actimmune and Pennsaid expanded Horizon Pharmaceuticals' product lineup, and in the first quarter, those two drugs accounted for $43 million of Horizon's $113 million in net sales.
Horizon Pharmaceuticals made another big splash when it acquired Hyperion Therapeutics for $1.1 billion earlier this year to land the rights to Ravicti and Buphenyl, two rare disease drugs that had sales of $113.6 million last year.
Overall, Horizon Pharmceuticals' acquisitions are expected to result in a big jump in its bottom line. The company is expected to deliver EPS of $1.22 this year and $1.77 next year, and that means that investors are paying just 18.7 times next year's earnings to own shares -- arguably a reasonable valuation for a growing company like this one.
Tying it together
Biopharma stocks move more wildly than other stocks, and its likely that these three companies aren't going to be immune to the industry's volatility. Although that risk means that investors should approach these companies cautiously, there's a lot to like about Depomed, Eagle Pharmaceuticals, and Horizon Pharmaceuticals that could make each an intriguing new idea to add to portfolios.