It’s understandable if some investors might be leery of investing in biotech. Two of the top biotech exchange-traded funds (ETFs) are lagging behind the broader market indexes so far this year. That’s a pretty good sign that the biotech space isn’t as hot as it’s been in the past.
However, long-term investors understand that short-term underperformance isn’t anything to worry about when companies have great prospects. If you have an investing time horizon measured in years instead of months, here are three top biotech stocks to buy right now.
Vertex Pharmaceuticals (NASDAQ:VRTX) arguably deserves the status as the overall best biotech around. Let’s start with the company’s strong financial position. Vertex’s revenue soared 55% year over year in 2020 to $6.2 billion. It generated $2.7 billion in profits. The biotech ended the year with a cash stockpile totaling $6.7 billion.
This financial strength is due to Vertex’s monopoly in treating the underlying cause of cystic fibrosis (CF). The company currently markets four CF drugs. Its newest member of the group, Trikafta/Kaftrio, is already a mega blockbuster in the U.S. and should pick up momentum in Europe as Vertex secures additional reimbursement agreements.
Vertex expects to dominate the CF market for years to come. However, the company has its eyes on expanding into new markets as well. Several of the biotech’s pipeline candidates target rare genetic diseases that offer lucrative opportunities, notably including alpha-1 antitrypsin deficiency, APOL1-mediated kidney diseases, beta-thalassemia, and sickle cell disease.
The company also thinks that it could have a game-changing therapy for type 1 diabetes on the way. Vertex recently advanced cell therapy VX-880 into phase 1/2 testing. The experimental drug holds the potential to essentially cure type 1 diabetes.
Regeneron Pharmaceuticals (NASDAQ:REGN) is also in great financial shape. The big biotech generated revenue of $8.5 billion last year, up 30% from 2019. Regeneron’s earnings totaled $3.9 billion. Its cash position stood at $6.7 billion as of Dec. 31, 2020.
Although Regeneron doesn’t enjoy a monopoly as Vertex does, the company’s lineup includes several big winners. Sales for eye disease drug Eylea continue to climb. Anti-inflammatory drug Dupixent and cancer immunotherapy Libtayo are delivering especially strong revenue growth.
The future looks bright for Regeneron. The biotech hopes to win another approved indication for Dupixent later this year in treating children with moderate-to-severe asthma. It recently scored additional U.S. approvals for Libtayo as a treatment for advanced basal cell carcinoma and first-line non-small cell lung cancer.
Regeneron could have new products on the way with great commercial prospects as well. It reported overwhelmingly positive results from a late-stage study of COVID-19 antibody cocktail REGEN-COV. The biotech’s pipeline includes three other late-stage antibody therapies targeting birch allergy, chronic obstructive pulmonary disease, and osteoarthritis pain.
Unlike Vertex and Regeneron, Novavax (NASDAQ:NVAX) can’t claim impressive sales and profits. The biotech doesn’t have a product on the market yet. However, that could change in the near future.
Novavax announced results from a U.K. late-stage study earlier this month that showed a 96.4% efficacy for its COVID-19 vaccine candidate NVX-CoV2373. These results indicate that NVX-CoV2373 could be one of the most effective coronavirus vaccines developed so far.
The company hopes to win Emergency Use Authorization (EUA) in the U.K. and the U.S. It remains to be seen if the U.S. Food and Drug Administration (FDA) will allow Novavax to file for EUA using its U.K. study data. However, even if it doesn’t, that would probably only present a delay of a couple of months since Novavax’s late-stage study of its COVID-19 vaccine in the U.S. and Mexico should wrap up soon.
NVX-CoV2373 is poised to be a huge winner right out of the gate. Novavax already has a supply deal with the U.S. for 100 million doses and with other countries for at least 180 million doses.
In addition, the biotech’s pipeline includes another promising candidate, flu vaccine NanoFlu. Novavax reported positive results from a late-stage study of NanoFlu last year. The company is exploring the potential for a combo COVID/flu vaccine that includes NVX-CoV2373 and NanoFlu.
This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.