Biotech stocks have a reputation as a moderate- to high-risk investment. That’s because many of these companies spend a fortune on research and development with no guarantee their products will ever reach the market.
Many biotech stocks tend to underperform compared to the rest of the Nasdaq Composite Index, a market-cap-weighted index predominantly focused on technology.
However, if you have a fairly high risk tolerance, a bear market represents a good time to take a chance on some stocks in the biotech industry. Stock prices are low, which means a potential for higher returns if you choose the right companies.
Which might lead you to the question of: What are the best biotech stocks to buy?
What Are Biotechnology Stocks?
Biotechnology combines biology and engineering to manufacture products or technology — most often, pharmaceuticals, lab equipment or diagnostic tools — designed to prolong human life while, ideally, improving its quality.
Biotechnology stocks are the instruments that help fund biotech companies. Many biotech companies fly under the radar of consumers and retail investors. That’s because once they develop new drug technology, they sell it to a pharmaceutical company that can mass produce the product.
One notable exception is the biotech firm Moderna, which played an instrumental role in the development of one of the first COVID-19 vaccines.
What Are the Best Biotech Stocks To Buy?
Some of the biotech stocks on this list are not household names. But most have tremendous revenue potential with promising drugs in various stages of development and successful drugs already available today.
Here are the seven best biotech stocks:
- Biogen (BIIB)
- BioMarin (BMRN)
- Amgen (AMGN)
- CRISPR Therapeutics (CRSP)
- Exelixis (EXEL)
- Bio-Techne (TECH)
- Regeneron Pharmaceuticals (REGN)
1. Biogen (BIIB)
As the first biotech stock that Warren Buffett ever invested in back in 2019, Biogen holds promise today for investors with a buy-and-hold mentality and high risk tolerance.
There is a lot of volatility in the company recently, with its Alzheimer’s drug Aduhelm showing great promise but only being prescribed in specific approved trials. The Centers for Medicare & Medicaid Services essentially cut off access to the drug to most Medicare beneficiaries, even after the Food and Drug Administration rushed approval of the treatment.
However, bad news surrounding Aduhelm may have been baked into the stock’s price, which is why shares didn’t plummet upon release of the news. Since then, the company has published positive results for a Phase 2 trial for a new systemic lupus erythematosus drug and an 18-month Phase 3 trial of another Alzheimer’s drug, lecanemab.
As of Oct. 18, the stock sits at $269.55, closer to its 52-week high than its 52-week low, and up 12.35% year to date.
- Solid fundamentals
- Trading near its one-year low
- Promising Alzheimer’s treatment received quick FDA approval
- New Alzheimer’s drug on the horizon
- Highly volatile
- Aduhelm not approved for widespread use in Medicare patients
2. BioMarin (BMRN)
BioMarin has recently had a string of good news resulting in the company upgrading its full-year revenue predictions. The $16.87 billion company specializes in pioneering treatments for rare genetic disorders and already has many drugs on the market.
MarketBeat gives BioMarin a “moderate buy” rating, with 12 Wall Street analysts issuing a “buy” rating and 3 issuing a “hold,” which is consistent with last month’s ratings.
- Outperforming S&P 500 this year
- Target price 24% above current price
- Niche products without a large market
- Not a short-term investment
3. Amgen (AMGN)
Amgen is best known for Neulasta, a drug that reduces infection risk in chemotherapy patients, Enbrel for inflammatory diseases and Prolia for osteoporosis. With this trilogy of successful drugs already on the market, the $135 billion biopharmaceutical company has solid fundamentals and steady income. In early June 2022, The FDA approved Amgen’s rheumatoid arthritis treatment, RIABNI.
Ten out of 25 Wall Street analysts covering Amgen give it a “buy” or “strong buy” rating, for a consensus “buy” rating, according to Yahoo Finance. However, MarketBeat analysts are giving it a “hold” rating.
- Successful drugs for common diseases already on the market
- New rheumatoid arthritis treatment just gained FDA approval
- Pays dividends of 3.09%
- Price hovering near 52-week high
- Many analysts give it a hold rating
4. CRISPR Therapeutics (CRSP)
CRISPR Therapeutics takes a unique approach to drug development for the treatment of serious diseases through gene editing. The company is developing promising treatments for diseases such as cystic fibrosis, Alzheimer’s, Parkinson’s, hemophilia, Tay-Sachs and more.
The biotech firm’s financial future is also promising, according to investors and analysts. MarketBeat gives CRISPR stock a “hold” rating and Yahoo Finance cites a consensus “buy” among 23 analysts. Over the last several months, several publications, including U.S. News & World Report and Investor’s Business Daily, have listed CRISPR as a top biotech pick.
- Promising treatments for common hereditary diseases
- Closer to 52-week low than 52-week high
- Not a good buy for risk-averse investors
- Not a short-term buy
5. Exelixis (EXEL)
Exelixis is a company focused on cancer treatments or, as its website states, a company that strives “to develop effective, tolerable and durable treatments to help patients with cancer thrive.” To date, the company has medicines available to treat kidney, liver and thyroid cancers along with advanced melanoma.
The consensus rating among 10 Wall Street analysts is “strong buy,” according to Yahoo Finance. The company has an annual earnings growth forecast of 23.67% through 2024, according to WallStreetZen. That’s more than double the biotech industry’s projected earnings growth rate and significantly higher than the U.S. market average earnings growth rate projection.
At a current price of under $18 per share, Exelixis is at a very attainable entry point for new investors and shows a lot of growth potential. However, it’s worth noting that the price dropped recently when a Phase 3 trial for the company’s renal cell carcinoma treatment was less effective than the company had hoped.
- Affordable stock
- Strong buy rating from analysts
- Recent drug showed poor results in Phase 3 trial
- Not a short-term buy
6. Bio-Techne (TECH)
Bio-Techne is a bit different from the other firms on this list. Rather than developing drug treatments, it supplies biological materials to other pharmaceutical and biotech firms for drug development and testing. It is also one of just a few companies on this list to offer a dividend.
The company has a projected earnings growth of 16.87%, according to MarketBeat, whose analysts give it a “buy” rating. Two out of five Wall Street analysts rated Bio-Techne a “strong buy,” two rated it a “buy” and one analyst rated it a “strong sell.”
Zacks predicts an average return from the stock relative to the market in the coming months and says it is fairly valued right now.
- Pays a dividend of 0.45%
- Buy rating from analysts
- Expensive entry point at just over $300
7. Regeneron Pharmaceuticals (REGN)
Regeneron Pharmaceuticals is probably best known for its COVID-19 treatment, REGEN-COV, which was granted an Emergency Use Authorization by the FDA. That EUA was later retracted, however, when the treatment was found to be ineffective against the Omicron variant.
Despite that, the company stock maintains high ratings, with Kiplinger recently calling it “one of the best biotech stocks in terms of technical performance.” The stock has outperformed the iShares Biotechnology ETF so far this year.
MarketBeat gave the stock a “buy” rating, with eight Wall Street analysts rating it a “strong buy,” five analysts rating it a “buy,” six analysts rating it a “hold” and one analyst rating it a “sell.”
- Analysts give it a buy rating
- Modest projected earnings growth
- Expensive entry point of over $700
- No dividends
Biotech stocks, especially in a bear market, can represent a tremendous value to investors with a moderate to high risk-tolerance. To mitigate risk, you might consider investing in a biotech ETF, like the iShares Biotechnology ETF (IBB) or the SPDR S&P Biotech ETF (XBI), instead.
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Biotech Stocks FAQHere are some commonly asked questions regarding investing in biotech stocks.
- Is it worth investing in biotech?
- Biotech stocks carry risks, as with any investments, but they can show tremendous returns over time. Experts say that biotech stocks may be excellent long-term investments, in part because of the lengthy time-to-market for many drugs.
- If you want to diversify your risk, consider investing in a biotech ETF, which is a balanced collection of biotech stocks.
- What biotech stock did Warren Buffett buy?
- In 2019, Warren Buffett's investment firm Berkshire Hathaway purchased biotech stocks for the first time. The firm purchased more than 648,000 shares of Biogen stock, worth $192.4 million. It was the first biotech company Buffett chose to invest in through his decades long history as the Oracle of Omaha.
- However, in an uncharacteristic move for the investor, he sold those shares in the second quarter of 2021, following the FDA's controversial approval of Biogen's promising Alzheimer's drug. At the time, the stock may have been worth as much as $267 million, or a 39% return on investment if Buffett sold at the stock's high point.
- In terms of biotech stock that Warren Buffett owns or has owned, Berkshire Hathaway has also held positions in Merck, AbbVie, Pfizer and Bristol Myers Squibb.
Daria Uhlig contributed to the reporting for this article.
Information is accurate as of Oct. 17, 2022.
Editorial Note: This content is not provided by any entity covered in this article. Any opinions, analyses, reviews, ratings or recommendations expressed in this article are those of the author alone and have not been reviewed, approved or otherwise endorsed by any entity named in this article.
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- ETF Stream. 2022. "Biotech stocks: High idiosyncratic risks, high alpha?"
- Fierce Pharma. 2021. "Oracle of Organon: Buffett's Berkshire cashes out on Biogen, trims pharma holdings but discloses stake in Merck spinoff."
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- Finviz. "BIIB."
- MarketBeat. "MarketBeat."
- WallStreetZen. "Exelixis Inc Stock Forecast, Predictions & Price Target."
- Zacks. "Zacks."
- National Institute on Aging. 2022. "NIA statement on report of lecanemab reducing cognitive decline in Alzheimer’s clinical trial."