Biotechnology stocks are among the most high-risk, high-reward stocks in the market. Many biotech companies are working to develop one or even a handful of world-changing drugs to address billion-dollar markets.
The fates of these often volatile stocks are tied closely to study data and approval decisions from the U.S. Food and Drug Administration or other drug regulators. The biotech industry has struggled as a whole in 2023, but Wall Street analysts say the innovation that has always supported the area is alive and well.
[Sign up for stock news with our Invested newsletter.]
Here are eight of the top biotech stocks to buy that analysts love:
|Stock||Implied Upside Over May 10 Close|
|Novo Nordisk A/S (ticker: NVO)||2.7%|
|Vertex Pharmaceuticals Inc. (VRTX)||7.1%|
|Gilead Sciences Inc. (GILD)||24.2%|
|Moderna Inc. (MRNA)||103.3%|
|Genmab A/S (GMAB)||19%|
|Incyte Corp. (INCY)||37.7%|
|Jazz Pharmaceuticals PLC (JAZZ)||37%|
|Ionis Pharmaceuticals Inc. (IONS)||73%|
Novo Nordisk A/S (NVO)
Novo Nordisk is a Denmark-based leader in insulin and diabetes care. The company produces a wide range of other pharmaceutical products as well. Bank of America analyst Sachin Jain says Novo is a top biotech stock pick and is positioned to generate industry-leading 11% compound annual sales growth through 2027.
In addition, Jain says the company has several bullish catalysts on the horizon in the next 18 months. Those catalysts include the launch of obesity treatment Wegovy, sales growth in injectable GLP1s, a class of medicine used to treat Type 2 diabetes, and coming data on pipeline drugs. Bank of America has a “buy” rating and $174 price target for NVO stock, which closed at $169.41 on May 10.
Vertex Pharmaceuticals Inc. (VRTX)
Vertex Pharmaceuticals is a biopharmaceutical company that specializes in developing and marketing treatments for cystic fibrosis. CFRA analyst Sel Hardy says Vertex’s first-quarter product revenues of $2.37 billion exceeded consensus analyst estimates and represented 13% year-over-year growth.
Sales were driven by better-than-expected uptake of the company’s triple-combination gene therapy for cystic fibrosis, Trikafta/Kaftrio. Total Trikafta sales were up 19% to $2.1 billion and represented 88% of total product revenue in the quarter. Hardy projects full-year 2023 revenue of $9.73 billion. CFRA has a “buy” rating and $375 price target for VRTX stock, which closed at $350.04 on May 10.
Gilead Sciences Inc. (GILD)
Gilead Sciences develops treatments for infections, respiratory disorders, cardiovascular conditions and cancer. Morningstar analyst Karen Andersen says Gilead’s HIV and oncology growth have been solid, and international sales of CAR T-cell lymphoma therapy drug Yescarta have exceeded expectations.
Anderson says Gilead faces ongoing COVID-19 sales headwinds and declining hepatitis C revenue in 2023 but is positioned to return to low-single-digit overall revenue growth and generate operating margins of at least 40% in 2024 and beyond. She says the market isn’t fully valuing the company’s oncology potential. Morningstar has a “buy” rating and $97 fair value estimate for GILD stock, which closed at $78.11 on May 10.
Moderna Inc. (MRNA)
Moderna is a leading biotechnology company in the field of mRNA therapeutics. Most investors likely know the company thanks to its leading COVID-19 vaccine. While COVID-19 vaccine sales growth has understandably slowed, Moderna recently guided for 2027 respiratory vaccine sales, including COVID-19 vaccines, of between $8 billion and $15 billion.
Andersen says Moderna’s influenza vaccine, mRNA-1010, should launch in 2024, and the company has other impressive vaccine candidates in the pipeline. She projects net losses through 2025, but new vaccine launches position the company well for the longer term. Morningstar has a “buy” rating and $266 fair value estimate for MRNA stock, which closed at $130.83 on May 10. Now could be a good entry point into the stock as it’s fallen about 18% in the past month.
[SEE: 7 ETFs to Buy as Interest Rates Rise.]
Genmab A/S (GMAB)
Genmab is a Danish biotech company that develops fully human antibodies to target diseases using its proprietary technology. Jain says Genmab has a compelling track record of results and is the preeminent European biotech stock. He says investors should focus on the company’s pipeline, including GEN1042, GEN1046, epcoritamab and hexabody CD38.
Jain also says a favorable arbitration decision regarding royalties for Darzalex, a multiple myeloma treatment, could be a bullish catalyst for the stock. He projects 11% revenue growth and $1.10 in earnings per share in 2023. Bank of America has a “buy” rating and $48 price target for GMAB stock, which closed at $40.35 on May 10.
Incyte Corp. (INCY)
Incyte specializes in oncology treatments. Andersen says the company’s Jakafi hematology drug has provided steady growth and its Opzelura topical immunology drug launch has demonstrated promise. She says underlying demand for both drugs is strong and projects peak Opzelura sales of $2 billion and peak Jakafi sales of $3 billion.
Andersen says Incyte has potential to expand further into the immunology market with its pipeline drug povorcitinib, but the recent failure in combination trials of Jakafi and parsaclisib was a setback for its hematology franchise. Morningstar has a “buy” rating and $88 fair value estimate for INCY stock, which closed at $63.92 on May 10.
Jazz Pharmaceuticals PLC (JAZZ)
Jazz is a biopharmaceutical company specializing in drugs to treat orphan conditions with a focus on sleep, hematology and oncology. Morningstar analyst Rachel Elfman says drugs Xywav for excessive daytime sleepiness, Epidiolex for childhood epilepsy and Rylaze for leukemia have been Jazz’s primary growth drivers in recent quarters.
Narcolepsy treatment Xyrem accounted for 28% of Jazz’s net product sales in 2022, but the drug will face generic competition in 2023. Elfman projects growth from Xywav, Rylaze, Epidiolex and Zepzelca will help offset patent-loss headwinds in the next several years.
Morningstar has a “buy” rating and $187 fair value estimate for JAZZ stock, which closed at $136.53 on May 10.
Ionis Pharmaceuticals Inc. (IONS)
Ionis Pharmaceuticals is a leading biotechnology company developing unique antisense oligonucleotide therapeutics that have the potential to treat most neurodegenerative diseases.
Ionis developed spinal muscular atrophy drug Spinraza, which is now being marketed by partner Biogen Inc. (BIIB). Andersen says Ionis has a series of late-stage clinical trials that will publish their results in the second half of 2023, and she says that news could be bullish catalysts for the stock.
Andersen says the next two years will be a critical period for Ionis and projects regulatory approvals and commercial launches of multiple new drugs could allow the company to become profitable by 2026. Morningstar has a “buy” rating and $62 fair value estimate for IONS stock, which closed at $35.83 on May 10.
More from U.S. News
7 Stocks That Are Good Inflation Investments
10 of the Best Stocks to Buy for 2023
8 Best Utility Stocks to Buy for Dividends Now
8 Best Biotech Stocks to Buy in 2023 originally appeared on usnews.com
Update 05/11/23: This story was previously published at an earlier date and has been updated with new information.