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Investing in biotechnology — manipulating biological systems and organisms to create new products — could impact your future in more ways than one.
While biotechnology isn’t a slam-dunk on the stock market due to factors like the high cost of research and development (R&D), you can still profit from holding biotech stocks.
When deciding on biotech stocks to buy, it’s wise to consider companies with at least one or two solid products already on the market, along with promising treatments in development. The revenue potential is better with biotech stocks that can deliver both.
The global biotechnology market was worth $372.8 billion in 2021 and is projected to grow to $1,345 billion by 2030. That 15.5% compound annual growth rate over the next eight years might bode well for your portfolio.
All stock prices are as of market close on November 23.
Best Biotech Stocks To Consider in 2022
The following are our picks for the best biotech stocks to watch:
| Biotech Stock | Ticker | TL;DR (Too Long; Didn’t Read) |
|---|---|---|
| Axsome Therapeutics | (AXSM) | Focused on CNS conditions (depression, Alzheimer’s, migraine); Newly approved drug for major depressive disorder |
| Biogen, Inc. | (BIIB) | Biogen is a neuroscience firm with a recently approved Alzheimer’s drug and others for MS |
| Catalyst Pharmaceuticals | (CPRX) | Specializes in rare diseases; currently just one drug for LEMS |
| CRISPR Therapeutics | (CRSP) | Company using CRISPR gene editing technology to develop treatments for cancers, blood disorders, and other serious diseases |
| Genmab | (GMAB) | Cancer drug developer that partners with major biopharma firms like AbbVie and Johnson & Johnson |
| Neurocrine Biosciences | (NBIX) | Ingrezza is its movement disorder treatment and it has several promising drugs in the pipeline; good growth stock potential |
| Vertex Pharmaceuticals Inc. | (VRTX) | Leading treatment for CF, working on drugs for kidney and liver diseases and Duchenne Muscular dystrophy; recent partner with CRISPR (CRSP) to treat/prevent blood diseases with gene editing |
1. Axsome Therapeutics (AXSM)
- Current Price: $56.85
- 12-Month High: $71.98
- 12-Month Low: $20.63
- 1-Year Target: $100.57
- Market Capitalization: $2.461 billion
Axsome Therapeutics develops treatments focused on central nervous system (CNS) conditions. Some of its drugs treat depression, Alzheimer’s disease agitation, migraine, narcolepsy, and fibromyalgia.
In October 2022, Axsome announced its new treatment for major depressive disorder, Auvelity, which was approved for prescription in the United States. (FDA approval was granted in August of 2022.) It’s the first oral medication of its kind to treat major depressive disorder.
Analysts at Simply Wall Street project Axsome Therapeutics will grow faster than industry competitors. Third-quarter results for 2022 showed revenue increased by 17%, and analysts predict that 2023 will produce 628% sales growth compared to the past 12 months.
However, it would be best if you use caution. The analysts provided a wide range of price targets ($35-$210), which could indicate that’s AXSM‘s value is hard to project.
2. Biogen, Inc.(BIIB)
- Current Price: $304.91
- 12-Month High: $307.40
- 12-Month Low: $187.16
- 1-Year Target: $307.78
- Market Capitalization: $43.92 billion
Biogen Inc. is a neuroscience research company founded in 1978. It aims to develop treatments for some of the most devastating neurological diseases like Alzheimer’s, multiple sclerosis (MS), ALS, and spinal muscular atrophy.
Aduhelm, Biogen’s promising new Alzheimer’s treatment, has received FDA approval. However, a snag is that Medicare only offers limited drug coverage.
Biogen also published promising Phase 2 trial results for Litifilimab, a lupus drug. Given that Biogen also has several MS treatments in its portfolio, it could be a solid pick for its current medications and those in the pipeline.
3. Catalyst Pharmaceuticals (CPRX)
- Current Price: $17.13
- 12-Month High: $17.22
- 12-Month Low: $5.24
- 1-Year Target: $17.76
- Market Capitalization: $1.783 billion
Investor’s Business Daily lists Catalyst Pharmaceuticals as a top biotech stock. The company’s mission is to develop new therapies to improve the quality of life for those with “rare and ultra-rare diseases.”
CPRX obtained FDA approval for its treatment for Lambert-Eaton myasthenic syndrome (LEMS) in 2018. Catalyst’s amifampridine is the only treatment approved by the FDA for adults with this rare disorder. The company collaborated with BioMarin Pharmaceuticals to develop this drug.
In the past year, Catalyst’s earnings per share (EPS) went up 62%, from $0.40 to $0.65. Revenue is also strong, so it may be a biotech stock to watch.
4. CRISPR Therapeutics (CRSP)
- Current Price: $55.49
- 12-Month High: $86.95
- 12-Month Low: $42.51
- 1-Year Target: $102.35
- Market Capitalization: $4.345 billion
This company will sound familiar if you’ve read about the researchers who received the 2020 Nobel Prize for research on CRISPR’s gene technology. CRISPR Therapeutics focuses on gene-based treatments for serious illnesses like cancer, diabetes, and genetic blood disorders.
CRISPR Therapeutics is a somewhat risky stock pick, but the gene-editing technology it’s developing has the potential to change a lot of lives. It conducts R&D of gene-based medicines that can cut DNA to disrupt or correct the genetic faults that cause disease.
The firm partners with another company on this list, Vertex Pharmaceuticals, Bayer, Nkarta Therapeutics, and Capsida Biotherapeutics. Treatments for sickle-cell disease, diabetes, hemophilia, ALS, and several cancers are in the pipeline.
5. Genmab (GMAB)
- Current Price: $41.84
- 12-Month High: $43.62
- 12-Month Low: $26.19
- 1-Year Target: $40.68
- Market Capitalization: $27.699 billion
Genmab is a Danish biotech company focused on cancer treatments. Its recent earnings report indicated a 60% increase year-over-year in revenue compared to the first nine months of 2021.
Sales of the drug Darzalex, developed with Janssen Biotech, grew by 35% in 2022 compared to 2021. The company also improved its financial guidance from August 2022 based on strong Darzalex sales as well as the benefit of the foreign exchange rate on royalties from U.S. sales.
Zacks Equity Research gave GMAB a “Buy” rating in November 2022, partly because it has been outperforming the medical sector, moving 0.1% on a year-to-date basis compared to -18.3% for the medical industry.
6. Neurocrine Biosciences (NBIX)
- Current Price: $119.25
- 12-Month High: $125.99
- 12-Month Low: $71.88
- 1-Year Target: $127.58
- Market Capitalization: $11.47 billion
Neurocrine Biosciences focuses on treatments for neurological, endocrine, and psychiatric disorders. NBIX has four FDA-approved therapies and others in the pipeline.
Ingrezza, Neurocrine’s treatment for adults with tardive dyskinesia, is one of its top products. Other drugs treat Parkinson’s disease, endometriosis, and uterine fibroids. Neurocrine Biosciences is also working on drugs to treat symptoms of Huntington’s Disease and schizophrenia.
On the positive side, third-quarter results in 2022 showed growth in sales and revenue compared to 2021. The company raised its Ingrezza net product sales guidance after $376 million in net product sales for Q3.
Zacks Equity Research noted three factors making Neurcrine a good growth stock pick: solid earnings growth, positive asset utilization ratio, and promising earnings estimate revisions.
7. Vertex Pharmaceuticals Inc. (VRTX)
- Current Price: $315.34
- 12-Month High: $323.61
- 12-Month Low: $182.66
- 1-Year Target: $324.62
- Market Capitalization: $80.971 billion
Vertex Pharmaceuticals (VRTX) conducts research to develop and test treatments for serious illnesses such as cystic fibrosis, kidney and liver diseases, and Duchenne muscular dystrophy. The company is also in the research and clinical trial phases of treatments for Beta thalassemia, sickle cell disease, and type 1 diabetes.
Though past performance doesn’t necessarily indicate future results, third-quarter results in 2022 revealed a product revenue increase of 18% over 2021. The recent report showed rising numbers for net income and cash, cash equivalents, and marketable securities.
Vertex Pharmaceuticals holds a considerable market share for cystic fibrosis (CF) treatments. Plus, it’s partnering with other firms, including Moderna and CRISPR Therapeutics, to develop potential CF treatments.
Other Ways To Invest In Biotech
If you’re hoping to invest in the biotechnology industry, know that you don’t have to buy shares of individual stocks. It might be less risky to put money into a wide range of biotech companies through biotech ETFs, mutual funds, or a robo-advisor portfolio.
Some biotech ETFs you can invest in are the First Trust NYSE Arca Biotechnology Index Fund (FBT), the iShares Biotechnology ETF (IBB), and the Invesco Dynamic Biotechnology & Genome ETF (PBE).
Should You Invest in Biotech Stocks?
As with any stock, biotech stocks have benefits and drawbacks for investors.
pros
- Although stock values in biotech recently hit a low, they have started to rebound, and there’s still room to grow.
- Selecting companies with a diverse portfolio of treatments or investing in biotech ETFs can help mitigate risk.
- Though it’s challenging to predict top-performing stocks, biotech stocks potentially offer high rewards in exchange for high risk.
cons
- Biotech is a somewhat risky healthcare investment due to the high research and development costs necessary to develop new drugs.
- Regulatory approval in the U.S. and abroad can be lengthy and challenging, and there’s no guarantee that a new treatment will gain approval.
The Bottom Line
If you’ve settled on biotech stock investing as part of your investment strategy, talk to your broker or place an order in your online brokerage account.
Although the biotech industry is poised for growth, it’s tough to determine which biotech stocks may bring the best returns. You can lower your risk by choosing companies that offer tried-and-true drugs and promising new ones in clinical trial phases or by investing in biotech mutual funds or ETFs.
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