Biotech is a notoriously risky business. Many biotechnology products do not produce the desired results consistently, while others fail to gain acceptance in the marketplace. Of course, when a biotech product succeeds, investors can make a lot of money.
You can stay off the roller coaster by looking for companies that have a stable track record, with growth prospects that are reasonable rather than dramatic. Despite the drama that is built into the biotech business, there are companies that proceed calmly and offer investors reliable returns. (To learn more, check out: A Primer on the Biotech Sector.)
We have selected five top biotech stocks that are poised for growth in the second half of 2018. All figures are current as of July 11, 2018.
Celgene Corporation (CELG)
Celgene focuses on cancer and inflammatory diseases. The company not only develops its own products – it collaborates with other large drug makers to bring products to market. Revenues have grown in recent quarters, and operating income has increased steadily. Celgene has been a stable company, especially considering that the biotech sector carries high risk.
The stock started 2017 with steady gains through April but then gave back those gains. At the beginning of June, the stock found support and began rising again. However, Celgene shares declined sharply in October 2017, falling more than 30% over the course of the month as the company canceled studies of a Crohn’s disease treatment and reported worse-than-expected third quarter results. The stock continued to tick downward in the first half of 2018, but given Celgene’s solid long-term track record, the recent declines may represent a buying opportunity. (See also: 4 Biotechs on Verge of Big Breakouts.)
Gilead Sciences, Inc. (GILD)
Gilead has been growing at a rate of around 30% for five years. The company is a leader in HIV treatments and has a successful drug for treating hepatitis C. A look at the stock chart shows that Gilead entered a declining price channel starting around May 2016. The shares put in a bottom at around $64, then broke sharply upward in late June 2017. The stock had additional high-volume breakouts at the beginning of September 2017 and then again to start the new year, reaching a 52-week high of nearly $90 toward the end of January 2018.
Gilead shares then ticked downward in early February along with the broader markets, and the stock saw additional sharp declines after posting lackluster first quarter results in April, but the shares then recovered to current levels of $76.02. Although the recent volatility in the stock could be related to uncertainty surrounding several of the company’s products and concerns about declining revenues from hepatitis C treatments, one potential catalyst is a new “shock and kill” HIV treatment combination in the early phases of development. (For more, see: The Biggest Risks of Investing in Gilead Stock.)
- Average Volume: 7,198,649
- Market Cap: $98.846 billion
- P/E Ratio (TTM): 28.92
- EPS (TTM): $2.63
- Dividend and Yield: $2.28 (3.03%)
Exelixis, Inc. (EXEL)
Exelixis focuses on cancer care. It has anti-tumor drugs as well as treatments for kidney cancer. The company has routinely delivered positive surprises on earnings. The stock had a breakout to start 2017 and then began forming a base. It remained in that consolidation phase through the first half of the year. Exelixis stock broke sharply upward out of the base in late June 2017, and after seeing some volatility during the later part of the year, it moved up strongly once again in December.
The stock continued to see some ups and downs to start 2018 before declining sharply in late February on a lackluster response to fourth quarter earnings, and it has struggled to post gains in the subsequent months, settling at current levels of $21.61. Exelixis entered a licensing deal with Takeda Pharmaceutical (TKPYY) last year that pleased investors, and the company recently reported positive results from a Phase 3 study of Cabometyx for the treatment of liver cancer. (See also: Make Room for Exelixis in Your Portfolio.)
- Average Volume: 4,572,853
- Market Cap: $6.415 billion
- P/E Ratio (TTM): 26.71
- EPS (TTM): $0.81
- Dividend and Yield: N/A (N/A)
Enzo Biochem, Inc. (ENZ)
Enzo offers therapies for cancer, diabetes, cardiovascular disease and infectious diseases. The stock entered an uptrend in March 2016 and started forming a new base in December 2016. Enzo shares broke out in early March 2017 and then saw a second breakout on June 11, 2017. The stock is now in a new base that began forming in late June of last year, and it continued to tick downward over the first half of 2018. With a market cap of approximately $239 million, Enzo represents the smallest company on our list, which could suggest even more volatility in a sector that is already known for its ups and downs.
- Average Volume: 151,242
- Market Cap: $238.659 million
- P/E Ratio (TTM): N/A
- EPS (TTM): -$0.09
- Dividend and Yield: N/A (N/A)
AbbVie Inc. (ABBV)
AbbVie is the maker of Humira, which treats autoimmune issues. The company also has products to treat leukemia and hepatitis C, as well as other treatments that suppress HIV. In addition, AbbVie is involved in testosterone-replacement treatments and has drugs for multiple sclerosis. AbbVie shares surged in September 2017, and at the end of that month, the company settled a dispute with Amgen Inc. (AMGN), successfully delaying the competitor’s launch of a biosimilar version of Humira.
AbbVie shares soared to an all-time intraday high over $125 on Jan. 26, 2018, but they have fallen since then. The company experienced a setback in July 2018 when it announced disappointing results in a trial of Imbruvica for the treatment of lymphoma, sending the stock price downward to current levels just below $95. (For more, see: How AbbVie Makes Its Money.)
- Average Volume: 8,155,779
- Market Cap: $143.775 billion
- P/E Ratio (TTM): 23.88
- EPS (TTM): $3.98
- Dividend and Yield: $3.84 (3.96%)
The Bottom Line
Investing is not gambling. Although the biotech sector carries risk, it is still possible to find solid companies with reasonable prospects for growth. All of the companies on this list have weathered the ups and downs of the industry, and they look like they are ready to come out on top in the second half of 2018. (For additional reading, check out: Risks and Rewards of Biotech Companies.)