Biotech Stocks: Top 5 to Watch Amid Surprising Hot Run

Biotech stocks are on a roll, but still outperforming the broader market.




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In 2020, the industry was at the forefront of the pandemic as Pfizer (PFE) and its partner BioNTech (BNTX), along with Modern (mRNA) and Johnson & Johnson (JNJ), released a trio of Covid vaccines. But as society learned to live with Covid — and other concerns about the economy, inflation and politics took center stage — interest in biotech fell by the wayside. Investor’s Business Daily’s shares of the biotech group have fallen sharply for 16 months.

After hitting a six-year low in mid-June, biotech stocks appeared to be gaining ground this fall. Now, stocks are mostly moving sideways. This comes amid struggles for the wider market, however. The group is ranked No. 16 out of 197 industry groups tracked by Investor’s Business Daily. Meanwhile, the pharmaceutical group is ranked No. 153.

But it’s important to keep track of specific measures when looking at stocks. In terms of fundamental and technical measures, as well as 12-month performance, the best biotech stocks today are:

  • Catalyst Pharmaceuticals (CPRX)
  • Genmab (GMAB)
  • Harmony Biosciences (HRMY)
  • Vertex Pharmaceuticals (VRTX)
  • Dynavax Technologies (DVAX)

The No. 1 Biotech Stock

Catalyst is the No. 1 biotech stock, leading an industry group of more than 800 companies.

Its only product is Firdapse, a treatment for Lambert-Eaton myasthenic syndrome, or LEMS. LEMS is a rare autoimmune condition that reduces muscle strength and often occurs in patients with lung cancer.

Although sales are growing, the company is looking to acquire a second or third product — either through an outright acquisition or a licensing deal.

Now, the biotech stock is forming a cup base with a buy point at 17.32, MarketSmith.com shows.

Catalyst stock is also on the Tech Leaders list. The stock ranks second on the IBD 50 list of elite growth stocks.

On the upside, CPRX shares have a best possible Composite Rating of 99, according to IBD Digital. This puts the biotech stock in the top 1% of all stocks on fundamental and technical measures. Its 12-month performance, as measured by its relative strength score, is also in the top 1% of all stocks.

Cancer treatments are the key

Genmab sells a small handful of cancer treatments. The company works with big name biopharmaceuticals including; AbbVie (ABBV), Johnson & Johnson (JNJ), Horizon Therapeutics (HZNP) and Seagen (SGEN).

In the September quarter, earnings and sales rose to 53 cents per share and $551 million, respectively. Both measures easily beat forecasts.

Now, Genmab is expanding its line of drugs to new solid tumors and blood cancers.

The stock has a top composite score of 99 and a strong relative strength score of 95. Also, its RS line is at a new high. Additionally, Genmab is a technology leader and is ranked No. 14 in the IBD 50. Genmab stock is forming a large bullish base with a buy point at 49.17.

Harmony’s Pipeline into a product

Harmony Biosciences is making a name for itself with a single product: pitolisant. The company sees the drug “as a portfolio in a product opportunity.”

Today, pitolisant is approved as a narcolepsy treatment called Wakix. But Harmony is also investigating pitolisant in other conditions, including a sleep disorder called idiopathic hypersomnia, a genetic disorder known as Prader-Willi syndrome and myotonic dystrophy, a muscle-weakness disease.

Harmony is also testing an early-stage product in Prader-Willi syndrome. Prader-Willi causes a number of behavioral and mental behavior problems. It can also lead to short stature.

The biotech stock is also a Tech Leader and ranks ninth in the IBD 50.

Harmony stock broke out of the cup-with-handle base with a buy point at 52.62 and is above the 50-day line. The shares have a perfect Composite Rating of 99 and a strong RS Rating of 97.

Moving beyond Cystic Fibrosis

Vertex is one of the largest biotech stocks by market capitalization. He ranks fourth behind Amgen (AMGN), Gilead Sciences (GILD) and Regeneron Pharmaceuticals (REGN).

The company is the de facto market leader in cystic fibrosis drugs. Third-quarter sales — dominated by the triple formula Trikafta — rose 18% to $2.33 billion.

But now it’s expanding into other endeavors. Vertex works with Crispr Therapeutics (CRSP) in a gene editing approach to a pair of blood diseases. In addition, Vertex recently announced its $320 million plan to buy its diabetes treatment partner, privately held ViaCyte. Companies are testing a cell replacement drug in type 1 diabetes.

Beyond that, Vertex is testing treatments for liver and kidney disease, Duchenne muscular dystrophy and pain.

The biotech stock has a perfect composite score and a relative strength score of 95. Shares are well above their 50-day moving average and recently broke out of a solid base with a buy point at 306.05, according to MarketSmith.com .

The company is also a Tech Leader.

Leveraging vaccine technology

Dynavax is one of the smaller biotech stocks on the list, but its stock is gaining steam.

The company sells a hepatitis B vaccine called Heplisav-B and has an emergency license in India for its Covid vaccine in partnership with India-based Biological E. Limited. Dynavax is also testing the vaccine adjuvant for pertussis, shingles and plague. Adjuvants enhance the typical immune response to vaccines.

During the September quarter, Dynavax reported sales of $167.7 million. Sales rose 55% to beat expectations to $159.4 million, according to FactSet. Adjusted earnings were 43 cents a share, reversing a loss last year and beating forecasts by 13 cents.

The biotech stock has risen steadily since hitting a low in late September. The shares have a relative strength score of 84 and a bullish composite score of 97. Dynavax stock has also recently bounced above its key moving averages.

Dynavax stock made the Tech Leaders list.

Follow Allison Gatlin on Twitter at @IBD_AGatlin.

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