If you want incredible returns, look no further than the biotechnology industry. O SPDR S&P Biotech ETF (NYSEMKT: XBI) – a good barometer for biotechnology – showed a gain of 48% last year. This marked the best performance for the ETF since 2013, when it shot up roughly the same proportion. In six of the past 10 years, the biotechnological ETF has generated a return of at least 30%.
Investing in this ETF is a great way to profit from the boost of biotechnology stocks. However, you can do even better by choosing individual stocks with tremendous potential. Here are three biotechnology options for 2021 that stand out especially.
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1. Vertex Pharmaceuticals
You will have a hard time finding biotechnology stronger than Vertex Pharmaceuticals (NASDAQ: VRTX). The company has just about everything, including a strong gap and several paths to growth.
Let’s start with the Vertex moat. Biotechnology practically detains the cystic fibrosis (CF) market with four approved drugs that treat the underlying cause of the genetic disease. Vertex expects to maintain a strong leadership position in the CF market at least until the late 2030s.
And growth? Vertex has just started marketing its newest CF drug, Trikafta / Kaftrio, in Europe. The drug became an almost instantaneous blockbuster in the United States last year and is almost certain to do so across the Atlantic. Meanwhile, Vertex has also obtained additional approvals for some of its other CF drugs that are expected to boost sales.
The biotechnology pipeline also includes several potential big winners. Despite a disappointing setback for one of its programs targeting the genetic deficiency of alpha-1 antitrypsin (AATD), Vertex will present the results of the phase 2 study of another AATD candidate this year. The company’s partnership with the pioneer in gene editing CRISPR Therapy can lead to the cure of rare blood disorders thalassemia beta and sickle cell disease.
Finally, Vertex has a large stock of money that it can and will likely use to expand its pipeline. The company used almost $ 1 billion in 2019 to buy Semma Therapeutics. The deal gave Vertex a promising gene therapy targeting type 1 diabetes, which is expected to advance to clinical trials this year.
2. Exelixis
I see Exelixis (NASDAQ: EXEL) like a kind of rough diamond. The shares rose just 14% last year, well below the performance of the ETF SPDR S&P Biotech. However, 2021 could be a much better year for Exelixis.
The company’s crown jewel is Cabometyx, which has already been approved in the United States as a first-line treatment for kidney cancer and a second-line treatment for liver cancer. Cabometyx appears to be on track to generate sales of well over $ 650 million this year. However, the drug is still not close to reaching its full potential.
Exelixis has a great opportunity with Cabometyx as part of combination therapies. A combination of the drug with Bristol Myers SquibbOpdivo may obtain US regulatory approval later this year. Cabometyx also has room to grow in international markets. This seems likely to happen, especially with the recent Japanese approval as a second-line treatment for liver cancer.
Thanks to Cabometyx’s commercial success, Exelixis’ cash position has improved significantly. And you are putting that money to use to reinforce your pipeline. In December, the company licensed Iconic Therapeutics’ flagship antibody-drug conjugate program, XB002, as well as Aurigene’s subsidiary experimental cancer drug XL102. Dr. Reddy’s.
3. Novavax
Interested in a really high-risk, high-reward biotech action? Check out Novavax (NASDAQ: NVAX). It was one of the biggest winners in 2020, with stocks soaring 2,700%. I think Novavax could go even higher this year.
Novavax’s rise last year was mainly driven by the rapid progress of its candidate vaccine COVID-19, NVX-CoV2373. The company’s early-stage results for the experimental vaccine were so encouraging that some analysts considered it potentially the best in class. Along the way, Novavax raised more than $ 2 billion in funding for its coronavirus program and supply agreements with several countries.
Biotechnology hopes to announce the interim results of a final stage study of NVX-CoV2373 conducted in the UK earlier this year. Novavax started a final-stage study of the candidate vaccine in the United States and Mexico in late December. It is possible that the company may file an application for emergency use authorization in the U.S. in the second quarter of 2021.
Bernstein analyst Ronny Gal projects that Novavax could earn $ 3.8 billion with NVX-CoV2373 this year. The company also has another potential blockbuster candidate who is heading for a regulatory approval request with the experimental NanoFlu flu vaccine. With its market capitalization still hovering around $ 8 billion, this high-risk biotechnology can bring big rewards if your clinical studies go well.