Investing in biotechs is usually a high-risk, high-reward venture. Given the absurdly low probability of successfully bringing a drug to market (and the costs associated with the effort), development-stage companies in the sector can see their entire share value evaporate — sometimes within a few days of releasing top-line results contrary to expectations.
With this in mind, it’s can be safer to buy shares of biotech firms that already have their therapeutics past the regulatory hurdle. Here’s how a company that’s marketing an effective cancer treatment, one that’s developed a life-saving COVID-19 vaccine, and another that’s manufacturing a multi-purpose antidepressant can add some muscle to your biotech portfolio.
Exelixis (NASDAQ:EXEL) is the developer behind cabozantinib, the first line of treatment against renal cell carcinoma. In clinical trials, 55.7% of patients who received the drug alongside an immunotherapy called Opdivo, which is marketed by Bristol Myers Squibb (NYSE:BMY), saw either complete elimination of their tumor activity or at least a 30% reduction in tumor diameter. That’s more than double the 27.1% overall response witnessed by patients who received the previous standard of care treatments for the condition. The therapy also treats liver and thyroid cancer.
It is no surprise that the company is profitable, with a net income of $28.4 million from revenue of $270.1 million in Q4 2020. By 2022, Exelixis expects its sales will top $1.5 billion. The company is also targeting three further label expansions for cabozantinib this year, along with initiating two clinical trials for new drugs. A big reason behind the company’s success is its dedication to research and development. It spent more than half of its sales in the past quarter for this purpose.
Despite winning a lot of revenue and displaying growth, the company is trading at a bargain: It has an enterprise value (EV) of only $5.6 billion. For those who are passionate about biotechs specializing in cancer treatment, Exelixis stock is a great bet.
This year, BioNTech (NASDAQ:BNTX) expects to produce 2 billion doses of its Comirnaty coronavirus vaccine and deliver about half that amount. Since it has a 50-50 profit and expense-sharing agreement with Pfizer (NYSE:PFE), the biotech should have up to $15 billion in sales in the bag by the end of the year, according to Pfizer’s revenue guidance. That’s huge news considering the company’s market cap stands at only $22 billion.
Even better, recent studies have shown that the company’s coronavirus vaccine is still effective at combatting emerging strains of the virus, albeit at lower rates. The vaccine demonstrated 95% efficacy against the original strain.
Having a multi-billion dollar coronavirus vaccine isn’t the only thing BioNTech has to offer. It also has a total of 20 product candidates in its pipeline, comprised of other vaccines and immunotherapies. Three of its oncology therapeutics will be heading to phase 2 clinical trials in the near future. The most promising of which include BNT311 for the treatment of non-small-cell lung carcinoma and BNT111 for advanced melanoma.
3. Intra-Cellular Therapeutics
Intra-Cellular Therapeutics (NASDAQ:ITCI) specializes in the field of psychiatric drugs, and has developed Caplyta for the treatment of schizophrenia in adults. Caplyta works by regulating dopamine and the release of serotonin in patients. Commercialization of the drug began last year, but the COVID-19 pandemic severely constrained its revenue generation.
Nevertheless, the drug brought in $22.5 million in sales last year, which is a small but rising fraction of the $8 billion U.S. schizophrenia treatment market. But the drug’s potential doesn’t stop there. Intra-Cellular plans to expand its label to target bipolar depression after success in late-stage clinical trials. Meanwhile, the drug is also in phase 3 studies for alleviating general depression.
Caplyta’s method and chemical composition patents do not expire until 2029. This gives the company eight years to generate value by tending to the medical needs of 33 million patients in the U.S. with said conditions. Intra-Cellular stock is also much cheaper than it looks, as the company has more than $650 million worth of cash on its balance sheet to offset $2.9 billion in market cap for an enterprise value of $2.24 billion. The massive market opportunity in front of Caplyta alone makes this a healthcare stock that investors should add to their watchlists.
This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.