2022 has been a challenging year for investors due to the combination of inflation and a slowing economy. Biotech stocks could be a place where investors can find outperformance given their low valuations and strong long-term fundamentals. Amgen (AMGN), Corcept Therapeutics (CORT), and Regneron (REGN) are 3 to consider.
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The stock market is like a pendulum that goes from ‘extreme greed’ to ‘extreme fear’. Given how frothy markets were in 2020 and for most of 2021, it shouldn’t be too surprising that we are now experiencing an inverse set of emotions.
However, the bear market is also going to create incredible opportunities for savvy investors who are able to pick the right stocks in the right sectors. In my opinion, the biotech sector is very interesting, because it hasn’t seen much speculative fervor since 2015 and valuations are very attractive.
From a longer-term point of view, an aging society means that more money will be spent on drugs and treatments. Additionally, drug discovery costs have declined due to newer technology, while pharmaceutical companies are flush with cash and have to ensure that their pipelines are well-stocked.
Below are 3 of the most attractive biotech stocks:
Amgen Inc. (AMGN)
AMGN is a pioneer when it comes to biotechnology-based human therapeutics, with successful products for renal disease and cancer supportive care products. Its flagship drugs include red blood cell boosters Epogen and Aranesp, immune system boosters Neupogen and Neulasta, and Enbrel and Otezla for inflammatory diseases.
AMGN also has a promising pipeline in addition to expectations of a strong decade of growth as it expands into international markets. Its management also has a successful track record of making acquisitions or partnering with smaller companies. For example, the acquisition of Decode gave the company the ability to identify potential drug targets that are validated by human genetics.
The stock has an overall grade of B, which translates into a Buy rating in our POWR Ratings system. The company has a Value Grade of B, which isn’t surprising, with a forward P/E of only 14.90. AMGN also has a Quality Grade of A, which means it has a healthy balance sheet. As of the most recent quarter, the company had $10.6 billion in cash compared to only $91 million in short-term debt.
Corcept Therapeutics (CORT)
CORT is a biotechnology company that is focused on drug-development to help patients manage unstable cortisol levels. Cortisol is the body’s stress hormone, and it can create adverse effects if not properly modulated specifically in areas like metabolism, mental health, and cancer.
The company’s primary product is Korlym which helped generate over $300 million in revenue last year. Currently, the stock has a valuation of $2.5 billion with $366 million in sales over the last 12 months.
The upside case for KORT is that Korlym continues to be approved for neat indications and age groups. Currently, it’s an approved treatment for adult patients with endogenous Cushing’s syndrome, suffering from type 2 diabetes, but there are other off-label uses as well.
CORT is also working on approval for additional indications that could potentially increase the TAM for Korlym. For Cushing’s, the drug has been given orphan status, although it is being challenged by generic drug manufacturers.
The company also has 4 different drug candidates that are in different stages of clinical trials. Most promising is Relacorilant which could be an improvement over Korlym due to fewer side effects and has also shown some positive effects in the treatment of several cancers. Another potential blockbuster is Exicorilant which is in phase 1 and 2 trials as a treatment for castration-resistant prostate cancers.
This type of upside makes CORT compelling, especially due to its extremely reasonable valuation. The POWR Ratings are also bullish on CORT as it’s rated a B which translates to a Buy. B-rated stocks have generated an average annual performance of 21.1% which compares favorably to the S&P 500’s average annual gain of 8.0%. Click here to see more of CORT’s POWR Ratings.
Regeneron Pharmaceuticals (REGN)
REGN is a biotechnology company that provides medicines for treating myriad diseases, including eye ailments, inflammatory and hematologic conditions, and infectious diseases such as Ebola and COVID-19.
REGN has a powerful pipeline and major presence in large markets. These include cancer, cardiovascular issues, eye disease, inflammation, and asthma. Its most well-known products are Eylea for macular degeneration; Praluent to help manage cholesterol levels and Dupixent for asthma.
REGN also stands out due to its very attractive valuation. The company has a forward P/E of 17 and a P/FCF of 10. It also has more than $7 billion in cash and low levels of debt which gives it plenty of firepower for buybacks.
In terms of its POWR Ratings’ component grades, REGN has a B for Quality due to its track record of successful drug development and patent protection for core products. The company also has a B for Value with a forward P/E of 16 that is below the market average even when accounting for its revenue decline next year. See the complete POWR Ratings for REGN here.
AMGN shares rose $1.78 (+0.66%) in premarket trading Monday. Year-to-date, AMGN has gained 22.52%, versus a -19.84% rise in the benchmark S&P 500 index during the same period.
About the Author: Jaimini Desai
Jaimini Desai has been a financial writer and reporter for nearly a decade. His goal is to help readers identify risks and opportunities in the markets. He is the Chief Growth Strategist for StockNews.com and the editor of the POWR Growth and POWR Stocks Under $10 newsletters. Learn more about Jaimini’s background, along with links to his most recent articles.
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