Over the previous five years, bio technology stocks have been beaten by the S&P 500. Controversies about drug pricing, the increasing cost of innovation in medicine, and greater generic competition have all been hitting away at biotech companies’ bottom lines.
These danger factors have meant the glass was half full — that is, they have delivered bargain opportunities to purchase biotech stocks at very low levels. So let’s look at two such companies and see why they are wonderful choices for investors looking for value.
Pfizer has been a leader in dealing with the covid pandemic with its vaccine, named Comirnaty. The company made $3.462 billion from this vaccine in Q1 of 2021, with revenue of more than $26 billion being expected for the entire year.
But its covid vaccine is not only a one-time increase to the company’s numbers. Recently, real-world research from Israel discovered that Comirnaty’s efficacy has lowered to 64% from 95% because of the rise of the deadly delta variant. Also, the vaccine’s safeguards against critical illness lowered to 93% from 100% in official studies. This almost ensures the need for boosters going forward.
Pfizer expects its overall biopharma sales to reach $71.5 billion this year. That means a 70.6% y/y growth from its 2020 numbers after counting in the spinoff of its Upjohn generic business — a level essentially unheard-of for a big company. Also, Pfizer believes its earnings per share will boost by 62% from 2020 to reach $3.60.
Judging by the good vaccine demand, I believe Pfizer can protect its high growth for two years at least. Moreover, the stock is crazy cheap, at only 11 times price to earnings. It also gives an impressive dividend of 4%.
2. Regeneron Pharmaceuticals
Regeneron has has some great growth — and its movement is still continuing. In the first quarter 2021, its net income and revenue grew by 78% and 38%, respectively, to $1.115 billion and $2.53 billion. Its top drugs were Eylea (which treats retinal disease), Dupixent (anti-allergy medication), and cancer-fighting Libtayo. The latter got regulatory clearance for treatment of non-small cell lung cancer and advanced basal cell carcinoma the first part of this year.
The company also had $262 million in sales from its REGEN-COV coronavirus antibody cocktail. So even with the pandemic declining, the company could possible sell the product to more than 2 million people in the United States with certain medical conditions as a prevention means, especially against possible variants.
Overall, Regeneron is one of the best growth stocks with a reasonable price to buy now. It sells at 12 times earnings, which is low for a 50% y/y earnings growth.
Author: Scott Dowdy