Biotech stocks: The top 5 to watch on a lightning fast run

Biotech stocks have been on a rollercoaster ride, but continue to outperform the broader market.




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In 2020, the industry came under the spotlight of the pandemic Pfizer (PFE) and its partner BioNTech (BNTX), along with Moderna (mRNA) and Johnson & Johnson (JNJ), launched a trio of Covid vaccines. But as society learned to live with Covid — and other concerns around the economy, inflation, and politics took center stage — interest in biotech faded. Shares of the Investor’s Business Daily biotech industry group fell largely for 16 months.

After hitting a six-year low in mid-June, biotech stocks seemed to gain a foothold this fall. Now stocks are mostly trending sideways. However, that comes amid competition for the wider market. The group is ranked number 19 out of 197 industry groups tracked by Investor’s Business Daily. Meanwhile, the pharmaceutical group is at number 123.

But it’s important to follow specific measures when researching stocks. In terms of fundamental and technical metrics and 12-month performance, today’s top biotech stocks 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 and leads 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 disease that affects muscle strength and commonly occurs in lung cancer patients.

While sales are growing, the company is looking to add a second or third product, either through an outright buyout or through a licensing deal.

The biotech stock just broke out of a cup-with-handle base, reaching a buy point of 16.76, according to MarketSmith.com.

Catalyst stocks are also on the Tech Leaders list. Stocks rank first on the IBD 50 list of elite growth stocks.

Bullish, according to IBD Digital, CPRX stock has a best possible Composite Rating of 99. This puts the biotech stock in the top 1% of all stocks in terms of fundamental and technical measures. Its 12-month performance, as measured by the Relative Strength Rating, is also in the top 1% of all stocks.

Cancer treatments are essential

Genmab sells a handful of cancer treatments. The company partners with major biopharmaceutical names, including AbbVie (ABBV), Johnson & Johnson (JNJ), Horizon therapies (HZNP) and sea (SGEN).

In the September quarter, earnings and revenue rose bullishly to 53 cents per share and $551 million, respectively. Both measures also far exceeded forecasts.

Now Genmab is expanding its drug package to new solid tumors and blood cancers.

Stocks have a tip-top Composite Rating of 99 and a strong Relative Strength Rating of 96. The RS line is also at a new high. Plus, Genmab is a Tech Leader and ranks #13 on the IBD 50. Genmab shares form a long cup base with a buy point at 49.17.

Harmony’s pipeline in a product

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

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

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

The biotech stock is also a Tech Leader, ranking seventh on the IBD 50.

Harmony shares broke out of a cup-and-handle base with a buy point of 52.62 and are above the 50-day line. Stocks 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 in terms of market capitalization. It is behind in fourth place Amgen (AMGN), Gilead Sciences (GUILD) and Regeneron Pharmaceuticals (REGN).

The company is the de facto leader of the cystic fibrosis drug market. Sales in the third quarter — dominated by the Trikafta triple regime — rose 18% to $2.33 billion.

But it’s now expanding into other endeavors. Vertex partners with Crispr therapies (CRSP) on an approach to gene editing for a few blood diseases. Furthermore, Vertex recently announced its $320 million plan to buy its partner in diabetes treatment, privately held ViaCyte. The companies are testing a cell replacement drug for type 1 diabetes.

In addition, Vertex is testing treatments for liver and kidney disease, Duchenne muscular dystrophy and pain.

The biotech stock has a perfect Composite Rating and a Relative Strength Rating of 96. The shares are well above their 50-day moving average and recently broke out of a flat base with a buy point at 306.05, according to MarketSmith.com.

The company is also a Tech Leader.

Using vaccine technology

Dynavax is one of the smaller biotech stocks on the list, but its shares are gaining momentum.

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

During the September quarter, Dynavax reported revenue of $167.7 million. Revenue was up 55%, surpassing expectations at $159.4 million, according to FactSet. Adjusted earnings were 43 cents per share, which was a setback from a loss last year and beat forecasts by 13 cents.

Biotech stocks have risen steadily since hitting a recent bottom in late September. Shares have a Relative Strength Rating of 83 and a bullish Composite Rating of 97. Dynavax shares also recently rose above major moving averages.

Dynavax stock has entered the Tech Leaders list.

Follow Allison Gatlin on Twitter at @IBD_AGatlin.

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