Although it’s been a difficult year for biotechnology stocks, there are still plenty of reasons for investors to be bullish on the sector. Many of the biggest innovations in medicine are occurring at small and midsized biotech companies in the U.S. These are the incubators for medical advancements and where important scientific breakthroughs are happening. New products and treatments are boosting sales and earnings at biotech companies, making them great long-term investments.
Although the S&P Biotechnology Select Industry Index is slightly down this year compared to a 16% advance for the broader S&P 500 index, the stunted movement can be attributed to investors focusing primarily on mega-cap tech stocks and artificial intelligence (AI) right now. In time, as the current market recovery broadens out, biotech stocks will rise again. Before that happens, investors may want to purchase some while they remain on sale. Here are the three best biotech stocks to buy in July.
Regeneron Pharmaceuticals (REGN)
Shares of Regeneron Pharmaceuticals (NASDAQ:REGN) have pulled back following a big run during the pandemic when the U.S. government awarded the company $450 million to manufacture an antibody cocktail to lessen the severity of Covid-19 symptoms. So far this year, REGN stock is flat (down 0.33%). The shares are currently trading nearly 14% below their 52-week high. But over the long term, Regeneron’s performance looks better, with the stock having almost doubled over the last five years.
Beyond Covid, Regeneron specializes in treatments for various eye diseases. Here too, the company has faced some setbacks. In late June, the U.S. Food and Drug Administration (FDA) declined to approve Regeneron’s medication, Eylea, which treats the leading cause of blindness among the elderly. REGN stock dropped nearly 9% on the news. However, many analysts expect the drug to eventually be approved. Regeneron’s stock has a reasonable price-to-earnings (P/E) ratio of just over 18 and is likely to remain strong over the long term.
Gilead Sciences (GILD)
Gilead Sciences (NASDAQ:GILD) is another biotech company that pursued Covid treatments during the pandemic. However, the company’s main focus is developing antiviral drugs used to treat diseases ranging from HIV/AIDS to hepatitis B and hepatitis C, as well as influenza (the flu). GILD stock has pulled back this year along with the biotech and pharmaceutical sectors. Through six months of 2023, GILD stock is down 10%. But even with that decline, the share price remains 23% higher than a year ago.
Another reason to be bullish on GILD stock is that the company raised its quarterly dividend payment in June, taking it to 75 cents a share, which equates to a strong yield of 3.91%. Going forward, the company has a series of leading medications used in treating HIV/AIDS that continue to drive its revenues higher. Gilead’s main HIV medication, Biktarvy, had 2022 sales of $10.4 billion, up 20% from 2021. It also has its cancer drug Trodelvy, which caused sales to rise by 79% to $680 million last year.
Vertex Pharmaceuticals (VRTX)
For a biotech stock that has bucked the downturn this year, check out Vertex Pharmaceuticals (NASDAQ:VRTX). In 2023, VRTX stock has gained 22%, bringing its total increase over the last five years to 100%. The Boston-based company specializes in medications to treat inflammatory and autoimmune diseases, as well as various types of cancer. The company has been particularly successful in developing treatments for cystic fibrosis.
A going concern since 1989, Vertex Pharmaceuticals has been an influential biotech company for more than 30 years now. Moving forward, Vertex Pharmaceuticals is developing new treatments for illnesses such as type 1 diabetes and pain management. A robust pipeline of new products should help ensure that Vertex’s revenue stream and earnings remain strong. VRTX stock has a P/E ratio of 27, which isn’t cheap but is still reasonable in comparison to the valuations of the largest pharmaceutical companies.
On the date of publication, Joel Baglole did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
