With the market off to a rather wobbly start to the second quarter of 2024, investors may be looking for the most undervalued biotech stocks to buy in April that can offer more bang for one’s buck. For new investors seeking reasonable valuations and overlooked long-term growth drivers, the biotech scene is worth considering.
With the rise of diabetes drugs, whose benefits may extend beyond losing weight (a recent study shed light on its ability to help treat Parkinson’s Disease potentially), the biotech industry could be where the puck is headed next as growth investors look for more reasonably-valued names in the market.
Let’s check out three compelling undervalued biotech stocks that, as the AI-fuelled tech trade gets choppy, inspires fear in some investors.
Pfizer (PFE)
Pfizer (NYSE:PFE) is one of the biggest names in the biopharmaceutical scene. And though it’s an older (and quite large) company with a $150.9 billion market cap, the firm has undergone quite the transformation in recent years to become more of an innovative biotech and less of a firm reliant on older drugs.
Indeed, the company boomed in 2021 as it unveiled its breakthrough COVID-19 vaccine made possible by mRNA technology. The vaccine boom didn’t last long, though, as the world reopened its doors, stopped actively following the state of the pandemic and vaccine demand dropped like a rock.
After PFE stock sank like a stone itself, now down more than 52% from its peak, the firm finally looks like an intriguing deep-value option for investors who aren’t afraid to attempt to catch the falling knife.
While I’m a fan of Pfizer’s long-term growth profile, the potential from its recently acquired cancer-focused biotech Seagen, and the intriguing drug pipeline, it will not be easy to turn the tide in the near- to medium-term.
However, if you have years to wait (the 6.17% dividend yield is an incentive to be patient), it makes sense to consider buying while shares trade at just 2.6 times price-to-sales (P/S) and 12.4 times forward price-to-earnings (P/E).
Bristol-Myers Squibb (BMY)
Bristol-Myers Squibb (NYSE:BMY) is another mature biopharma play that’s been beaten down over the past year. Though shares seemed to have bottomed out in the low-$50 range, they’re still down over 36% from late-2022 all-time highs. Like Pfizer, Bristol-Myers Squibb is on the receiving end of older drugs that are going off-patent. Specifically, Revlimid took quite a hit last year as it competed against generic alternatives.
Fortunately, Bristol has some promising new drugs that could step in and revamp growth at some point over the medium term. Several new drugs, including Reblozyl, helped drive meaningful top-line growth. With a slew of recent acquisitions, the hope is that Bristol may find itself back on the growth track sooner rather than later as it looks to make the most of the new additions to its impressive oncology portfolio.
Bristol may have recently faced a setback as its Crohn’s drug Zeposia failed Phase 3 clinical trials. Though disappointing, I think it’s a mistake to discount the other promising candidates within Bristol’s strong new drug pipeline. At writing, shares are going so cheap at 7.4 times forward P/E.
Moderna (MRNA)
You probably don’t hear much about Moderna (NASDAQ:MRNA) anymore now that COVID-19 barely makes the headlines. Undoubtedly, the mRNA technology innovator boomed, like Pfizer, only to go bust. These days, shares remain in a funk, down over 77% from their peak, with not much to get excited about from a technical standpoint.
Though Moderna COVID-19 jabs are likely to stay down, the firm is innovating to (hopefully) create a new cash cow of a drug. Indeed, the COVID-19 windfall helped it finance other mRNA treatments in the pipeline. Most notably, its flu program could be intriguing, with Blackstone recently providing $750 million in funding.
While Moderna certainly seems like more of a moonshot at this point, given the COVID-19 business probably isn’t coming back, I do view the biotech as an intriguing pick-up for its promising and well-funded pipeline, its mRNA prowess and the blockbuster potential behind its cancer vaccines. That said, I have no idea if anything within its pipeline will see the light of day soon enough to propel shares higher this year.
As much as I like the company, it’s a more speculative biotech play until it returns to positive revenue growth.
On the date of publication, Joey Frenette 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.
