Biotech Stocks: The Top 5 To Watch Amid A Blazing Hot Run

Biotech stocks have been on a roller-coaster ride and they’re riding a crest again.

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In 2021 the industry was thrust into the pandemic limelight as Pfizer (PFE) and its partner BioNTech (BNTX), 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 fell by the wayside. Shares of Investor’s Business Daily’s biotech industry group largely declined for 16 months.

Until now.

After hitting a six-year low in mid-June, biotech stocks seem to have regained their footing. The group IBD tracks has surged a collective 22.5% over the past month as of Thursday’s close. Trailing that, pharmaceutical stocks have risen about 10%.

“The sector has started to show signs of a rebound, and we believe several key data events in the coming months as well as any pickup in (mergers and acquisitions), will likely be pivotal in determining whether investor risk appetite will increase and help sustain the recovery,” RBC Capital Markets analyst Brian Abrahams said in a recent report.

But it’s key to watch specific measures when examining stocks. In terms of fundamental and technical measures as well as 12-month performance, the best biotech stocks today are:

• Amphastar Pharmaceuticals (AMPH)
• Dynavax Technologies (DVAX)
• Vertex Pharmaceuticals (VRTX)
• Alkermes (ALKS)
• Corcept Therapeutics (CORT)

The No. 1 Biotech Stock

Amphastar is the No. 1 biotech stock, leading an industry group of nearly 900 companies.

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Its biggest product is Primatene Mist, an over-the-counter asthma inhaler that temporarily relieves mild symptoms of intermittent asthma. In the first quarter, the inhaler brought in nearly $24.7 million in sales, growing 34% year over year.

Other big products include generic epinephrine for allergic emergencies and biosimilar glucagon, which treats low blood sugar. Revenue from the duo diverged in the previous quarter as epinephrine sales fell 3% but glucagon sales climbed 38%.

Now, the biotech stock is forming a double-bottom base with a buy point at 42.41, MarketSmith.com shows.

Amphastar ranks fifth on the IBD 50 list of elite growth stocks. Its shares are also on the Tech Leaders list.

Bullishly, AMPH shares have a best-possible Composite Rating of 99, according to IBD Digital. This puts the biotech stock in the top 1% of all stocks in terms of fundamental and technical measures. Its 12-month performance, measured by the Relative Strength Rating, is in the top 2% of all stocks.

Vaccines Take Center Stage

Dynavax is a vaccine company. It makes a hepatitis B vaccine for adults called Heplisav-B. The company also makes a second vaccine that adds an adjuvant to Heplisav-B. Adjuvants are substances that boost the immune response of a vaccine.

Last quarter, the two products brought in $114 million in sales, surging 37% year over year. That was below more bullish views for $154.3 million, however, and the biotech stock toppled 6% on the report.

Dynavax is also working on Tdap — tetanus, diphtheria and pertussis — and shingles vaccines. Further, it’s testing a plague vaccine using $22 million in funding from the Department of Defense. Plague is a potentially deadly infectious disease caused by bacteria found in fleas and rodents. Dynavax will add its adjuvant to the Department of Defense’s experimental vaccine in Phase 2 testing.

Last month, the biotech stock retook its 50-day moving average. And early this month, it rose above its 200-day moving average. Shares have a perfect Composite Rating of 99 and a strong Relative Strength Rating of 97, and belong to the Tech Leaders list.

Moving Beyond Cystic Fibrosis

Vertex is one of the biggest biotech stocks in terms of market cap. It ranks third behind Amgen (AMGN) and Gilead Sciences (GILD).

The company is the de facto leader of the cystic fibrosis drug market. First-quarter sales — dominated by its triple regimen Trikafta — jumped 22% to almost $2.1 billion.

But it’s now expanding into other efforts. Vertex is partnered with Crispr Therapeutics (CRSP) on a gene-editing approach to a pair of blood diseases. Further, 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 in type 1 diabetes.

Beyond that, Vertex is testing treatments for liver and kidney diseases, Duchenne muscular dystrophy and pain.

The biotech stock has a perfect Composite Rating and a Relative Strength Rating of 97. Shares are also well above their key moving average lines.

Vertex is sixth on the IBD 50 list. The company is also a Tech Leader.

Biotech Stock: Changing Older Meds

Alkermes works in the neuropsychiatric segment. The company sells Vivitrol, a treatment for alcohol or drug dependence, and Aristada, a schizophrenia treatment. Its newest drug is Lybalvi, a treatment for bipolar 1 disorder and schizophrenia.

First-quarter sales of all three drugs grew a collective 11% to about $22 million.

The company aims to improve on older medicines with unwanted side effects. Lybalvi, for example, uses an older antipsychotic that causes weight gain. A second drug mitigates that side effect.

The biotech stock is now forming a lengthy cup-with-handle base and an entry at 32.89.

Promisingly, Alkermes shares also have a nearly top-notch Composite Rating of 98. Its Relative Strength Rating is a bit lower at 94. But the biotech stock is well above its key moving average lines.

Alkermes is also a Tech Leader.

Gaining Recognition For One Key Drug

Biotech stock Corcept is gaining steam following the reversal of Roe v. Wade.

The company sells commercial treatment Korlym. Korlym treats Cushing’s syndrome, a disorder in which the body makes too much of the hormone cortisol. That can lead to weight gain, a hump between the shoulders, easy bruising and weak muscles.

The chemical name for Korlym is mifepristone. Other companies sell mifepristone as part of a regimen to induce abortion in early pregnancy. Korlym is much more expensive than the abortifacient and is not used in abortion.

In the first quarter, Korlym generated $93.7 million in sales, growing 18%.

The biotech stock recently broke out of a cup base with an entry at 25.78. Shares are now beyond the 5% chase zone. Corcept stock also has matching Composite and Relative Strength ratings of 98.

Plus, Corcept shares land on the Tech Leaders list.

Follow Allison Gatlin on Twitter at @IBD_AGatlin.

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