Biotechnology uses living organisms to develop cutting-edge medical treatments and drugs to treat diseases and ease human suffering. The biotech sciences include genetics, genetic engineering, gene therapy, applied immunology, and bioengineering. Companies that break ground in these areas may profit handsomely. Those that do not may fiscally suffer.

The difficulty in predicting which path such companies will take makes the biotech industry notoriously more volatile than the broader stock market. Consequently, investors willing to accept more risk, for the promise of excessively higher returns, may wish to diversify their equity portfolio with a stable of biotech stocks.

The Biggest Biotech Stocks

The largest biotech companies by market capitalization currently listed on U.S. stock exchanges as of Jan. 11, 2021, are:

 
Company
 
Ticker
 
Specialization / Focus
 
Market Capitalization ($Billions US)
Novo Nordisk
 

NVO
 
Hemophilia, diabetes, obesity
163 
Vertex Pharmaceuticals
VRTX Cystic fibrosis 61.0
 
Regeneron Pharmaceuticals
 
REGN
 
Cancer, allergic and inflammatory diseases, cardiovascular and metabolic diseases
 
53.4
Moderna MRNA Infectious and rare diseases, cancer, cardiovascular disease 46.4
Alexion ALXN Severe and ultra-rare disorders 34.2
Royalty Pharma RPRX Biotechnology royalties 32.1
 
Seagen
SGEN  
Cancer
 
32.0
Genmab A/S GMAB Antibody products for cancer patients 
27.3
BioNTech BNTX Cancer immunotherapy 26.2
 
BeiGene
BGNE Cancer
 
 
26.38

Source: Yahoo! Finance

Biotech ETFs

Biotech stocks can rise or fall, based on a host of company-specific factors, such as research announcements and Food and Drug Administration (FDA) clinical trial results. Therefore investors may wish to diversify their biotech exposure by allocating portions of their portfolios to biotech mutual funds or biotech exchange-traded funds (ETFs) such as SPDR S&P Biotech ETF (XBI), iShares Biotechnology Index (IBB), Market Vectors Biotech ETF (BBH) and PowerShares Dynamic Biotech & Genome ETF (PBE).

The Bottom Line

Biotechnology is on the front line of medical research and technology. Investing in biotech companies can pay off handsomely, given the industry‚Äôs potential for high profits, but the high risks associated with these firms can produce substantial losses. An investor can mitigate that risk by investing in mutual funds or ETFs, in order to diversify their biotech holdings.