The biotechnology industry includes companies that develop drugs and diagnostic compounds for the treatment of diseases and medical conditions. These products must go through a rigorous, costly, and time-consuming testing process before potentially obtaining approval from the U.S. Food and Drug Administration (FDA). This means that investors may wait for years before knowing whether a drug under development will pay off. The group includes small start-up companies that focus on single drugs as well as large, well-established corporations that generate dozens of potential new drugs each year. Some of the largest biotechnology companies in the world include Amgen Inc. (AMGN), Regeneron Pharmaceuticals Inc. (REGN), and Biogen Inc. (BIIB). Biotech stocks, as represented by the iShares Nasdaq Biotechnology ETF (IBB), have outperformed the broader market, providing investors with a total return of 28.0% compared to the S&P 500's total return of 13.9% over the past 12 months. These market performance numbers and the statistics in the tables below are as of June 8.

Here are the top 3 biotech stocks with the best value, the fastest earnings growth, and the most momentum.

Best Value Biotech Stocks

These are the biotech stocks with the lowest 12-month trailing price-to-earnings (P/E) ratio. Because profits can be returned to shareholders in the form of dividends and buybacks, a low P/E ratio shows you’re paying less for each dollar of profit generated.

Best Value Biotech Stocks

 

Price ($) Market Cap
($M)

 
12-Month Trailing P/E Ratio
XBiotech Inc. (XBIT) 14.48 417.8 0.9
Vanda Pharmaceuticals Inc. (VNDA) 11.46 625.2 5.4
Innoviva Inc. (INVA) 13.90 1,408 8.1

Source: YCharts

  • XBiotech Inc.: XBiotech is a biopharmaceutical company that discovers, develops, and commercializes monoclonal antibodies for treating a variety of diseases, including cancer, vascular disease, inflammatory skin disease, and diabetes.
  • Vanda Pharmaceuticals Inc.: Vanda Pharmaceuticals is a biopharmaceutical company focused on the development and commercialization of a portfolio of clinical-stage, small- molecule therapies for central nervous system disorders. The company posted revenue growth of 21.6% for Q1 2020, which ended 31 March 2020. Vanda also announced that it was working on therapies to combat COVID-19.
  • Innoviva Inc.: Innoviva is an asset management company focused on health care that engages in the development, commercialization, and financial management of biopharmaceuticals. The company announced in May that it had appointed Pavel Raifeld to the role of Chief Executive Officer (CEO).

Fastest Growing Biotech Stocks

These are the biotech stocks with the highest year-over-year (YOY) earnings per share (EPS) growth for the most recent quarter. Rising earnings show that a company’s business is growing and is generating more money that it can reinvest or return to shareholders.

Fastest Growing Biotech Stocks

 

Price ($) Market Cap ($B)
 
EPS Growth (%)
Genmab A/S (GMAB) 29.08 18.9 239.1
Vertex Pharmaceuticals Inc. (VRTX) 265.69 68.9 122.3
Innoviva Inc. (INVA) 13.90 1.4 90.3

Source: YCharts

  • Genmab A/S: Genmab is a Denmark-based biotechnology company that specializes in the development of antibody therapeutics for the treatment of cancer. The company announced in March that it had appointed Anthony Mancini to the roles of Executive Vice President and Chief Operating Officer (COO).
  • Vertex Pharmaceuticals Inc.: Vertex Pharmaceuticals discovers, develops, and manufactures drugs used in the treatment of conditions including cancer, autoimmune disease, and neurological disorders. The company reported net income growth of 124% on product revenue growth of 77% for Q1 2020, which ended 31 March 2020. Vertex noted that the COVID-19 pandemic has not had any impact on the continuity of its supply chain for its approved medicines.
  • Innoviva Inc.: See company description above.

Biotech Stocks with the Most Momentum

These are the biotech stocks with the highest total return over the last 12 months. Some of the companies below are considered penny stocks because they are small in size and typically trade for less than $5 per share. While these stocks can offer outsized returns they tend to be less liquid and therefore much more risky than non-penny stocks, making them poor candidates for investors with low risk tolerance.

Biotech Stocks with the Most Momentum

 

 Price ($) Market Cap ($M) 12-Month Trailing Total Return (%)
MedMira Inc. (MIR.V) CA$0.52 CA$342.4 5,100
Trillium Therapeutics Inc. (TRIL.TO) CA$9.53 CA$795.2 1,830
Novavax Inc. (NVAX) 46.30 2,716 656.5
S&P 500 N/A N/A 13.9
iShares Nasdaq Biotechnology ETF (IBB) N/A N/A 28.0

Source: YCharts

  • MedMira Inc.: MedMira is a Canada-based biotechnology company that develops, manufactures, and markets rapid diagnostic tests and instrumentation. Its products aid the diagnosis of both infectious and non-infectious diseases.
  • Trillium Therapeutics Inc.: Trillium Therapeutics is a Canada-based biotechnology firm specializing in clinical-stage immuno-oncology treatments. It has preclinical programs and therapies that focus on treating cancer.
  • Novavax Inc.: Novavax is a clinical stage biotechnology company that creates vaccines to address a wide range of infectious diseases using proprietary virus-like particle (VLP) technology. The company posted a 15.2% decline in revenue and net loss of $25.9 million for Q1 2020, which ended 31 March 2020. The company is working on a vaccine candidate for COVID-19.