Biotechnology is comprised of a broad range of 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 it can often be a long time until investors see if the development of a particular drug 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. The largest biotechnology stocks in the world include Amgen Inc. (AMGN), Gilead Sciences Inc. (GILD), and Vertex Pharmaceuticals Inc. (VRTX). In the trailing 12-month period, the biotechnology sector has underperformed relative to the S&P 500, with the iShares Nasdaq Biotechnology ETF (IBB) returning 12.9% compared to 27.3% for the S&P 500. All figures are as of January 8, 2020.
Below, we'll take a look at the top 3 stocks in the biotechnology sector for the first quarter of 2020 in terms of the best value, the fastest earnings growth, and the most momentum.
Biotechnology Stocks with the Best Value
Here are the biotechnology stocks with the lowest 12-month trailing price-to-earnings (P/E) ratio in the sector. 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.
|Biotechnology Stocks with the Best Value|
|Price ($)||Market Cap ($B)||12-Month Trailing P/E|
|Lexicon Pharmaceuticals Inc. (LXRX)||3.98||0.4||2.9|
|Ligand Pharmaceuticals Inc. (LGND)||98.98||1.7||3.6|
|Innoviva Inc. (INVA)||13.79||1.4||4.1|
- Lexicon Pharmaceuticals Inc.: Lexicon Pharmaceuticals develops and markets drugs for the treatment of diabetes, neuropathic pain, and cancer-related intestinal issues. On December 20, the company announced promising results in the Phase 3 trial of Sotagliflozin, a compound for the treatment of type 2 diabetes.
- Ligand Pharmaceuticals Inc.: Ligand Pharmaceuticals acquires and licenses technologies and delivery systems that help other pharmaceutical companies develop medicines.
- Innoviva Inc.: Innoviva develops and markets pharmaceuticals for the treatment of chronic obstructive pulmonary disease (COPD) and asthma.
Biotechnology Stocks with the Fastest Earnings Growth
Here are the biotechnology stocks with the highest year-over-year 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.
|Biotechnology Stocks with the Fastest Earnings Growth|
|Price ($)||Market Cap ($B)||EPS Growth (%)|
|Galapagos NV (GLPG)||206.80||13.4||1960.0|
|Vanda Pharmaceuticals Inc. (VNDA)||16.44||0.9||1320.0|
|Incyte Corp. (INCY)||77.14||16.6||321.4|
- Galapagos NV: Headquartered in Belgium, Galapagos develops clinical stage pharmaceuticals for illnesses that include rheumatoid arthritis, Crohn's disease, ulcerative colitis, and cystic fibrosis.
- Vanda Pharmaceuticals Inc.: Vanda Pharmaceuticals develops and commercializes drugs used in the treatment of sleep disorders, schizophrenia, dermatitis, cystic fibrosis, and more.
- Incyte Corp.: Incyte focuses on the discovery, development, and commercialization of oncology drugs. The company just announced the Phase 3 trial for Itacitinib, a treatment for graft-versus-host disease, did not meet objectives.
Biotechnology Stocks with the Most Momentum
These are the biotechnology stocks that had the greatest positive price change over the past 12 months.
|Biotechnology Stocks with the Most Momentum|
|Price ($)||Market Cap ($B)||12-Month Price Change (%)|
|Axsome Therapeutics Inc. (AXSM)||92.25||3.4||1240.0|
|Kodiak Sciences Inc. (KOD)||67.31||3.0||724.9|
|Constellation Pharmaceuticals Inc. (CNST)||40.81||1.4||572.3|
|iShares Nasdaq Biotechnology ETF (IBB)||--||--||12.9|
- Axsome Therapeutics Inc.: Axsome Therapeutics specializes in the development and commercialization of pharmaceuticals used in the treatment of central nervous system disorders. On December 30, the company announced promising results in the Phase 3 trial of AXS-07, a compound for the treatment of migraines.
- Kodiak Sciences Inc.: Kodiak Sciences develops and commercializes pharmaceuticals used to treat retinal diseases.
- Constellation Pharmaceuticals Inc.: Constellation Pharmaceuticals discovers, develops, and markets pharmaceuticals to treat drug-resistant cancers. On December 13, the company completed a secondary stock offering of 7,475,000 shares.
Yahoo Finance. "Charts," Accessed Jan 8, 2020.
Yahoo Finance. "Charts," Accessed Jan 8, 2020.
Lexicon Pharmaceuticals Investor Relations. "Lexicon Pharmaceuticals Announces Topline Phase 3 Data for Sotagliflozin in Type 2 Diabetes," Accessed Jan 9, 2020.
Incyte Investor Relations. "Incyte Announces Results of Phase 3 Study of Itacitinib in Patients with Treatment-Naïve Acute Graft-Versus-Host Disease," Accessed Jan 7, 2020.
Axsome Therapeutics Investor Relations. "Axsome Therapeutics Announces AXS-07 Achieves Co-Primary and Key Secondary Endpoints in MOMENTUM Phase 3 Migraine Trial in Patients with History of Inadequate Response," Accessed Jan 9, 2020.
Constellation Pharmaceuticals Investor Relations. "Constellation Pharmaceuticals Announces Closing of Public Offering of Common Stock and Full Exercise by Underwriters of Option to Purchase Additional Shares," Accessed Jan 9, 2020.