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). Many biotech companies have been rushing to develop tests and treatments for COVID-19. During the past year, biotech stocks, as represented by the iShares Nasdaq Biotechnology ETF (IBB), have posted a total return of 22.3% compared to the Russell 1000's total return of 13.8% as of September 11, 2020. All data below are as of September 14, 2020.

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) 18.99 550.5 1.2
Vanda Pharmaceuticals Inc. (VNDA) 9.74 532.3 4.7
Innoviva Inc. (INVA) 11.47 1,163 5.6

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. On August 17, XBiotech announced that it had discovered antibodies that could potentially be used as a therapy to treat SARS-CoV2, the virus causing COVID-19. One week later, the company reported that the FDA had issued emergency use authorization for COVID-19 Convalescent Plasma (CCP) as a treatment for COVID-19, opening the door to using XBiotech's screening test as a key means of identifying CCP.
  • 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. On August 31, the company reported that the Phase III study of its drug, Tradipitant, was progressing. The drug has potential applications in the treatment of gastroparesis, a disease related to the stomach, and as a possible means of accelerating clinical improvement in patients with COVID-19 pneumonia.
  • Innoviva Inc.: Innoviva is an asset management company focused on health care that engages in the development, commercialization, and financial management of biopharmaceuticals.

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) 35.54 23.2 3,630
Regeneron Pharmaceuticals Inc. (REGN) 544.75 58.0 353.0
Bio-Techne Corp. (TECH) 243.75 9.4 252.4

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.
  • Regeneron Pharmaceuticals Inc.: Regeneron Pharmaceuticals discovers, develops, and markets biopharmaceutical products for the treatment of a variety of medical conditions. On September 14, Regeneron and the University of Oxford announced that RECOVERY (Randomised Evaluation of COVid-19 thERapY), a major randomized clinical trial of potential COVID-19 treatments, will evaluate Regeneron's investigational antibody cocktail for the treatment of the disease, REGN-COV2.
  • Bio-Techne Corp.: Bio-Techne develops, makes, and markets biotechnology products as well as clinical diagnostic controls.

Biotech Stocks with the Most Momentum

These are the biotech stocks with the highest total return over the last 12 months.

Biotech Stocks with the Most Momentum

 

 Price ($) Market Cap ($B) 12-Month Trailing Total Return (%)
Trillium Therapeutics Inc. (TRIL.TO) CA$18.58 CA$1.6 3,620
Novavax Inc. (NVAX) 95.45 5.8 1,560
Mersana Therapeutics Inc. (MRSN) 18.65 1.3 792.3
Russell 1000 N/A N/A 13.8
iShares Nasdaq Biotechnology ETF (IBB) N/A N/A 22.3

Source: YCharts

  • Trillium Therapeutics Inc.: Trillium Therapeutics is a Canada-based biotechnology company specializing in clinical-stage immuno-oncology treatments. It has preclinical programs and therapies that focus on treating cancer. On September 10, the company announced that it priced its planned public offering of 10,000,000 common shares at $130 million, or $13.00 per share.
  • Novavax Inc.: Novavax is a clinical stage biotechnology company that creates vaccines to address a wide range of infectious diseases. On September 2, the company reported that positive Phase 1 data for its drug NVX‑CoV2373, a potential COVID-19 vaccine candidate, had been published in The New England Journal of Medicine.
  • Mersana Therapeutics Inc.: Mersana Therapeutics specializes in oncology agents and creates products used in the treatment of tumors and cancer.