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 actually 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 performed roughly in line with the S&P 500, with the iShares Nasdaq Biotechnology ETF (IBB) posting a total return of -12.2% compared to -12.1% for the benchmark index. All figures are as of March 17, 2020.
Below, we'll take a look at the top 3 stocks in the biotechnology sector for the second 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|
|Ligand Pharmaceuticals Inc. (LGND)||63.37||1.0||2.2|
|Vanda Pharmaceuticals Inc. (VNDA)||8.10||0.4||3.8|
|Arena Pharmaceuticals Inc. (ARNA)||36.33||1.8||4.8|
- Ligand Pharmaceuticals Inc.: Ligand Pharmaceuticals acquires and licenses technologies and delivery systems that help other pharmaceutical companies develop medicines. In February, Ligand raised its 2020 financial guidance based on higher sales of the company's Captisol technology. Captisol could be used with the antiviral drug remdesivir, which is seen as a potential candidate for treating COVID-19.
- Vanda Pharmaceuticals Inc.: Vanda Pharmaceuticals develops and markets a series of clinical-stage drug treatments targeting central nervous system disorders.
- Arena Pharmaceuticals Inc.: Serving clients in the U.S. and Switzerland, Arena Pharmaceuticals is responsible for a receptor-based screening capability used across multiple biotechnological applications. The company announced in February that it expects to deliver up to 8 major data readouts by 2021, which marks an important achievement in the development and testing process of new drug treatments.
Biotechnology Stocks with the Fastest Earnings Growth
Here are the biotechnology 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.
|Biotechnology Stocks with the Fastest Earnings Growth|
|Price ($)||Market Cap ($B)||EPS Growth (%)|
|Galapagos NV (GLPG)||161.01||10.4||1960.0|
|Bio-Techne Corp. (TECH)||161.17||6.2||571.1|
|Neurocrine Biosciences Inc. (NBIX)||77.05||7.1||84.2|
- Galapagos NV: Headquartered in Belgium, Galapagos develops clinical stage pharmaceuticals for illnesses that include rheumatoid arthritis, Crohn's disease, ulcerative colitis, and cystic fibrosis.
- Bio-Techne Corp.: Bio-Techne manufactures and sells a variety of biotechnology products, including immunoassays, growth factors, proteins, and more. In its Q2 FY 2020 report, Bio-Techne reported 6% YOY growth to organic revenue.
- Neurocrine Biosciences Inc.: Neurocrine Biosciences is a biotechnology company focused on the development of treatments for anxiety, depression, Alzheimer's disease, multiple sclerosis, and a variety of other neurological diseases and disorders. For FY 2019, Neurocrine Biosciences reported $788.1 million in revenue, a YOY increase of 74.7%.
Biotechnology Stocks with the Most Momentum
These are the biotechnology stocks that had the greatest positive total return over the past 12 months.
|Biotechnology Stocks with the Most Momentum|
|Price ($)||Market Cap ($B)||12-Month Total Return (%)|
|Kodiak Sciences Inc. (KOD)||40.33||1.8||478.6|
|Forty Seven Inc. (FTSV)||92.23||4.4||419.3|
|Trillium Therapeutics Inc. (TRIL.TO)||CA$4.05||CA$0.3||406.2|
|iShares Nasdaq Biotechnology ETF (IBB)||--||--||-12.2|
- Kodiak Sciences Inc.: Kodiak Sciences develops and commercializes pharmaceuticals used to treat retinal diseases. Last year, the company completed crucial clinical studies of its KSI-301, a drug therapy for certain types of macular degeneration.
- Forty Seven Inc.: Forty Seven is a clinical-stage immuno-oncology company that develops novel therapies for the treatment of various types of cancer. In March, the company announced that Gilead Sciences, Inc. (GILD) would acquire it for approximately $4.9 billion in a cash deal that's expected to close during the second quarter of 2020.
- Trillium Therapeutics Inc.: Canadian biotechnology firm Trillium Therapeutics is a clinical-stage immuno-oncology company. It has preclinical programs and therapies that focus on treating cancer.
YCharts. "Financial Data," Accessed March 18, 2020.
Ligand Pharmaceuticals, Inc. "Ligand Raises 2020 Financial Guidance Due to Higher Captisol Material Sales," Accessed March 18, 2020.
Arena Pharmaceuticals, Inc. "Arena Announces Management and Program Updates and Reports Fourth Quarter and Full-Year 2019 Financial Results," Accessed March 18, 2020.
Bio-Techne Corp. "Bio-Techne Releases Second Quarter Fiscal 2020 Results," Accessed March 18, 2020.
Neurocrine Biosciences, Inc. "Neurocrine Biosciences Reports Fourth Quarter and Full-Year 2019 Financial Results," Accessed March 18, 2020.
Kodiak Sciences, Inc. "Kodiak Sciences Announces Fourth Quarter and Full Year 2019 Financial Results and Recent Business Highlights," Accessed March 18, 2020.
Forty Seven, Inc. "Gilead to Acquire Forty Seven for $4.9 Billion," Accessed March 17, 2020.