Pharmaceutical stocks often reward investors with dividends and growth, but they have risks. Drugs can fail to win the approval of the Food and Drug Administration, patents expire, and competing drugs may drive an old standby out of the market.

When investing in the pharmaceutical sector, it is important to look for companies that have a firm hold on a narrow market. Many successful pharmaceutical companies focus on specific types of diseases and disorders, so they can become the go-to source for doctors treating those conditions. (See also: The Risks And Rewards Of Pharma Stocks.)

We have selected four companies that are in an uptrend and have a steady market for their products. All figures are current as of June 21, 2017.

1. Supernus Pharmaceuticals 

Supernus (SUPN) specializes in drugs for treating diseases of the nervous system. This includes epilepsy, attention deficit disorder, and depression.

Revenues have been relatively flat for the past four years, and operating income has remained at the same level for that period. 

SUPN has had deep troughs, but it has recovered nicely each time and is finding support at its 50-day moving average. That moving average is widening the gap between itself and the 200-day moving average, indicating that the short-term uptrend is rising faster than the long-term one. This means new buyers are coming in.

2. Achaogen 

Achaogen (AKAO) develops drugs that treat drug-resistant infections. The company has been in business since 2002, so it is relatively young by industry standards.

Revenues dropped, according to the last quarterly report on March 31, 2017.  However, buyers have continued to boost the stock price. In other words, investors are banking on AKAO coming out with a new drug soon.

There was a major breakout for the stock in December 2016. The volume was dramatically higher, indicating investors were pouring into the stock. Achaogen has risen from there, but began moving sideways in March 2017.

3. Keryx Biopharmaceuticals Inc.

Keryx Biopharmaceuticals (KERX) specializes in treatments for renal disease, but the company also makes drugs that treat anemia, kidney disease, and the gastrointestinal tract.

The company has entered agreements with Japanese companies to license products in that country. Revenues have been rising for four years straight, though income has remained negative.

Investors started snapping up shares in November 2016, driving the stock sharply upward. After that, KERX formed a base and was consolidating its gains. Its 50-day moving average crossed above its 200-day moving average in mid-April 2017. This is a bullish sign. The stock had a breakout in May, but has given back most of its gains.  

4. Enanta Pharmaceuticals Inc. 

Viral infections and liver diseases are the focus of Enanta Pharmaceuticals, Inc. (ENTA). The company collaborates with AbbVie (ABBV) and has been in business since 1995.

Income has remained positive for the past four years, though revenues have been choppy. 

After a November 2016 breakout, the stock has risen steadily. Its 50-day moving average is diverging from the 200-day moving average, and this is a bullish sign for 2017. The stock is currently in a base.

The Bottom Line

Big Pharma is not doing as well as smaller companies with niche markets right now. That’s not to say that this will be the trend for the rest of 2017, but the niche companies on this list started the year with positive developments. They might be a good way to play the pharma sector for those who want stronger growth than the large stalwarts provide. 

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