When it comes to risk vs. reward in the stock market, the biotech sector has one of the highest potential payoffs. Many a fortune has been made after successful clinical results or a timely FDA approval for a new drug. Following a company’s progress from research to approval can be a life-changing way to invest.
At the same time, biotech companies can fail during a clinical trial or get denied by the FDA. In the biotech sector, this type of failure can set a company back years or worse, send them into bankruptcy. Like any industry, there are biotech leaders as well and you’ll read about two of them in this article. These 3 biotech stocks offer incredible potential for any long-term, well-diversified portfolio.
Novo Nordisk A/S (NVO)
Novo Nordisk A/S (NYSE:NVO) is a Danish multinational biotech company that was founded in 1923. It is the most valuable biotech company in Europe and its market capitalization has surpassed the annual GDP of Denmark. As an ADR, NVO trades on the New York Stock Exchange but its home exchange is in Copenhagen. Only 7 analysts follow the stock in the US with a one-year price target range of $122.27 to $159.05 with an average price target of $139.70.
Even if you aren’t too familiar with Novo Nordisk, you’ve likely heard of its two most popular drugs. Although Novo Nordisk has a nearly 33% market share of the global diabetes drug market, the company is better known for its weight loss treatments: Wegovy and Ozempic. As of September 2023, more than 9 million Americans were using one of the two drugs. This is an increase of 300% from 2020.
Novo Nordisk’s revenue has grown for 12 consecutive quarters and has a 5-year CAGR of 16%. The ADR stock trades for about 39x forward earnings and 17.4x sales, which puts the stock at a bit of a premium valuation. Over the past five years, NVO has returned more than 420% so shareholders likely aren’t too concerned about the high multiple the stock trades at.
Intellia Therapeutics Inc (NTLA)
Intellia Therapeutics (NASDAQ:NTLA) is an American clinical-stage biotech company with a unique way of approaching treatments for diseases. The 23 analysts who cover Intellia’s stock are more bullish on the stock than the market has been. As per Yahoo Finance, they have a one-year average price target of $70.13. This is more than $40.00 higher than what NTLA is currently trading at.
Intellia is known as being a trailblazer in the CRISPR gene-editing field. It made history in 2021, becoming the first company to ever treat and edit cells in vivo. This means that Intellia edited the genes of a live patient to treat ATTR Amyloidosis. Intellia has multiple treatments that are both in vivo and ex vivo in its pipeline. The company has caught the eye of institutions and is one of Cathie Wood’s largest holdings. Ark Invest owns approximately 7.66% of Intellia’s shares across their various ETFs.
It’s always difficult to value a pre-revenue, clinical-stage biotech company. Obviously, Intellia is not going to have a reading for its price-to-earnings ratio. Currently, NTLA is trading at about 69x sales and has earned about $36 million in revenue over the past 12 months. When investing in NTLA, you are speculating on how successful the company can one day be.
Amgen Inc (AMGN)
Amgen (NASDAQ:AMGN) is an American multinational biotech company that was founded in 1980. It is a component of the NASDAQ 100, the S&P 500, and the Dow Jones Industrial Average. Amgen has 22 Wall Street analysts who cover its stock with a one-year price target range of between $170.00 and $380.00. The average target price for these analysts is $307.59 which is nearly $40.00 higher than Amgen’s current price.
Amgen is well-known for its diverse pipeline of drugs and clinical trials. It is one of the more successful biotech companies bringing in nearly $30 billion in revenue in 2023. The company has several treatments for various cancers, asthma, thyroid issues, and even one in the clinical trial phase for weight loss. One other thing attractive about Amgen’s stock? It’s dividend. The company has paid a dividend since 2011 and has raised in each of the last 14 years.
Compared to Novo Nordisk, Amgen trades at pretty reasonable valuations. Currently, AMGN is trading at about 13.8x forward earnings and just 5x sales. Considering the dividend yield of 3.35% and the wide range of drugs already on the market, Amgen is a safe biotech stock that can provide steady income to your portfolio.
On the date of publication, Ian Hartana and Vayun Chugh did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.