Sometimes the best way to jump into an industry like biotech is to follow the popular trades. Though that may go against the common advice of avoiding hype cycles and the fear of missing out, seeing which biotech stocks are experiencing the highest 24-hour trading volumes can be a quick way to learn which catalysts are driving investors to the industry.
That’s because the biotech industry is unique in its ability to forecast demand for a future drug product or treatment by estimating the size of a patient population. For example, drugs intended to treat or prevent viruses have limitless revenue potential while drugs that treat hereditary or genetic diseases are constrained in sales by the number of people in the world born with the disease.
As such, investors can use these kinds of broad numerical estimates to gauge the overall potential of biotech stocks for research and portfolio selection.
Pfizer (PFE)
With 39,753,100 shares trading in the last 24 hours, Pfizer (NYSE:PFE) seems to be back in the spotlight as it is currently the most traded biotech stock by volume. The investor excitement likely comes as a result of Pfizer’s second-quarter revenue handily exceeding previous expectations as the company raises its full-year outlook. This comes even at a time when the drugmaker is working to cut operational costs amid worries its Covid-19 products will no longer be relevant in the market.
Currently, much of the company’s financial growth stems from acquired drugs and more recently launched treatments which have successfully offset the dip in Covid-19 product demand. This highlights the reality of investing in a large biotech corporation like Pfizer, which is that the company has both the resources and the mass to consistently create its opportunities in the market. As a result, PFE stock is among the hottest biotech stocks trading today.
Merck (MRK)
On the other side of the investing coin, Merck (NYSE:MRK) saw shares fall following its second-quarter earnings report, despite relatively steady financial metrics. With 14,117,400 shares moving in the last 24 hours, Merck investors are either selling in response to panic or buying the dip. But the long-term dynamics for the stock could be changing regardless.
That’s because one of the company’s key breakthrough vaccines for human papillomavirus (HPV) has seen demand begin to slip in its critical Chinese market. The drug, known as Gardasil, has been one of Merck’s main revenue drivers over the last few years, but should the company struggle to expand its adoption abroad, sales will likely stagnate.
Beyond this, Merck faces the patent expiration of one of its best-selling cancer drugs, Keytruda, in 2028. While that’s still a handful of years away, it means the competition-free environment MRK has enjoyed for Keytruda’s patient population will vanish, ultimately impacting price and sales. While it’s a loss for MRK investors, cheaper cancer drugs are always a win for patients.
Teva Pharmaceuticals (TEVA)
Seeing 15,705,600 shares of Teva Pharmaceuticals (NYSE:TEVA) trade in the past 24 hours likely means the company’s generalist approach to the pharmaceutical sector is succeeding. The company has quietly amassed the world’s largest generic drug portfolio of 3,500 different products. It now serves patients in over 58 countries, with nearly 200 million people around the globe taking Teva medicine daily.
Thus, Teva’s greatest asset is time, as the company will only continue to acquire new generic drug recipes as brand-name drugs lose their patent protection over time. For investors, this means an early position in Teva today could translate to a lucrative holding far into the future when many of the already most effective formulas are fully generic and affordable to vast population groups.
With this potential trajectory and its successful second-quarter financial growth, TEVA stock will likely remain among the most popularly traded biotech stocks on the market.
On the date of publication, Viktor Zarev did not have (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.
On the date of publication, the responsible editor did not have (either directly or indirectly) any positions in the securities mentioned in this article.