The biotechnology industry includes biotech companies that use living systems and organisms to develop or make products. In the financial world, they comprise a sector known as biotech.
The products in question must go through a costly and timely testing process before gaining approval from the FDA (Food and Drug Administration). Therefore, investing in these small start-up company stocks can pay off in the long term once the drugs they research obtain authorization.
In this article:
- Good Value
- One to Watch
Top Biotech Companies Q3 2020
Biotech stocks have outperformed the broader market in recent years. Since the bear market in March, the Nasdaq Biotechnology Index (NBI) has closely followed, if not outpaced, the market-leading Nasdaq-100.
We’re looking at 4 different biotech stocks that are worth watching for the latter part of 2020.
Gilead Sciences (NASDAQ: GILD)
Among the 15 largest constituents in the NBI, Gilead Sciences have taken center stage in the last few months because of their key role in developing COVID-19 treatment and prevention. The FDA granted them emergency authorization to research the drug Remdesivir.
In June, they announced they were ready to start trials of the treatment in different versions of the medicine. After the initial donation of their limited supply, Gilead will begin charging for the drug, though no price has yet been decided.
Investing in Gilead could benefit if their coronavirus program is successful. However, they should still remain strong due to other pre-FDA approved medicines to treat rheumatoid arthritis, and their already approved and profiting HIV drug, Biktarvy; sales for quarter one more than doubled.
Trailing price-to-earnings ratio (P/E) is a standard comparative valuation multiple that is calculated on the last 12 months of earnings. It is calculated by taking the current stock price and dividing it by the trailing EPS, or earnings per share, for the past year.
A low P/E Ratio can indicate that the stock is undervalued, and therefore investors can often buy the stock at a discount and then profit when the price of that stock climbs.
These biotech stocks have the lowest 12-month trailing P/E Ratio and are therefore good for value.
XBiotech Inc. (XBIT)
This biopharmaceutical company researches, develops and commercializes monoclonal antibodies used in the treatment of various diseases, including cancer, inflammatory skin disease, diabetes, and vascular disease.
Founded in 2005 and with its headquarters in Austin, Texas, this biotech company has seen a recent share price increase of 33% since the WHO declared coronavirus (COVID-19) pandemic status.
Innoviva Inc. (INVA)
This asset management company is focused on health care that engages in the advancement and financial management of biopharmaceuticals.
Innoviva stocks are currently holding a Zacks Rank of #1. According to them, this list is made up of the top 5% of stocks with the most potential.
INVA’s P/E ratio is below the industry average, but this could mean a bargain for investors as some economists believe they have a stable earnings outlook, and their stocks are currently undervalued.
One of the standout characteristics for Innoviva Inc. is that it passes 6 of the 9 financial assessments in the Piotroski F-Score. A good F-Score suggests that the company has strong signs of quality. This world-class accounting-based scoring system is used for finding stocks with an improving financial health trend.
Additionally, in May, Innoviva announced the appointment of Pavel Raifeld to the role of Chief Executive Officer (CEO). Raifeld is a veteran healthcare executive with a strong background in business development, strategy, and corporate finance. He has focused much of his career on the creation of exceptional shareholder value.
One to Watch
One of the strongest sectors in 2020 for penny stocks has been biotech. Biotech stocks are inherently volatile, and halfway through the year, we’ve seen many penny stocks make fiery moves in the stock market.
This is likely not just because of the coronavirus pandemic, but this industry is working on life-changing treatments that aren’t likely to lose their appeal after COVID-19 leaves the headlines.
Cleveland BioLabs (CBLI)
This high volume penny stock could be one to watch this year. Their shares have jumped up and down since January, settling in courses, but they have recently jumped again by a staggering 40%.
Reasons are relatively unknown, although last month, they publicized the closing of its earlier announced registered direct offering of an aggregate of 1,515,878 shares of its common stock, at a purchase price of $2.0945 per share.
They have recently been mentioned in an industry report from Orion Research pitted alongside companies like GSK and Sanofi.
Armistice Capital has a past performance of investing in penny stocks from the biotech industry, and they have taken a more substantial stake, of 3,9%, in Cleveland BioLabs.
If you’re considering investing in any stock, consult a financial adviser.
What stocks are on your hot list? How many are biotech companies? Let us know in the comments section below.