I love investing in biotech stocks because they have single handedly propelled my model portfolio to massive outperformance over the years.
Biogen (NASDAQ: BIIB), Regeneron Pharmaceuticals (NASDAQ: REGN), and Gilead Sciences (NASDAQ: GILD) have been some of my biggest winners over the past decade.
But now with market caps of $43 billion, $60 billion, and $80 billion, respectively, Wall Street has caught on and limited the potential future returns by bidding up their stock prices.
So, allow me to specify… I love investing in unknown small-to-medium-sized biotech companies because they give you the best opportunity to significantly outperform any market cycle.
See, they’re not necessarily correlated with the broader market because investors value these stocks on their underlying fundamentals i.e. their ability to create new drugs that solve massive human health problems with FDA approval.
The single most important factor to consider when investing in biotech companies is timing – when to get in and when to get out.
To do that, you have the analyze the likelihood that the biotech’s newest drug will be successful and earn FDA approval in the quickest time possible.
So let's get started.
My #4 Biotech Stock to Own Today
Like I said before, timing is everything when it comes to picking the best biotech stock.
And I really think the timing is perfect right now for one mid-sized biotech company – Acadia Pharmaceuticals Inc. (NASDAQ: ACAD) – to deliver investors 1,000% returns.
Here’s a brief summary of what you need to know about the company now…
Acadia develops and commercializes biopharmaceutical products to address central nervous system disorders.
The company aims to discover small molecule drugs that address disorders such as Parkinson's, Alzheimer's, and schizophrenia.
It already has one drug approved by the FDA that helped it generate $339 million last year.
And it has another drug in the pipeline now that’s expected to pass soon and help the company generate $2.5 billion by 2024.
My #3 Biotech Stock to Own Today…
XBiotech Inc. (NASDAQ: XBIT) is a clinical-stage biopharmaceutical company headquartered in Austin, Texas.
The company discovers and develops “true human” antibody technology to treat a variety of diseases, including a therapeutic antibody as a treatment for cancer.
This is one of my top small cap biotech stock to buy now because the company’s recent Phase II trials look promising, meaning they’re one step closer to FDA approval. All it needs to do is pass Phase II and Phase III, which could happen by early 2021.
At the same time, XBIT already has solid profits from other drug sales. In fact, the company has one of the lowest 12-month trailing price-to-earnings (P/E) ratios of any firm its size. A low P/E ratio essentially means you’re paying less for each dollar of profit generated.
Since the company has $0 in debt and massive earnings relative to its tiny $534 million market cap, profits can be returned to shareholders in the form of dividends and buybacks.
The company went from losing $21 million in fiscal 2018 to profiting $668 million in 2019.
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Big Pharma loves to buy small biotech's right after the market drops.
When the market dropped 19% in the fourth quarter of 2018, Ex-Wall Street CEO Dylan Jovine picked 3 biotech stocks ripe for a takeover.
On October 1st, 2018, he recommended Tesaro… 63 days later it was taken over for an easy 91% profit…
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So, that gives it a 12-month trailing P/E of 0.8 today. Anything under 1.0 is considered low and makes the stock a “strong buy” in my humble opinion.
Back in January, XBIT announced it will use much of its 2019 profits to repurchase up to $420 million of its own shares.
XBiotech also has new 30,000 square foot infection disease R&D facility on the way. That will allow the company to develop significantly more monoclonal antibody medicines for cancer patients.
The new facility will in turn boost XBIT’s net income significantly and the stock could easily double once its fully operational. With those extra profits, I expect the company to begin paying a dividend to its shareholders.
My #2 Biotech Stock to Own Today…
Novavax (NASDAQ: NVAX) is the hottest stock on Wall Street right now…
But that doesn’t mean we still can’t continue to profit from the stock if it’s able to develop a working coronavirus solution…
Novavax announced its potential vaccine to prevent COVID-19 (called NVX-CoV2373) generated promising immune responses in an early stage clinical trial.
The phase one trial included 131 healthy participants between the ages 18 and 59 at two sites in Australia.
Novavax said 106 participants received one of four dose levels of the potential vaccine. The remaining 25 patients received a placebo.
Participants received two doses of the potential vaccine via intramuscular injection approximately 21 days apart.
The vaccine produced neutralizing antibodies, which researchers believe are necessary to build immunity to the virus and “killer T-cells.”
Additionally, the neutralizing antibodies that were produced were higher than those seen in people who have recovered from COVID-19.
Novavax said the vaccine was well tolerated with no serious adverse effects reported. Most patients reported tenderness and pain at the injection after the first dose. Some also reported headaches, fatigue or muscle aches.
Only one participant in the trial experienced a mild fever after a second dose, the company said.
Earlier media reports and analysts cited eight possible hospitalizations related to the study. But Novavax clarified those false reports, explaining no patients were in fact hospitalized.
The stock initially fell on these incorrect safety concerns. But then it rocketed as much as 20% high on Wednesday.
Where NVAX Stock Could Head from Here
The United States government recently announced it would pay Novavax $1.6 billion to develop and manufacture the potential vaccine.
As part of the Trump administration’s “Operation Warp Speed” initiative, the aim is to deliver 100 million doses by the beginning of next year.
The money will also cover the cost of running a late-stage trial for Novavax, which could begin as early as October.
The company has said it would begin a phase two trial in multiple countries if the early stage trial was successful.
I’ll keep you updated when that happens. And if it is successful, it wouldn’t surprise me to see the stock shoot 5X higher from current levels.
My #1 Biotech Stock to Own Today…
Steve Cohen, the legendary billionaire stock picker known for delivering huge returns for his clients at SAC Capital – one of the most successful hedge funds ever – is at it again.
But this time, he's doing it with his new company Point72 Asset Management – which manages $17.2 billion for high-net-worth individuals.
Even if us normal folks can’t invest in the Point72 fund itself, we can still copy Cohen’s trades…
You see, Point72 is required to disclose all its holding publicly every quarter.
And last quarter, Cohen’s firm revealed a new position in one penny stock that caught my eye.
Cocrystal Pharma is a clinical stage biotechnology company discovering and developing novel antiviral therapeutics that target the replication machinery of influenza viruses, hepatitis C viruses, and noroviruses.
The company employs structure-based technologies and Nobel Prize-winning expertise to create first-and best-in-class antiviral drugs.
COCP is currently developing an oral broad-spectrum replication inhibitor called a non-nucleoside inhibitor – which is currently being evaluated in a Phase 2a study for the treatment of hepatitis C as part of an ultra-short therapy of four to six weeks.
Now if you don't know what any of that means, it doesn't matter. All you need to know is that it's huge for the treatment of some of the world's most-killer diseases… and potentially for investors too.
The stock shot up from $0.87 to $2.16 after Cohen announced his stake in the company late last year.
But now that’s it’s down to only $1.40 per share, that makes Cocrystal Pharma one of the more interesting penny stocks to watch for potentially huge gains in 2021.
If those Phase 2 trials turn out successful and the company moves on to Phase 3, the stock should get a boost. And if Phase 3 is successful, the stock could soar.
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