3 of Biotech’s Best

Diane is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.

It’s been a healthy year-to-date for the biotech sector, with the space logging huge gains above and beyond those of the broad based market. Industry companies have thrived thanks to technological advances that facilitated new discoveries and stoked greater demand for life-enhancing and lifesaving products.

Industry research firm IBIS World estimates global biotechnology industry revenue will jump 12.7% in 2013, reaching $262 billion. That follows an average annual growth rate of 11% over the last five years.

Moreover, the industry is still in the growth stage of its life cycle. Constant technological findings, an insatiable appetite for new and better drugs, and the explosive growth of emerging markets will influence and fuel the industry. Let's take a closer look at three of biotech's best.

One of the biggest

Biogen (NASDAQ: BIIB), one of the biggest and best-known names in the biotech sector, is up some 40% since the start of 2013, and a whopping 120% over the past two years.

Driving the Massachusetts based company is a solid pipeline of drugs to treat multiple sclerosis. The firm also has a number of other therapies to treat diseases such as rheumatoid arthritis, lymphomas, Crohn’s disease, and psoriasis.

Tecfidera is Biogen’s new oral therapy recently approved in the U.S. for the treatment of relapsing forms of MS. The drug has been proven to significantly reduce important measures of the disease, including relapses and the development of brain lesions.

In addition, it is shown to slow disability progression over time.  Only on the market for a few months, Tecfidera sales have already surpassed even the loftiest expectations and are on pace to reach $800 million this year. 

Biogen’s 2013 full year earnings are expected to grow 21.4%, with several analysts becoming more upbeat over the last few weeks. Consensus for this year's cumulative earnings have risen to $7.66. Meanwhile, full 2014 consensus numbers have surged from $8.77 to $10.17.  Founded in 1978, Biogen is the world’s oldest independent biotechnology company and boasts more than $5 billion in annual revenue

The innovator

Celgene (NASDAQ: CELG), a global biopharmaceutical company with a market cap of $51 billion, is on a mission to deliver truly innovative and life changing drugs. There are more than 300 clinical trials at major medical centers using compounds from Celgene for the treatment of myriad cancers and rare blood diseases.

Shares have been on a tear, doubling over the last 12 months. Yet that hasn’t stopped a handful of analysts from further upgrading shares even at today’s levels.

Recently, Jefferies Group reaffirmed its “buy” rating and has a $152 price target. Cantor Fitzgerald and Guggenheim both reiterated “buy” ratings and $142 price targets. And, Argus raised its guidance from  to “buy” from “hold” and have a $140 price target on the stock.

Celgene itself apparently sees more upside. In mid-June, the company announced an additional $3 billion share repurchase. Year-to-date, Celgene has repurchased roughly $1.8 billion of stock and has exhausted the previous $2.5 billion stock authorization. Over the last four years, Celgene has repurchased approximately $6.5 billion of its common stock.

Drugs for unmet needs

Gilead Sciences (NASDAQ: GILD) discovers, develops, and commercializes therapies for the treatment of life threatening diseases and treatment in areas of unmet needs.

In April, Gilead submitted a new drug application to the FDA for sofosbuvir, a once a day oral treatment for chronic hepatitis C virus. Chronic HCV affects up to four million Americans and is the leading cause of liver cancer and liver transplantation in the U.S.

Currently treatment for HCV includes 24-28 weeks of therapy with an injectable drug known to cause dramatic side effects, leaving some patients unable to complete therapy. Sofosbuvir shortens the therapy to 12-16 weeks.  The company also recently reported marked success with a treatment in clinical studies for indolent non-Hodgkin’s lymphoma.

At the end of last year, Gilead’s market cap stood at $84.34 billion, almost doubling in value during 2012.  In May of 2013, Gilead’s market value surpassed big pharma players like AstraZeneca, Bristol-Meyers Squibb, and Eli Lilly.

Earnings for its first quarter missed expectations by $0.02, but the company is optimistic going forward. Shares are up roughly 40% this year and should continue their upward trajectory thanks to pioneering new treatments and strategic alliances.

Foolish final thoughts

The biotech sector should continue to be a market leader. As the economy improves, so should funding for new research which will lead to more cutting-edge products, drive growth and boost revenue. The best days for biotech lie ahead.

 

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Diane Alter has no position in any stocks mentioned. The Motley Fool recommends Celgene and Gilead Sciences. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. Is this post wrong? Click here. Think you can do better? Join us and write your own!

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