Chris Markoch
·4 min read
Investing in biotechnology (biotech) stocks is often thought of as being too risky for most investors. That’s not necessarily the case. While many investments are viewed as speculative, several blue-chip companies stand out among the top biotech stocks to buy for a conservative retirement portfolio.
If and how you get involved depends in large part on your risk tolerance. For example, many small-cap biotech companies who trade as penny stocks. These can offer the chance turn a small investment into millions of dollars. But these companies can also go bankrupt before ever getting a drug to market.
On the other hand, more established companies boast FDA-approved products and robust pipelines. However, these stocks can frequently carry both a high stock price and a high valuation, making them less desirable.
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With that in mind, this is still a sector where the benefits and risks are in plain sight. Let’s discuss three of the top biotech stocks to buy for investors of all styles.
Amylyx Pharmaceuticals (AMLX)
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The first stock is the one with the most risk. Amylyx Pharmaceuticals (NASDAQ:AMLX) is a small-cap stock with just a $1.28 billion market cap as of March 2024.
But, for individuals and families who have struggled with ALS, the company may be an example of a big thing coming in a small package. AMLX received FDA approval for its flagship ALS treatment, Relyvrio, in September 2022.
However, to showcase the risk involved, AMLX stock investors watched the price go down even as revenue went up. Then, the company posted four consecutive quarters of positive earnings.
Some of the decline may have been due to short interest which was still around 11% in early February. That has since come down slightly. And, as long as the company’s top and bottom lines continue trending in the right direction, traders will start to look for more attractive stocks to short.
CRISPR Therapeutics (CRSP)
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CRISPR Therapeutics (NASDAQ:CRSP) had a breakthrough in 2023. That is when the company’s proprietary CRISPR/Cas-9 technology received FDA approval for the first time. It was the culmination of a years-long partnership with Vertex Pharmaceuticals.
The expectation is that this will be the first of many approvals to come. That’s why the long-term outlook for CRSP stock is so exciting. It takes a little bit of the risk off CRSP stock.
However, before going all in on CRSP, there is a significant hurdle to overcome. Simply put, gene editing is expensive. So insurers are still wrestling with how, or if, to cover reimbursem*nt for these procedures. That’s an issue that may prevent widespread adoption.
This headwind could be the reason analysts believe CRISPR may be fairly valued at around $80 a share. Nevertheless, CRSP is objectively cheap as biotech stocks are concerned. And, investors who are so predisposed will note that Cathie Wood is one of the company’s biggest investors.
Vertex Pharmaceuticals (VRTX)
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Finally, Vertex Pharmaceuticals (NASDAQ:VRTX) rounds out this short list of top biotech stocks to buy. VRTX is ideal for less risk-tolerant investors because it has a proven portfolio of existing drugs that are already driving profits and free cash flow.
As mentioned above, the company partnered with CRISPR Therapeutics to get its gene editing treatment, Casgevy, approved for Sickle Cell Disease and beta thalassemia. That’s one reason why analysts are forecasting top line revenue for 2024 to come in around $10.7 billion, an 8% year-over-year (YOY) increase.
Furthermore, Casgevy is an important step towards the company’s goal of diversifying into areas beyond its established leadership position in cystic fibrosis. As another example of the company’s diversification efforts, Vertex anticipates filing with the FDA for approval of VX-548 by the middle of 2024. The latter is the company’s treatment for acute neuropathic pain.
With a forward P/E ratio of 27x, VRTX stock is expensive relative to the biotechnology sector. However, it’s trading at a discount of over 50% relative to its five-year average.
On the date of publication, Chris Markoch 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.
Chris Markoch is a freelance financial copywriter who has been covering the market for over five years. He has been writing for InvestorPlace since 2019.
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