The stock market is off to a fantastic start this year, with the S&P 500 index up 16%. But biotech stocks are performing even better — the SPDR S&P Biotech ETF is up nearly 19%.
Which biotech stocks look like great picks to deliver strong returns going forward? That’s the question we posed to three Motley Fool contributors. They identified…
Amgen (NASDAQ:AMGN), Emergent BioSolutions (NYSE:EBS), and Viking Therapeutics (NASDAQ: VKTX) as their top biotech stocks to buy in May. While all three are trading well below their 2018 highs, here’s why they look promising.
Taking a “BiTE” out of cancer
Todd Campbell (Amgen): Every year the top scientific minds in cancer get together in early June for the American Society of Clinical Oncology (ASCO) conference to discuss the latest advances. This year, Amgen could emerge from the conference a winner after presenting data on bispecific T cell engager (BiTE) drugs, two-sided antibodies that bind to a target and a T cell to overcome cancers’ natural defenses.
At ASCO, management plans to present data on AMG-420, a BiTE targeting BCMA, a protein expressed in multiple myeloma. Last year, Amgen said AMG-420 elicited a complete response in five heavily pretreated multiple myeloma patients, leading industry watchers to wonder if it could be a better solution than highly touted chimeric antigen receptor T cell gene therapies under development at bluebird bio and others.
Amgen could also benefit from first-in-human results to be presented at ASCO for AMG-212, a BiTE targeting an antigen expressed in most prostate tumors. Bayer conducted the study under a license with Micromet prior to Amgen acquiring it in 2012. If the data is encouraging, it could be good news for a new half-life extended BiTE molecule, AMG 160, that Amgen’s moved into clinical testing in the indication.
Also, Amgen will share first-in-human efficacy and safety data for AMG 510, a drug targeting KRAS G12C, a common mutation occurring in 14% of lung adenocarcinomas and about 4% of colon cancers. Previously, RAS mutations like this have been considered undruggable, but Amgen’s R&D team thinks AMG 510 could change that.
Admittedly, there’s no guarantee data presented at ASCO will send Amgen’s shares higher. But, I think there’s a good chance it happens. The company’s growth has slowed lately because of expiring patents. If these presentations convince investors that growth could reaccelerate in the future, then picking up shares now could be a smart decision.
Sometimes the best time to buy is when the news is bad
Chuck Saletta (Emergent BioSolutions): Emergent BioSolutions saw its shares get shellackedrecently after it delivered disappointing earnings results and guided the near term downward. As painful as that move was to shareholders who owned the company before the news hit, the decline might very well be just what those sitting on the sidelines need in order to consider taking the plunge to invest.
After the plunge, Emergent BioSolutions sported a stock price of around $49 per share. Despite the short-term pain Emergent is projecting, analysts anticipate the company will earn around $3.33 per share in 2020. That gives it a price-to-anticipated-forward-earnings ratio of…
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