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The biotech industry witnessed a rebound in 2017 from last year’s challenges despite rising competition, pipeline setbacks, pricing pressure, slowdown in growth of mature products and generic competition for certain key drugs.
More frequent FDA approvals, new product sales’ ramp up, R&D success and innovation, strong clinical study results and continued strength in some legacy products have changed the scene for the better this year.
In fact, the NASDAQ Biotechnology Index has gained 20.9% so far this year, in sharp contrast to last year’s performance when the index was down 22%.
Notably, the Medical – Biomed/Genetics sub-industry carries a Zacks Industry Rank of #108, which places it at the top 41% of 250 plus Zacks industries. Our back-testing shows that the top 50% of the Zacks ranked industries outperforms the bottom 50% by a factor of more than two to one. Moreover, the Medical – Biomed/Genetics industry has increased 3.7% this year so far.
The positive factors are expected to continue contributing to the sector’s growth next year. Meanwhile, the uncertainty around the passing of the tax reform has reduced with the U.S. Senate clearing an amended version last week. The bill will now be presented to a conference committee where representatives from the House and Senate will come together to draft the final bill.
The reform aims to bring down the corporate tax to stimulate economic as well as employment growth. If the tax reforms are approved, biotech companies will be at an advantage with more cash left on hand. This cash can be utilized for mergers/acquisitions, which have been relatively less this year than in 2016.
Which Stocks to Pick?
To cash in on the favorable drug/biotech trends, this is the right time to add a few stocks that have growth potential.
We have taken the help of the Zacks Stock Screener to make our selection foolproof. To shortlist the stocks from the vast universe of biotech companies, we have picked stocks that carry a Zacks Rank #1 (Strong Buy) or 2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
To further narrow down the list, we have selected those which have a Growth Score of A or B. Our research shows that stocks with a Growth Score of A or B when combined with a Zacks Rank #1 or 2 offer the best upside potential. Also, we’ve highlighted stocks that are currently trading under $20 per share.
Here are the four stocks that fulfilled these criteria:
San Diego-based Halozyme Therapeutics, Inc. (HALO – Free Report) carries a Zacks Rank #2. The stock has a Growth Score of A. Shares of the company have gained 110.5% year to date. Moreover, the stock is currently valued at $19.57.
The company has surpassed the Zacks Consensus Estimate in the three out of the trailing four quarters by an average of 37.67%. Also, the loss estimates have narrowed from 83 cents to 71 cents for 2018 over the last 60 days.
Protagonist Therapeutics, Inc. (PTGX – Free Report) carries a Zacks Rank #1. The stock has a Growth Score of B and is currently valued at $17.57. The company has surpassed the Zacks Consensus Estimate by an average of 13.83% in two out of the trailing four quarters. Also, the loss estimates have narrowed from $3.38 to $1.82 for 2018 over the last 60 days.
Aptose Biosciences Inc. (APTO – Free Report) carries a Zacks Rank #2 and has a Growth Score of B. Shares of the company have gained 23.7% year to date. Moreover, the stock is currently valued at $1.8. The company has surpassed the Zacks Consensus Estimate by an average of 27.14% in two out of the trailing four quarters. Also, the loss estimates have narrowed from 75 cents to 69 cents for 2018 over the last 30 days.
The clinical stage biopharmaceutical company, Pieris Pharmaceuticals, Inc. (PIRS – Free Report) , carries a Zacks Rank #2 and has a Growth Score of A. Shares of the company have skyrocketed 327% year to date. Also, the loss estimates have narrowed from 85 cents to 63 cents for 2018 over the last 60 days. Moreover, the stock is currently valued at $5.79.