Biotechs are one part of the market with the most upside. Some of the best-performing stocks of all time have come from this sector. Though biotech stocks are inherently complicated due to their complex subject matter, they are worthy of consideration especially once they mature.
One approach is to invest in broad-based ETFs. Another is to build small positions in high-quality companies with promising products in the pipeline.
Let’s shift our attention to two specific biotech stocks that fit this criterion: Vertex Pharmaceuticals (VRTX) and Seattle Genetics (SGEN).
Vertex Pharmaceuticals (VRTX)
VRTX has access to some of the country’s top minds as it is located in the academic hotbed of Boston, MA. VRTX specializes in creating and commercializing drugs that treat serious diseases. In particular, VRTX is primarily focused on treating cystic fibrosis.
VRTX has a B POWR Rating grade. The stock has an A Quality component grade along with a B Value component grade. Keep on digging and you will find VRTX has Cs in the Sentiment and Stability components. Investors who are curious as to how VRTX grades out in the Momentum and Growth components of the POWR Ratings can find out by clicking here.
Out of the 493 publicly traded companies in the Biotech space, VRTX is ranked 20th. Click here to learn more about the publicly traded companies in the Biotech sector.
VRTX is held in high regard by the top analysts. These investing experts have set an average target price of $285.39 for the stock. If VRTX hits this target price, it will have popped by 35%. The highest target price for the stock is $358. A total of 26 analysts have issued VRTX recommendations. Exactly nine of these analysts view VRTX as a Strong Buy, 13 consider it a Buy and four consider it a Hold.
VRTX has a forward P/E ratio of 18.45, meaning the stock is fairly priced. However, this ratio has the potential to be significantly higher if VRTX moves toward its 52-week high of $306.08 in the months ahead.
VRTX revenue jumped 14% in the first quarter alone, rising to $1.723 billion. The company's earnings increased by 16% in the quarter to hit $781 million. However, the caveat is the bulk of the company’s revenue stems from medications that treat cystic fibrosis. If a competitor were to create a better medication or a similar medication with a lower price point, VRTX’s main revenue driver would be jeopardized.
Seattle Genetics (SGEN)
SGEN develops and commercializes therapies that treat the “Big C” of cancer. The company’s top product, Adcetris, has been approved for the treatment of Hodgkin lymphoma and systemic anaplastic large cell lymphoma. SGEN raked in $658.6 million in Adcetris sales this past year alone.
SGEN is a POWR Ratings mixed bag with a C overall rating indicating the stock is a Hold. However, SGEN has Bs in the Quality and Value components of the POWR Ratings. SGEN's Stability component has a C grade. The stock's Sentiment component grade is a D. Click here to find out how SGEN fares in the Momentum and Growth components of the POWR Ratings.
Of the nearly 500 publicly traded companies in the Biotech space, SGEN is ranked 70th. You can find out more about the stocks in this industry by clicking here.
The analysts have high hopes for SGEN, setting an average target price of $189.13 for the stock. If SGEN hits this price level, it will have increased by 23%. The highest analyst target price for the stock is $254 while the lowest target price is $148. Of the 19 analysts who have issued SGEN recommendations, five view it as a Strong Buy, six view it as a Buy, and eight views it as a Hold.
Vertex vs. Seattle Genetics: Which Biotech Stock is a Better Buy?
If your portfolio does not include biotech stocks, it is not a truly comprehensive and well-diversified collection of stocks. Though biotech stocks are inherently complicated due to their complex subject matter, they are worthy of consideration even if you do not have a full understanding of the science behind these businesses.
There is no need to pore over the subtle details of prospective biotech investments hour after hour. Even if you were to embark on such an endeavor, you probably would not develop a true understanding of the science these seemingly futuristic companies are using to improve the world around us. In short, there is an element of risk involved in biotech investing though the same can be said of stocks in other sectors.
Let’s shift our attention to two specific biotech stocks that every investor should consider adding to their portfolio: Vertex Pharmaceuticals (VRTX) and Seattle Genetics (SGEN).
Vertex Pharmaceuticals (VRTX)
VRTX has access to some of the country’s top minds as it is located in the academic hotbed of Boston, MA. VRTX specializes in creating and commercializing drugs that treat serious diseases. In particular, VRTX is primarily focused on treating cystic fibrosis.
VRTX has a B POWR Rating grade. The stock has an A Quality component grade along with a B Value component grade. Keep on digging and you will find VRTX has Cs in the Sentiment and Stability components. Investors who are curious as to how VRTX grades out in the Momentum and Growth components of the POWR Ratings can find out by clicking here.
Out of the 493 publicly traded companies in the Biotech space, VRTX is ranked 20th. Click here to learn more about the publicly traded companies in the Biotech sector.
VRTX is held in high regard by the top analysts. These investing experts have set an average target price of $285.39 for the stock. If VRTX hits this target price, it will have popped by 35%. The highest target price for the stock is $358. A total of 26 analysts have issued VRTX recommendations. Exactly nine of these analysts view VRTX as a Strong Buy, 13 consider it a Buy and four consider it a Hold.
VRTX has a forward P/E ratio of 18.45, meaning the stock is fairly priced. However, this ratio has the potential to be significantly higher if VRTX moves toward its 52-week high of $306.08 in the months ahead.
VRTX revenue jumped 14% in the first quarter alone, rising to $1.723 billion. The company's earnings increased by 16% in the quarter to hit $781 million. However, the caveat is the bulk of the company’s revenue stems from medications that treat cystic fibrosis. If a competitor were to create a better medication or a similar medication with a lower price point, VRTX’s main revenue driver would be jeopardized.
Seattle Genetics (SGEN)
SGEN develops and commercializes therapies that treat the “Big C” of cancer. The company’s top product, Adcetris, has been approved for the treatment of Hodgkin lymphoma and systemic anaplastic large cell lymphoma. SGEN raked in $658.6 million in Adcetris sales this past year alone.
SGEN is a POWR Ratings mixed bag with a C overall rating indicating the stock is a Hold. However, SGEN has Bs in the Quality and Value components of the POWR Ratings. SGEN's Stability component has a C grade. The stock's Sentiment component grade is a D. Click here to find out how SGEN fares in the Momentum and Growth components of the POWR Ratings.
Of the nearly 500 publicly traded companies in the Biotech space, SGEN is ranked 70th. You can find out more about the stocks in this industry by clicking here.
The analysts have high hopes for SGEN, setting an average target price of $189.13 for the stock. If SGEN hits this price level, it will have increased by 23%. The highest analyst target price for the stock is $254 while the lowest target price is $148. Of the 19 analysts who have issued SGEN recommendations, five view it as a Strong Buy, six view it as a Buy, and eight views it as a Hold.
The Better Buy
VRTX is the better buy as it is rated 50 slots higher than SGEN in the Biotech industry rankings. Tipping the scales even more in favor of VRTX is its superior POWR Rating grade of B. If you are looking for exposure to the biotech space, VRTX is clearly a solid play.
VRTX is the better buy as it is rated 50 slots higher than SGEN in the Biotech industry rankings. Tipping the scales even more in favor of VRTX is its superior POWR Rating grade of B. If you are looking for exposure to the biotech space, VRTX is clearly a solid play.
SGEN shares were trading at $154.75 per share on Friday morning, up to $3.65 (+2.42%). Year-to-date, SGEN has declined -11.64%, versus a 12.77% rise in the benchmark S&P 500 index during the same period.
About the Author: Patrick Ryan
Patrick Ryan has more than a dozen years of investing experience with a focus on information technology, consumer and entertainment sectors. In addition to working for StockNews, Patrick has also written for Wealth Authority and Fallon Wealth Management.
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