Profitable pills: where to find the best biotech stocks

Marek Poszepczynski of the International Biotechnology Trust highlights three top biotech stocks to buy now.

A professional investor tells us where he'd put his money. This week: Marek Poszepczynski of the International Biotechnology Trust highlights three top biotech stocks.

Biotechnology is rightly classified as a growth sector, but not all companies have the same earnings potential. The drugs addressing the highest unmet medical needs tend to produce significant profits and consistent cash flows. Products that either cure a previously untreatable disease or improve patients' quality of life will sell well and are more likely to benefit from reimbursements by governments and health insurers.

Ideally, the product should be able to maintain a dominant position in its therapeutic area for a long period of time. A company is better able to protect its drug pricing and profitability if it faces fewer competitors. We have selected three stocks to fit these criteria, each with a different risk profile to cater for a variety of risk appetites.

Help for HIV and hepatitis patients

Gilead (Nasdaq: GILD)

But while the overall outlook for Gilead is robust, investors should be aware that the growth potential for this company is slowing as it is hard for such a large firm to expand rapidly. Investors with a higher risk appetite could look to smaller, faster-growing firms such as Vertex or Insmed.

The gold-standard cystic fibrosis drug

Vertex (Nasdaq: VRTX)

As this disease only affects a relatively small number of patients, the company has received orphan-drug status (this is granted to treatments for rare diseases). This allows Vertex to charge a high price for its product and the portfolio is also shielded from competition by Vertex's intellectual-property rights.

A crucial antibiotic

Insmed

(Nasdaq: INSM)

Investing in the antibiotic space has been tough in recent years despite the clear and growing unmet need. However, Insmed has succeeded in developing and launching Arikayce. Initial sales look robust.

Recommended

Carbon emissions trading: how to profit from the price of pollution
Funds

Carbon emissions trading: how to profit from the price of pollution

Carbon-emission allowances are still an esoteric market, but one that looks set to grow. This new fund could help you cash in.
21 Sep 2021
Three strong Asian stocks trading at bargain prices
Share tips

Three strong Asian stocks trading at bargain prices

Professional investor Nitin Bajaj of the Fidelity Asian Values investment trust picks three stocks that dominate their industries, earn good returns o…
20 Sep 2021
Share tips of the week – 17 September
Share tips

Share tips of the week – 17 September

MoneyWeek’s comprehensive guide to the best of this week’s share tips from the rest of the UK's financial pages.
17 Sep 2021
Royal Mail will deliver for investors – here's how to play it
Trading

Royal Mail will deliver for investors – here's how to play it

Royal Mail Group has found its feet in the past 18 months and looks cheap. Matthew Partridge looks at how to trade the shares.
14 Sep 2021

Most Popular

The times may be changing, but don’t change how you invest
Small cap stocks

The times may be changing, but don’t change how you invest

We are living in strange times. But the basics of investing remain the same: buy fairly-priced stocks that can provide an income. And there are few be…
13 Sep 2021
Two shipping funds to buy for steady income
Investment trusts

Two shipping funds to buy for steady income

Returns from owning ships are volatile, but these two investment trusts are trying to make the sector less risky.
7 Sep 2021
Should investors be worried about stagflation?
US Economy

Should investors be worried about stagflation?

The latest US employment data has raised the ugly spectre of “stagflation” – weak growth and high inflation. John Stepek looks at what’s going on and …
6 Sep 2021