Three biotech stocks to buy for healthy long-term returns

Professional investor Marek Poszepczynki of the International Biotechnology Trust picks three biotech stocks with strong balance sheets that look well placed to weather the crisis.

Healthcare is typically immune to a global economic downturn as demand for medications remains relatively consistent. The Covid-19 pandemic, moreover, could give the biotechnology sector a long-term fillip. Biotech will be central to developing both treatments and vaccines to control the disease. The stocks that help society navigate the challenge posed by the virus are likely to perform well; the same will apply to those that manage to maintain their existing drug sales. 

Some companies will, however, see their business models come under threat. In particular, contract-research organisations will struggle because many clinical trials will be paused or abandoned. Those with limited cash reserves will also be hit hard as it will be difficult to raise more money. 

Firms specialising in inessential drugs for the elderly will see their sales falter as treatment for conditions that are not urgent, such as glaucoma and osteoporosis, can be postponed and the elderly will avoid going out to the pharmacy or GP for treatments. Here are three stocks with strong balance sheets that look well placed to weather the crisis.

A defence against muscular dystrophy 

Rare-disease specialist PTC Therapeutics (Nasdaq: PTCT) treats Duchenne muscular dystrophy, which causes a progressive loss of skeletal and heart muscle. PTC has two drugs on the market: Translarna, which tackles the condition when it is caused by a specific genetic defect, and Emflaza, which can be used by all sufferers of the disease.

As Duchenne is a severe disease, patients cannot miss their treatments. This will help protect PTC sales during the Covid-19 outbreak. PTC has also developed an oral version of a spinal muscular atrophy drug known as Risdiplam. The current formulation is administered intravenously. An oral option will mean patients needn’t make regular visits to the hospital.

Danish oncology specialist Genmab (Copenhagen: GMAB) makes monoclonal antibodies (molecules that bolster or imitate the immune system’s attack on cancer cells) to target specific types of cancer. It has two drugs approved for use: Daratumumab and Ofatumumab. The first treats multiple myeloma (a cancer that forms in white blood cells) while the second treats relapsing multiple sclerosis. 

The company’s pipeline is also interesting. It is engaged in an antibody arms race, aiming to boost the ability of antibodies to kill cancer cells. It is developing several different types. For example, one will be able to carry cytotoxic agents to deliver chemotherapy directly to specific cancer cells. Another will be able to bind to a target before connecting it with a white blood cell to help kill the cancer cell. And a third will be more potent than naturally occurring antibodies to make it more effective.

Cornering the Parkinson’s market

Nuplazid, from Acadia Pharmaceuticals (Nasdaq: ACAD), is used to treat the hallucinations and delusions associated with Parkinson’s disease. This is the only drug available to treat this condition and there is no competition on the horizon.

The same drug recently completed late-stage clinical trials for the treatment of dementia-related psychosis. As there are many more people suffering from dementia than from Parkinson’s, should the drug receive approval it is likely to generate much higher sales in the future.

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