Biotechnology is one of the most volatile sectors in the market, which is why it’s been so interesting to see certain stocks in that area showing lots of relative strength during a volatile first few months of the year. Investors should note that it is essential to choose carefully when adding exposure in this market area, as many of these companies are one FDA approval away from success and failure.
A great way to potentially take advantage of the upside that biotech stocks offer is by narrowing your focus to companies that offer both a strong pipeline of promising new drugs and an existing line of successful drugs that help keep the business financially stable.
A few names that fit that description have been some of the biggest outperformers in the market to start the year, which tells us a lot about what institutions and large investors are interested in buying during an uncertain period for both the economy and the market.
There’s certainly a good chance that these current winners will continue trending higher, mainly thanks to their lower exposure to geopolitical risks and sky-high upside should they receive approval for a new blockbuster drug. That’s why we’ve put together a brief overview of 2 biotech stocks showing serious relative strength to help you isolate some of the most intriguing names in the sector to target now. Let’s take a deeper look below.
1. AbbVie
First up is AbbVie (NYSE:ABBV), a very appealing biotech stock that has rallied over 20% year-to-date and continues to trend nicely. This is an appealing research-based biopharmaceutical company for several reasons, including a very consistent history of dividend increases. AbbVie is a dividend king, which means it has boosted its payout for 50 consecutive years. The stock offers a 3.48% dividend yield, and investors can likely count on the company to generate enough cash flows to support the dividend for years to come. That type of consistency and reliability is not easy to find these days, which is likely one reason why shares have been rallying.
It’s worth noting that AbbVie’s key drug Humira, which is used to treat rheumatoid arthritis and is the company’s largest product by revenue, will face a lot of biosimilar competition in 2023. With that said, AbbVie has been focused on developing new drugs that can drive growth and diversify its product base for the long term. Oncology drugs like Venclexta and Imbruvica are good examples of immunology drugs like Skyrizi and Rinvoq. The company also acquired Botox-manufacturer Allergan (NYSE:AGN) back in 2020, which should lead to strong organizational synergies and a more diverse revenue base for AbbVie over the long term, making this a very appealing option in the biopharma space.
2. Vertex Pharmaceuticals
Cystic fibrosis is one of the most common and most serious genetic diseases in America, which is a great reason why Vertex Pharmaceuticals (NASDAQ:VRTX) is an easy company to get behind. It’s a biotechnology company focused specifically on developing and commercializing therapies for the treatment of cystic fibrosis. Shares of this biotech stock have recently broken out to new all-time highs and are currently up over 22% year-to-date, which is strong outperformance compared to the S&P 500 thus far in 2022. Vertex is appealing given the company’s dominant position in CF drugs. It has limited competition in that space and is eligible to treat roughly 90% of the CF population with its drugs Kalydeco, Orkambi, Symdeko, and Trikafta.
It’s also worth noting that Vertex has primarily discovered many of its new drug candidates in-house, which points toward the potential for future successful drugs in the company’s pipeline. Vertex’s revenue grew by 22% year-over-year in 2021, and with exciting new gene-editing candidates in phase 3 trials, the company could be on the verge of even more growth ahead. The bottom line is that Vertex Pharmaceuticals has been one of the strongest stocks in the market over the last few weeks, and with good reason. Investors looking for exposure to this intriguing company might consider adding shares on pullbacks in the coming sessions.