Galena Biopharma Inc (GALE), Gilead Sciences, Inc. (GILD): Two Biopharmaceutical Companies Worth Buying

The biotechnology industry had a good time last year and the market expects the trend to continue in 2013 as well. As the chart below shows, the AMEX biotechnology index has outperformed the S&P 500 index by a mile in the last one year. A major factor behind this stellar performance has been the large number of drug approvals by the FDA.

I believe that the sector will continue to outperform the market and investors should consider investing in a mix of small and large cap biotechnology companies. Galena Biopharma Inc (NASDAQ:GALE) and Gilead Sciences, Inc. (NASDAQ:GILD) have both outperformed the S&P 500 index in the last one year, and I believe these stocks have the potential to rise further.

GILD data by YCharts

A small cap to watch

Galena Biopharma Inc (NASDAQ:GALE) is a biopharmaceutical company involved in the development of oncology treatments. The company’s leading candidate is NeuVax, which is currently in Phase III trials for treating the recurrence of breast cancer. Right now, there’s a high demand for small biotechnology companies with promising drug candidates. This is because a number of major patents are expiring, such as Lipitor and Seroquel IR, which means that manufacturers of these drugs are being forced to invest in new drugs to fill this major void.

Galena Biopharma Inc (NASDAQ:GALE) has a very strong recommendation from sell side analysts which have a unanimous buy rating on the stock. The mean sell side target price on the stock is $4.8, which is 50% above the current stock price. There are number of potential buyers of Galena, which include some leading players like AstraZeneca plc (NYSE:AZN) and Pfizer Inc. (NYSE:PFE).

AstraZeneca recently decided to focus on three key areas, including Oncology. Galena Biopharma Inc (NASDAQ:GALE) would be a perfect fit for a company suffering from a weak pipeline and falling revenue such as AstraZeneca. The company currently has more than $8.5 billion in cash and can easily afford Galena worth around $200 million. AstraZeneca has already announced that it plans to make focused acquisitions and Galena will make a lot of sense for the struggling giant.