In this article, we discuss the 10 biotech stocks that investors are watching. If you want to read about some more biotech stocks, go directly to Investors are Watching These 5 Biotech Stocks.
The stock market plunge in the past few weeks because of soaring inflation and a hawkish central bank has also resulted in a drawdown of investments in the biotech sector. However, since interest rates remained low for a good number of years before the present crisis, venture funds and large firms still boast some strong cash reserves. In mid-June, Third Rock Ventures, a top healthcare venture capital firm, announced a new fund worth $1.1 billion. The fund will invest in new life science companies, giving a new lease of life to emerging biotech startups.
Biotech startups have been battered this year as research and development funding dries up. According to a report from trade group Biotechnology Industry Organization, funding for research and development in the biotech sector is down 47% so far this year compared to figures for 2021. The volume of IPOS during this time has also plunged 83%. Overall, there are increasing job cuts as well as investors shift away from growth stocks. BIO claims that 54 biotech firms announced job cuts in the first half of the year, compared to 13 in all of 2021.
However, there is a growing sense of positivity around the sector as well in hopes that biotech giants like Pfizer Inc. (NYSE:PFE), Eli Lilly and Company (NYSE:LLY), and AbbVie Inc. (NYSE:ABBV) will embark on a buying spree to take advantage of the correction in valuations in the industry. Venture capital firms are also more active in the sector as mergers and acquisition activity picks up as well. The second half of the year promises to be more fruitful for the industry than the first half.
Our Methodology
The companies that operate in the biotech sector and have growth catalysts for the coming months were selected for the list. An extensive database of around 900 elite hedge funds tracked by Insider Monkey in the first quarter of 2022 was used to identify the popularity of each stock among hedge funds.
Investors are Watching These Biotech Stocks
10. Sanofi (NASDAQ:SNY)
Number of Hedge Fund Holders: 19
Sanofi (NASDAQ:SNY) is a healthcare company that develops and markets therapeutics solutions. On June 24, the company announced that a COVID-19 vaccine it had developed in partnership with drug giant GSK had shown efficacy against the Omicron variant of the virus in a late stage study. A top GSK official has said that the companies are looking forward to discussions with regulatory authorities and aims to make the vaccine candidate available later this year. Sanofi will be the marketing authorization holder under the partnership.
On May 23, SVB Leerink analyst David Risinger initiated coverage of Sanofi (NASDAQ:SNY) stock with an Outperform rating and a price target of $64, noting that the stock offered the investors a chance for growth at a reasonable price.
At the end of the first quarter of 2022, 19 hedge funds in the database of Insider Monkey held stakes worth $1.5 billion in Sanofi (NASDAQ:SNY), the same as in the preceding quarter worth $1.4 billion.
Just like Pfizer Inc. (NYSE:PFE), Eli Lilly and Company (NYSE:LLY), and AbbVie Inc. (NYSE:ABBV), Sanofi (NASDAQ:SNY) is one of the stocks on the radar of hedge funds.
In its Q3 2021 investor letter, Dodge & Cox Stock Fund, an asset management firm, highlighted a few stocks and Sanofi (NASDAQ:SNY) was one of them. Here is what the fund said:
“Sanofi (NASDAQ:SNY) (3.5% position) is a diversified, global pharmaceuticals company with leading positions in vaccines, consumer health products, rare diseases, and emerging markets. Despite a favorable business mix, Sanofi (NASDAQ:SNY) has underperformed its peers in new product development, commercial execution, and profit growth. A new management team, recruited in 2018-19, has made progress turning the company around. Its drug pipeline is improving, targets for higher margins are being met, and earnings per share are growing. Sanofi also pays a 4% dividend yield, maintains a strong balance sheet, and has relatively low exposure to potential pressures from U.S. drug pricing.”
9. Novartis AG (NYSE:NVS)
Number of Hedge Fund Holders: 21
Novartis AG (NYSE:NVS) makes and sells healthcare products across the world. On June 24, the firm announced that the European Medicines Agency had recommended the approval of Scemblix, a drug made by the firm for the treatment of myeloid leukemia, for adult patients. After the formal approval, the drug will be available as 20 mg and 40 mg film-coated tablets. In general, after drugs are recommended for approval by the European Medicines Agency, the European Commission gives a final nod to the drug as well.
On December 2, Novartis AG (NYSE:NVS) has also recently revealed that it will be spending around $250 million in the next five years to advance research and development of new treatments to fight against neglected tropical diseases and malaria.
At the end of the first quarter of 2022, 21 hedge funds in the database of Insider Monkey held stakes worth $1.84 billion in Novartis AG (NYSE:NVS), compared to 25 in the preceding quarter worth $1.88 billion.
8. Novo Nordisk A/S (NYSE:NVO)
Number of Hedge Fund Holders: 31
Novo Nordisk A/S (NYSE:NVO) is a Denmark-based healthcare firm. The company has recently teamed up with French tech firm Echosens to advance early diagnosis of non-alcoholic steatohepatitis and increase awareness of the disease. The former is a condition in which there is inflammation and liver damage and build up of fat in the liver in people who drink little or no alcohol. The two companies will support additional clinical validation and use of non-invasive diagnostic tests as part of the collaboration.
On May 31, Guggenheim analyst Seamus Fernandez upgraded Novo Nordisk A/S (NYSE:NVO) stock to Buy from Neutral with a price target of DKK 896, lauding the market potential of the pipeline drugs of the company.
At the end of the first quarter of 2022, 31 hedge funds in the database of Insider Monkey held stakes worth $4.49 billion in Novo Nordisk A/S (NYSE:NVO), up from 28 in the previous quarter worth $4.43 billion.
In its Q1 2022 investor letter, Baron Funds highlighted a few stocks and Novo Nordisk A/S (NYSE:NVO) was one of them. Here is what the fund said:
“We initiated a position in Novo Nordisk A/S (NYSE:NVO), a leading global biopharmaceutical company headquartered in Denmark that specializes in treatments for diabetes, obesity, and other chronic diseases. Novo Nordisk and Eli Lilly, another holding in the Fund, are leaders in the GLP-1 (glucagon-like peptide 1 agonists) class of diabetes treatments, a $15 billion market that is growing rapidly but still has just 3% penetration of diabetes prescriptions globally. Diabetes drugs in the GLP-1 class include Trulicity (Eli Lilly), Ozempic (Novo Nordisk), and Rybelsus (Novo Nordisk). These drugs stimulate insulin secretion and inhibit glucagon secretion, which helps lower blood sugar levels. GLP-1s also slow stomach emptying and increase how full you feel after eating, which reduces appetite and can lead to weight loss. We believe Novo Nordisk’s diabetes franchise will continue to generate solid growth driven by Ozempic and Rybelsus. We are particularly excited about the growth prospects for Novo Nordisk’s anti-obesity franchise, which is just getting started with the launch of Wegovy. In a 68-week clinical study of adults living with obesity or excess weight with a medical problem, adults taking Wegovy lost on average 35 pounds or roughly 15% body weight. There are over 650 million people living with obesity globally and only 2% are treated with an anti-obesity medication. Even with more conservative assumptions about the addressable patient population, we think Novo Nordisk’s obesity franchise can exceed $10 billion in sales over time. Novo Nordisk launched Wegovy in June 2021 but faced supply constraints due to overwhelming demand and manufacturing constraints at a contract manufacturer. Management has indicated supply issues will ease in the second half of 2022. Novo Nordisk’s pipeline includes new diabetes and anti-obesity medications that improve upon its existing portfolio. We think Novo Nordisk A/S (NYSE:NVO) can generate double-digit revenue and earnings growth for many years.”
7. Bio-Rad Laboratories, Inc. (NYSE:BIO)
Number of Hedge Fund Holders: 45
Bio-Rad Laboratories, Inc. (NYSE: BIO) markets life science research and clinical diagnostic products. On April 28, the company posted earnings for the first quarter of 2022, reporting earnings per share of $4.94, beating market estimates by $1.83. The revenue over the period was $700 million, down over 3.5% compared to the revenue over the same period last year but beating analyst expectations by $22 million. The COVID-related revenue during the first three months of 2022 was $45 million.
On May 2, Citi analyst Patrick Donnelly maintained a Buy rating on Bio-Rad Laboratories, Inc. (NYSE: BIO) stock and lowered the price target to $750 from $800, noting that healthy growth in the life sciences sector was helping the firm beat market estimates on earnings.
At the end of the first quarter of 2022, 45 hedge funds in the database of Insider Monkey held stakes worth $1.5 billion in Bio-Rad Laboratories, Inc. (NYSE: BIO), compared to 38 in the previous quarter worth $1.3 billion.
6. AstraZeneca PLC (NASDAQ:AZN)
Number of Hedge Fund Holders: 45
AstraZeneca PLC (NASDAQ:AZN) makes and sells prescription medicines. On June 24, the firm revealed that the European Medicines Agency had recommended the expanded approval of Lynparza, a drug made by the company for the treatment of adult patients with high risk early breast cancer, and those who have been previously treated with neoadjuvant or adjuvant chemotherapy. In the first quarter of 2021, the drug generated more than $790 million in revenue for AstraZeneca PLC.
On May 24, Danske Bank analyst Caroline Baner initiated coverage of AstraZeneca PLC (NASDAQ:AZN) stock with a Buy rating and a price target of GBP 13,100, noting that the firm had durable growth drivers and visibility through 2030.
At the end of the first quarter of 2022, 45 hedge funds in the database of Insider Monkey held stakes worth $4.5 billion in AstraZeneca PLC (NASDAQ:AZN), up from 42 in the previous quarter worth $3.8 billion.
In addition to Pfizer Inc. (NYSE:PFE), Eli Lilly and Company (NYSE:LLY), and AbbVie Inc. (NYSE:ABBV), AstraZeneca PLC (NASDAQ:AZN) is one of the stocks that elite investors are keeping their eye on.
In its Q1 2022 investor letter, Baron Funds highlighted a few stocks and AstraZeneca PLC (NASDAQ:AZN) was one of them. Here is what the fund said:
“AstraZeneca PLC (NASDAQ:AZN) is a pharmaceutical company developing products across a range of indications including oncology, cardiovascular, and respiratory. AstraZeneca PLC (NASDAQ:AZN) is widely recognized as having the best top-line and bottom- line growth profiles in the pharmaceutical space without a discernable patent cliff this decade. Given consistent new product outperformance (Calquence and Enhertu are recent examples), we expect continued share appreciation as AstraZeneca’s financials compound.”
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Disclosure. None. Investors are Watching These 10 Biotech Stocks is originally published on Insider Monkey.
