Biotech companies, including Catalyst Pharmaceuticals Inc., Mersana Therapeutics Inc., and Harmony Biosciences Holdings Inc., are leading peers in revenue growth within an industry that has sustained overall performance following slowing vaccine demand.1
The S&P Biotechnology Select Industry Index has fallen about 4% in the past 12 months, compared with a 7% drop in the Russell 1000 Index.2
We look at the top three biotech stocks in three categories: the best value, the fastest growth, and the best performance. The data are as of April 14.
Best Value Biotech Stocks
These are the biotech stocks with the lowest 12-month trailing price-to-earnings (P/E) ratio. Because profits can be returned to shareholders in the form of dividends and buybacks, a low P/E ratio shows that you’re paying less for each dollar of profit generated.
- Theravance Biopharma Inc.: Theravance Biopharma is a biopharmaceutical company in the Cayman Islands that develops and manufactures respiratory medicines such as Yupelri and Trelergy to treat COPD.
- Intercept Pharmaceuticals Inc.: Intercept is a biopharmaceutical company that manufactures drugs to treat non-viral liver disease.
- BioNTech SE: BioNTech is a German-based immunotherapy company focused on developing therapies for cancer and other serious diseases. In collaboration with Pfizer Inc., the company developed a vaccine against COVID-19. In March, the company announced a new American Depositary Shares (ADS) repurchase program for up to $500 million during the rest of 2023.3
Fastest Growing Biotech Stocks
These are the top biotech stocks as ranked by a growth model that scores companies based on a 50/50 weighting of their most recent quarterly year-over-year (YOY) percentage revenue growth and most recent quarterly YOY earnings-per-share (EPS) growth.
Both sales and earnings are critical factors in the success of a company. Therefore, ranking companies by only one growth metric makes a ranking susceptible to the accounting anomalies of that quarter (such as changes in tax law or restructuring costs) that may make one figure or the other unrepresentative of the business in general.
Due to the nature of biotech business models, especially early on, earnings and revenue can undergo large growth spurts when a deal is made or a drug is approved, so we are not excluding outliers with growth of over 2,500% as we typically do.
- Catalyst Pharmaceuticals Inc.: Catalyst is a biopharmaceutical company that develops and manufactures therapies to treat rare neurologic disorders.
- Mersana Therapeutics Inc.: Mersana Therapeutics is a clinical-stage pharmaceutical company that develops antibody-drug conjugates (ADC) for cancer treatments. The company’s revenue increased to $14.7 million in the fourth quarter of 2022 from $11,000 the year before. Management attributed the jump in revenue to collaboration agreements with GSK and Janssen Biotech.4 Note Mersana doesn’t have an EPS growth figure in the table above because the company reported negative EPS in the most recent quarter.
- Harmony Biosciences Holdings Inc.: Harmony Biosciences develops therapies to treat rare neurological disorders. Its flagship medication is WAKIX, which helps treat narcolepsy disorder. President and CEO, John Jacobs, stepped down from his role at the beginning of the year. Jeffery Dayno, MD, the company’s Executive Vice President and Chief Medical Officer was appointed interim CEO by the board.5 On Feb. 21, the company reported fourth-quarter earnings, with net income more than doubling compared to Q4 2021 due to growing demand for its drug WAKIX.6
