The 4 Largest Biotech Stocks Are Cheaper Than S&P 500

Health and Healthcare

Published: February 1, 2016 9:50 am

Last Updated: January 13, 2020 1:50 pm

When some investors think about biotech, the first thoughts are of incredibly volatile companies, with clinical data and binary outcomes that can make the stocks swing up and down wildly. However, the biggest companies in the industry are not only relatively inexpensive, they are also hardly the volatility demons some investors shy away from.

A recent Jefferies research note makes the case that the multiple for the four largest biotechs has dipped below that of the S&P for the first time since early in 2011, despite displaying higher rates of growth: 11.6% versus 10.6%. Now this hardly makes the companies appropriate for conservative stock accounts, but it shows what a great value these stocks are after the sector overall has been hammered, down a stunning 33% since last summer.

Here are the four largest biotech stocks.

Amgen

Amgen posted outstanding fourth-quarter earnings and it remains a top stock for investors to buy. Amgen Inc. (NASDAQ: AMGN) focuses on areas of high unmet medical need and leverages its biologics manufacturing expertise to strive for solutions that improve health outcomes and dramatically improve people’s lives. A biotechnology pioneer since 1980, Amgen has grown to be one of the world’s leading independent biotechnology companies, reaching millions of patients around the world and developing a pipeline of medicines with breakaway potential.

Total product revenues increased 3% from the year-ago quarter to $5,329 million, with products like Enbrel, Kyprolis, Sensipar, Prolia and Xgeva driving growth. Revenues of Amgen’s erythropoiesis-stimulating agent (ESA) Aranesp grew 4% from the year-ago quarter to $499 million, reflecting higher unit demand in the United States, given the shift in dialysis customer purchases from Epogen. This was partially offset by price and some unfavorable currency movement. But as usual, outstanding overall numbers.

Amgen’s double-digit earnings and revenue growth rate is expected to continue for the foreseeable future because of the company’s very deep clinical pipeline, which includes potential blockbusters Repatha for high cholesterol and Kyprolis for relapsed multiple myeloma. Amgen also has one of the industry’s deepest biosimilar pipelines, which is expected to generate upward of $3 billion in annual sales in the years ahead.

Amgen shareholders receive a 2.62% dividend. Thomson/First Call consensus price target for the stock is $185. Shares closed Friday at $152.73.