RPRX - Wall Street Favorites: 3 Biotech Stocks With Strong Buy Ratings for June 2024

2024-06-26 06:00:00 ET

InvestorPlace - Stock Market News, Stock Advice & Trading Tips

I’m on the hunt for ‘Strong Buy’ biotech stocks .

According to Finviz.com, there are 680 U.S.-listed biotech stocks. Of those, 73 have a market capitalization of $2 billion or greater, with 44 rated ‘Strong Buy.’

Which ones to buy? I’m admittedly not a biotech junkie, so I’m interested in businesses that are close to profitability. That’s tough for this particular industry where drug development is obscenely expensive.

However, of the 44, five have a positive P/E ratio. At least one or two of them should be considered. The third will be an ETF biotech with at least $400 million in net assets. VettaFi currently lists six that meet this requirement.

The largest biotech ETF is the iShares Biotechnology ETF (NASDAQ: IBB ). It is severely underperforming the markets in 2024, up 1.3%, considerably less than the S&P 500 , which has gained 15.2% year-to-date. It’s not the ETF I’ll choose.

Read on and I’ll highlight my two biotech stocks and one ETF to buy for June.

Corcept Therapeutics (CORT)

Corcept Therapeutics (NASDAQ: CORT ) has a market cap of $3.18 billion. Its shares are up 26.3% year-to-date and 41.4% over the past year. All five analysts that cover its stock rate it a Strong Buy with a $40.00 target price, 31% higher than its current share price.

Who is Corcept? Its investor relations page states :

“Corcept Therapeutics is a commercial-stage company engaged in the discovery and development of medications to treat severe endocrinologic, oncologic, metabolic and neurologic disorders by modulating the effects of the hormone cortisol,”

My mom had cortisol issues in her 80s. Cortisol is a hormone is made by your adrenal glands and helps people cope with stress, not to mention many other functions of your body, including breaking down carbohydrates, lipids, and proteins. In my mom’s case, it caused low blood pressure.

In Q1 2024, it generated $146.8 million in revenue, 39% higher than a year earlier. On the bottom line it generated net income of $0.25 a share, 79% higher than Q1 2023. Since 2012, it has generated most of its revenue from Korlym , which is used to treat Cushing’s syndrome (hypercortisolism) in the U.S.

As doctors become more familiar with hypercortisolism, Korlym will become even more prescribed than it already is. In the meantime, it has several Phase 3 and Phase 4 trials underway for Korlym’s use.

It expects 2024 revenue of $635 million at the midpoint of its guidance, up $20 million from its previous outlook.

Royalty Pharma (RPRX)

Royalty Pharma (NASDAQ: RPRX ) has a $16.23 billion market cap. Its shares are down 3.9% YTD and 9.6% over the past year.

I recommended Royalty Pharma along with two other stocks most investors have ever heard of. Its business is simple but difficult.

Simple in the sense that it’s easy to understand what it does: It provides drug developers with capital to commercialize new drugs in return for royalties, which are a percentage of future revenue on these drugs. Difficult because drug development isn’t an exact science. Biotech valuations are so high because of the risks and costs associated with getting products to market and ensuring their long-term success.

Royalty went public in 2020 at $28 a share. It currently trades 87 cents below its IPO price despite the fact its total revenue has grown by $540 million over the past four years from $1.81 billion in 2019, to $2.34 billion in 2023. Meanwhile, its operating income in 2023 was $1.49 billion, an operating margin of nearly 64%.

In a way, owning RPRX stock is like owning an ETF in the sense that it has royalty agreements in place for more than 35 approved products and 17 development-stage therapies, of which 15 have annual sales over $1 billion, providing portfolio-like diversification.

VanEck Biotech ETF (BBH)

VanEck Biotech ETF (NASDAQ: BBH ) has net assets of $450.0 million . Its shares are up 2.1% YTD and 10.8% over the past year.

BBH was launched in December 2020. It tracks the performance of the MVIS US Listed Biotech 25 Index , a collection of companies involved in the development and production of drugs based on genetic analysis and diagnostic equipment.

The index tends to favor larger biotech firms that are U.S.-listed companies in the biotech industry. To be eligible to be included in the index, a company must generate 50% of their revenue from biotech.

It takes the 50 largest biotech stocks by full market capitalization, and reduces that down to the top 25 by free-float market capitalization (i.e., counting only shares that are readily available for trading in the market) and three month average daily trading volume.

At the end of December, the stocks in the index ranged from $4.9 billion to $154.1 billion with a weighted average market cap of $69.1 billion. Large-cap stocks account for 54% of the portfolio, mid caps (42%), and small caps (4%). Its top 10 holdings represent 70% of net assets.

Since inception in December 2011, a $10,000 investment is worth just less than $50,000 today, a compound annual growth rate of 13.7%. It charges $35 per $10,000 invested.

On the date of publication, Will Ashworth did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines .

More From InvestorPlace

• The #1 AI Investment Might Be This Company You’ve Never Heard Of
• Musk’s “Project Omega” May Be Set to Mint New Millionaires. Here’s How to Get In.
• Legendary Investor Predicts: “Forget A.I. THIS Technology Is the Future”

The post Wall Street Favorites: 3 Biotech Stocks With Strong Buy Ratings for June 2024 appeared first on InvestorPlace .