In this article, we will be taking a look at 12 cheap biotech stocks to buy. To skip our detailed analysis of the biotech sector, you can go directly to see 5 Cheap Biotech Stocks To Buy.
The biotechnology sector has been on the rise over the past three decades. Several forecasts expect the sector to make significant headway through developing cures for various diseases.
Some of the more famous names in the biotech space include companies like Regeneron Pharmaceuticals, Inc. (NASDAQ:REGN), BioNTech SE (NASDAQ:BNTX), and AbbVie Inc. (NYSE:ABBV). These companies have steadily been making a name for themselves by producing medical cures and vaccines. Consequently, biotech stocks began soaring last year. According to a Wall Street Journal article published in August 2022, the SPDR S&P Biotech ETF, an equal-weighted fund of biotech stocks, was up by 41.4% in August from its low on May 11. Another fund, iShares Biotechnology ETF, also rose by 21.8% from its low on June 16. A comparison with the S&P 500's performance between June and August shows that the broader benchmark index was only up by 16.9% over the same period. This representation of the biotech sector's outperformance in the market resulted in renewed optimism among investors eyeing the sector, leading to stronger support for biotech stocks on Wall Street.
Let's now take a look at the 12 cheap biotech stocks to buy.
We scanned Insider Monkey's database of 920 elite hedge funds and picked the top 12 biotech stocks with P/E ratios less than 20. That means the stocks mentioned in the article are the most popular cheap biotech stocks among elite hedge funds. For reference, P/E ratio for the broader biotech industry is 113, according to NYU Stern's database.
The stocks are ranked based on their P/E ratios, from the highest to the lowest.
Note: All share prices mentioned in the article are as of January 22, 2023.
Number of Hedge Fund Holders: 39
P/E ratio as of January 22: 20.70
Incyte Corporation (NASDAQ:INCY) is a biopharmaceutical company. It is based in Wilmington, Delaware.
Incyte Corporation (NASDAQ:INCY) is considered to be undervalued at present, considering it showed a 20% year-over-year product revenue growth in the third quarter of 2022. Analysts believe the stock is trading at a discount, with its P/E ratio being just over 20 and with revenue growing by $38 million year-over-year by November 2022.
Incyte Corporation (NASDAQ:INCY) had 39 hedge funds long its stock in the third quarter of 2022, with a total stake value of $3.4 billion.
Number of Hedge Fund Holders: 27
P/E ratio as of January 22: 19.26
Harmony Biosciences Holdings, Inc. (NASDAQ:HRMY) is a commercial-stage biotech company. It is based in Plymouth Meeting, Pennsylvania.
David Amsellem at Piper Sandler holds an Overweight rating on Harmony Biosciences Holdings, Inc. (NASDAQ:HRMY) shares as on January 4. Piper Sandler set a price target of $70. This is an increase from their previous target of $62, meaning analysts currently see huge upside potential in the stock.
Harmony Biosciences Holdings, Inc. (NASDAQ:HRMY) was found among the 13F holdings of 27 hedge funds in the third quarter. Their total stake value was $338 million.
Number of Hedge Fund Holders: 80
P/E ratio as of January 22: 19.09
AbbVie Inc. (NYSE:ABBV) is a biotech company based in North Chicago, Illinois. The company's products include Humira, a therapy for autoimmune and intestinal Behçet's diseases.
A Buy rating was reiterated on AbbVie Inc. (NYSE:ABBV) shares on January 5 by Truist analyst Robyn Karnauskas.
In the broader healthcare sector, AbbVie Inc. (NYSE:ABBV) is trading at a discounted valuation compared to its competitors, such as Johnson & Johnson.
In total, 80 hedge funds were long AbbVie Inc. (NYSE:ABBV) in the third quarter, with a total stake value of $1.9 billion.
Number of Hedge Fund Holders: 47
P/E ratio as of January 22: 17.71
United Therapeutics Corporation (NASDAQ:UTHR) develops and commercializes products to treat chronic diseases in the US and worldwide. It is based in Silver Spring, Maryland.
On December 6, United Therapeutics Corporation (NASDAQ:UTHR) was initiated with a Buy rating at UBS by analyst Ashwani Verma.
United Therapeutics Corporation (NASDAQ:UTHR) is currently trading at an attractively low valuation with a P/E ratio of 17.71 and a PEG ratio of 1.11. The company's PEG ratio is based on the consensus expected earnings growth of 13% annually over the next three to five years.
Our hedge fund data shows 47 hedge funds long United Therapeutics Corporation (NASDAQ:UTHR) in the third quarter. Their total stake value was $2.5 billion.
Number of Hedge Fund Holders: 35
P/E ratio as of January 22: 17.43
Exelixis, Inc. (NASDAQ:EXEL) is a biotech company based in California, US. The company is focused on oncology and works to develop medicines for cancers.
An Outperform rating was reiterated on Exelixis, Inc. (NASDAQ:EXEL) shares on January 21 by analyst Andy Hsieh at William Blair.
The average analyst price target on Exelixis, Inc. (NASDAQ:EXEL) stands at $25, representing an upside potential of 50%. The company has a market capitalization of $5.3 billion, making it an attractive buy relative to its peers.
There were 35 funds long Exelixis, Inc. (NASDAQ:EXEL) in the third quarter, with a total stake value of $671 million.
Number of Hedge Fund Holders: 43
P/E ratio as of January 22: 15.09
Regeneron Pharmaceuticals, Inc. (NASDAQ:REGN) is a biotech company based in the US. The company invents and commercializes medicines to treat a range of diseases across the globe.
JPMorgan's Chris Schott upgraded Regeneron Pharmaceuticals, Inc. (NASDAQ:REGN) shares from Neutral to Overweight on January 21.
Between April and August of 2022, Regeneron Pharmaceuticals, Inc. (NASDAQ:REGN) saw a share price decline of 20%. The stock has since recovered to its current share price of $722, and analysts on Wall Street expect it to continue upwards as 2023 progresses. JPMorgan, for instance, currently holds a price target of $850 on the stock. Coupled with the company's P/E ratio of 15.09, this makes the stock seem to be trading at a discount to its true potential.
Citadel Investment Group was the largest stakeholder in Regeneron Pharmaceuticals, Inc. (NASDAQ:REGN) in the third quarter, holding 603,600 shares worth $415.8 million. In total, 43 hedge funds were long the stock, with a total stake value of $1.3 billion.
Bronte Capital, an investment management company, mentioned Regeneron Pharmaceuticals, Inc. (NASDAQ:REGN) in its third-quarter 2022 investor letter. Here's what the firm said:
“There have been some bright spots in our long book. Regeneron Pharmaceuticals, Inc. (NASDAQ:REGN), a major position and a stock we wrote up in our June 2021 letter, has been one of the best performing stocks in the S&P 500 this year. Alas it has not been enough to offset some of our weaker stocks, let alone our overweight exposure to the UK (and Europe) which have suffered from both stock and currency weakness. We do not think we are bad at picking stocks on the long side and hope – reasonably we think – for better relative results in the future. Prior to COVID, our longs were markedly better than the index. Unfortunately, if you look at our long book this quarter and since the onset of the COVID pandemic, there is scant evidence that we have added any value by picking stocks to go long.”
Regeneron Pharmaceuticals, Inc. (NASDAQ:REGN), like BioNTech SE (NASDAQ:BNTX), and AbbVie Inc. (NYSE:ABBV), is a highly popular biotech stock today, as evidenced by the number of hedge funds piling into it.
Number of Hedge Fund Holders: 70
P/E ratio as of January 22: 14.32
Biogen Inc. (NASDAQ:BIIB) develops and delivers therapies for neurological and neurodegenerative diseases. The company is based in Cambridge, Massachusetts.
Brian Abrahams at RBC Capital holds an Outperform rating on Biogen Inc. (NASDAQ:BIIB) shares as of January 10.
Compared to the company's current share price of $285.77, RBC Capital analysts hold a price target of $362 on the stock, representing how undervalued the market views Biogen Inc. (NASDAQ:BIIB) to be.
There were 70 hedge funds long Biogen Inc. (NASDAQ:BIIB) in the third quarter. Their total stake value was $3.7 billion.
ClearBridge Investments, an investment management company, mentioned Biogen Inc. (NASDAQ:BIIB) in its third-quarter 2022 investor letter. Here's what the firm said:
“Biogen Inc. (NASDAQ:BIIB) was the leading contributor among several biopharma names, boosted by positive, pivotal clinical data for its next-generation Alzheimer’s treatment Lecanemab. In a pivotal trial, the drug proved safe and efficacious in slowing progression of Alzheimer’s disease.”
Biogen Inc. (NASDAQ:BIIB), like Regeneron Pharmaceuticals, Inc. (NASDAQ:REGN), BioNTech SE (NASDAQ:BNTX), and AbbVie Inc. (NYSE:ABBV), is a biotech stock with immense growth potential.
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Disclosure: None. 12 Cheap Biotech Stocks To Buy is originally published on Insider Monkey.
