It’s been a difficult time for biotechnology stocks. After a boom during the Covid-19 pandemic, the entire sector appears to have been abandoned by investors. The Standards and Practices (S&P) 500 Biotechnology Select Industry Index has declined 11% throughout the past 12 months and is down 18% throughout the last five years. Companies large and small have seen their stock prices slump as investor confidence in the industry wanes. Of course, hurdles surrounding prescription drug makers and medical treatments are legendary. Having said that, there are still some undervalued biotech stocks that you should consider.
Huge capital outlays, years of research, regulatory hurdles, rampant competition and the ever-present threat of losing patent exclusivity loom over the entire industry. This is leading many investors to steer clear of it altogether. However, there are some hidden gems to be found among biotech stocks. The downturn has left many companies with extremely attractive valuations. Here are the three most undervalued biotech stocks to buy in September 2023.
Biopharmaceutical company Moderna (NASDAQ:MRNA) has suffered a big comedown throughout the last two years. The company’s share price is currently down 41% this year and 77% below its all-time high reached in September 2021. The company’s Covid-19 vaccine was one of the first approved by the U.S. Food and Drug Administration (FDA). It was a global hit and generated sales of $18.4 billion last year, but those sales are projected to fall to $5 billion this year. This is sending MRNA stock sharply lower as a result.
The other issue pulling MRNA stock lower is the fact that its pipeline has not produced any other commercially available medications. While the company has several new prescription drugs in development, its Covid-19 vaccine is currently the only product generating any revenue. However, there is some hope of an upsurge in Covid-19 vaccine sales this fall and winter. This is particularly true as people get boosted against the respiratory illness. Moderna currently has $14.6 billion of cash on its balance sheet, putting it in a strong position.
Shares of Amgen (NASDAQ:AMGN) have generated no gains this year. The company’s stock is up less than 1% since January. Over five years, the shares have risen a middling 30%. It is trading at 17 times future earnings and is offering shareholders a quarterly dividend of $2.13 per share, for a yield of 3.25%. AMGN stock looks undervalued at current levels. Amgen specializes in medications that treat autoimmune diseases such as rheumatoid arthritis and drugs that prevent infections. Amgen is one of the biggest independent biotech companies in the world.
The stock has been held back by its $27.8 billion acquisition of Horizon Therapeutics (NASDAQ:HZNP). This deal will give Amgen access to blockbuster medications such as thyroid eye disease treatment Tepezza and gout drug Krystexxa. However, this has drawn close scrutiny from regulators. Once the Horizon takeover is completed, it should provide Amgen with plenty of growth opportunities and light a fuse under the share price. Amgen also has a strong pipeline with more than 40 products in differing stages of clinical development. This is one of the most undervalued biotech stocks.
Shares of Pfizer (NYSE:PFE) looks dirt cheap right now. The biotech company’s stock is currently sitting at a 52-week low and down 34% year to date. Through five years, the share price has declined 17%. Right now, PFE stock is trading at a rock bottom nine times future earnings, and it provides a dividend of 41 cents a share, for a yield of nearly 5%. Among biotechnology companies, few if any look as undervalued as Pfizer, whose share price has crumbled following its second-quarter financial results being made public.
For Q2 of this year, Pfizer reported a 54% year-over-year decline in its revenue due mainly to dwindling sales of its Covid-19 vaccine. Sales of Pfizer’s Covid-19 shot fell 83% to $1.49 billion during Q2. The company said it is in a “transition period” as it navigates its post-pandemic sales boom, and said it is considering widespread cost cuts in the coming months. However, Pfizer too has other commercial products and a strong pipeline of new medications that it says should help it find new areas for growth.
On the date of publication, Joel Baglole 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.