Specialty drug companies offering a lot of upside are finding favour with growth investors, but how high can these stocks climb, and are they good value for money? Let’s take a look at three of the most exciting pharma stocks on the TSX and see how they’re performing.
A biopharmaceutical company with a bright future, Aurinia (TSX:AUP)(NASDAQ:AUPH) has long been talked up by pundits as a focal point for growth investors looking for niche medical exposure. Aurinia is in the business of trialing a novel drug called voclosporin, an immune system suppressant with a number of uses from dry eye to kidney inflammation. With its second-quarter report due out tomorrow, it’s worth reviewing the stock’s stats ahead of a potential investment.
A possibly gravity-defying share price marks Aurinia out as a clear target for serious growth investors. Its one-year returns of 21.5% compares favourably with the Canadian biotech industry average of 4.6%, while looking further back, five-year returns of 93.8% are suitably high, especially when one considers that the industry has returned only 14.3% for the same half-decade.
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With one-year returns of 127.3%, Viemed (TSX:VMD) is one of the top-performance pharma stocks to get invested in if a quick turnaround is your goal when it comes to capital gains. While it hasn’t got the stolid balance sheet or exciting future outlook of Aurinia, for a short-term play designed to bring in quick cash, Viemed should be on a momentum investor’s wish list.
A high-octane specialty pharma stock with some key quality indicators, Viemed is a developer of novel treatments for sufferers of breathing-related complaints, such as chronic respiratory conditions and sleep apnea and patients being treated for neuromuscular conditions. High returns in a niche market are the name of the game in biopharma investing, and Viemed ticks all the boxes.
Zymeworks (TSX:ZYME)(NYSE:ZYME) is a good play for value, with a price-to-book that undercuts the average for a biotech stock. A mixed Q2 just saw Zymeworks’s EPS miss by a hair’s breadth, though its revenue beat is certainly encouraging, especially if investors are holding for the long term. Perhaps even more encouraging, though, is Zymeworks’s deal-making strategy: The cancer treatment company has buddied up with eight major pharma businesses.
Promising lab data could see Zymework’s best hope, a drug called ZW25, add serious upside to the company’s share price in coming years. In the meantime, a collaboration with another business in the cancer treatment space, BeiGene, will help open territories in Oceania and Asia. A sturdy balance sheet and industry-normal value make the stock a low-stress play for upside in the biopharma space.
The bottom line
The three stocks listed here are diverse enough to be held concurrently in a single capital gains portfolio, though a low-risk investor may not want to put too many of their eggs in the same basket. For long-term upside, Aurinia could be the best bet here with its mix of upward momentum and reasonable value, though Viemed and Zymeworks also display steep upside potential.
This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.
Fool contributor Victoria Hetherington has no position in any of the stocks mentioned. The Motley Fool owns shares of Viemed Healthcare Inc. Viemed is a recommendation of Hidden Gems Canada.