Healthcare stocks aren’t attractive to investors in 2022. The selloff is more severe than information technology, given the sector’s year-to-date loss of nearly 51%. Moreover, underperforming cannabis stocks like Canopy Growth, Tilray, and Cronos Group are among the constituents.
However, three biotech stocks are buying opportunities in this down market. BELLUS Health (TSX:BLU) outperforms with its 31.66% year-to-date gain, while Knight Therapeutics (TSX:GUD) isn’t tanking so far this year. HLS Therapeutics (TSX:HLS) deserves special mention, because it pays a decent dividend.
Promising drug candidate
BELLUS Health remains on investors’ radars because of its lead drug candidate. This $1.68 billion clinical-stage biopharmaceutical company is developing BLU-5937, a medicine to treat refractory chronic cough (RCC) and other hypersensitivity indications. At $13.39 per share, the trailing one-year price return is 75.95%.
Management has high hopes for obtaining approval for BLU-5937. Roberto Bellini, president and chief executive officer (CEO) of BELLUS Health, confirmed the initiation of the CALM Phase 3 program. It should be the final clinical step to potentially bringing BLU-5937 or the P2X3 antagonist product candidate into the market.
Bellini said, “With no approved treatments in the United States, RCC remains a high unmet need … We are encouraged by BLU-5937’s potential to be an innovative and best-in-class product in the treatment landscape if approved.” The biotech firm will advance the CALM programs and hopes to share the top-line data for CALM-1 in the second half of 2024 and CALM-2 in 2025.
Buy rating
Knight Therapeutics is a specialty pharmaceutical company with a market cap of $600.55 million. Its focuses on acquiring or in-licensing and commercializing pharmaceutical products for Canada and Latin America. The Therapeutic Areas where it derives revenue are Oncology/Hematology, Infectious Diseases, and Other Specialty.
In the third quarter (Q3) of 2022, revenue declined 1% to $72.28 million versus Q3 2021, although net income reached $1.59 million compared to the $8.58 million net loss from a year ago. The $211.9 million revenue after three quarters in 2022 represents a 14% year-over-year growth.
Its president and CEO Samira Sakhia said, “During the past months, we have assumed the commercial activities of Exelon in Brazil, Colombia, Argentina, Mexico, Chile, Peru and Canada.” Exelon is a prescription product for the symptomatic treatment of mild to moderately severe dementia in people with Alzheimer’s and Parkinson’s disease.
Market analysts covering Knight recommend a buy rating. Their 12-month average price target is $7.09, or a 34.5% climb from its current price of $5.27 (-0.57% year to date).
Dividend-paying biotech
HLS Therapeutics focuses on acquiring and commercializing late-stage development and commercial-stage pharmaceutical products in North America. This $345.2 million pharmaceutical company concentrates primarily on the central nervous system and cardiovascular markets.
Despite the US$4.4 million net loss in Q3 2022, HLS CEO Gilbert Godin said the operating metrics remain strong. He cited the ramped activity of Vascepa, a prescription medicine used to reduce the risk of heart attack, stroke, and certain types of heart issues. The stock trades at a bargain ($10.66 per share and -27.78% year to date) but pays a 1.96% dividend.
High risk but high reward
Biotech stocks are high-risk, high-reward investments because they live or die on the effectiveness and safety of their lead drug candidates. However, BELLUS Health is the most exciting pick, as the clinical trials of BLU-597 are progressing very well.
