The recent correction in the stock market has created new buying opportunities for investors. With all the concerns about the global economy, it makes sense to consider investing in companies that are not deeply impacted by recessions. Biotech and healthcare companies are generally insulated from the economy much better than most. The lower stock prices brought about by the correction and the recession-resistant nature of these companies, could allow biotech and healthcare investments to outperform. To be sure, investing in this sector has major risks, but the rewards can be equally large. The names below might be particularly compelling because all are pursuing treatments for hepatitis, which is has blockbuster potential. Some investors might remember that earlier this year, Bristol-Myers (BMY) acquired Inhibitex, Inc. (INHX), a biotech focused on hepatitis treatments, for $26 per share. Many healthcare and major biotech companies are actively pursuing merger and acquisition deals, and more buyouts could occur in this sector. Some corporate balance sheets are loaded with cash, financing costs are low and major pharmaceutical companies need to find growth through acquisitions. Here are some stocks to consider now:
Achillion Pharmaceuticals, Inc. (ACHN) is a biopharmaceutical company focusing on developing treatments for hepatitis C infections. It also has antiviral and antibacterial candidates in the pipeline. ACH-1625 is the most advanced candidate, and it is currently in phase 2 clinical trials. It is a promising hepatitis C inhibitor with the potential for once-daily dosing. Investor interest in hepatitis is strong because it has block-buster market potential and companies (like Inhibitex) pursuing this segment have been the subject of takeovers. This company could be particularly attractive to a suitor because it is so highly focused on hepatitis. Achillion has a strong balance sheet with about $65 million in cash and less than $1 million in debt. At least one insider is taking advantage of the currently low stock price: On June 11, 2012, Dennis Liotta, a director, bought 10,000 shares in a transaction valued at about $61,600. On June 10, he also bought 10,000 shares for a two day total of 20,000 shares.
Here are some key points for ACHN:
- Current share price: $6.38
- The 52 week range is $3.81 to $12.95
- Earnings estimates for 2012: a loss of 64 cents per share
- Earnings estimates for 2013: a loss of 69 cents per share
- Annual dividend: none
Opko Health Inc., (OPK) shares have been in a trading range of around $4.50 to $5 for the past couple of months. With the shares now at the low end of that range, it could be an ideal time to buy. This company is developing specialized drugs and vaccines. It recently announced acquiring a 45% stake in a private Israeli company that is developing a hepatitis B vaccine which has shown promise in clinical studies. The CEO of Opko, Phillip Frost, is a billionaire who has been very successful in past biotech and healthcare-related endeavors. He has also been involved in merger and acquisition deals and he serves as chairman of the board at Teva Pharmaceutical Industries (TEVA). That is another reason why it is particularly interesting to follow and perhaps invest in Opko. On June 14, 2012, Phillip Frost, bought 200,000 shares in a transaction valued at about $922,000. On June 13, he also bought 85,000 shares for a two day total of 285,000 shares. The CEO has been steadily buying over the past few months.
Here are some key points for OPK:
- Current share price: $4.59
- The 52 week range is $3.30 to $5.85
- Earnings estimates for 2012: a loss of 12 cents per share
- Earnings estimates for 2013: a loss of 13 cents per share
- Annual dividend: none
Bristol-Myers Squibb shares have been a great investment for the past several months. Thanks to a stable revenue source and a generous dividend yielding about 4%, this company makes sense for income investors. This company acquired Inhibitex for about $2.5 billion or $26 per share earlier this year. Inhibitex was acquired due to a candidate it developed to treat hepatitis, and the stock went from about $3, to $26 in just months. Bristol-Myers also owns blockbuster drugs such as Plavix and Abilify. The deal for Inhibitex could add growth potential in the future, and more deals are possible thanks to the strong balance sheet.
Here are some key points for BMY:
- Current share price: $34.13
- The 52 week range is $25.69 to $35.44
- Earnings estimates for 2012: $1.96 per share
- Earnings estimates for 2013: $1.92 per share
- Annual dividend: $1.36 per share which yields 4%
Disclaimer: Data is sourced from Yahoo Finance. No guarantees or representations are made. Hawkinvest is not a registered investment advisor and does not provide specific investment advice. The information is for informational purposes only. You should always consult a financial advisor.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.