The biotech industry can be a tricky one for investors. Stocks tend to soar and crash wildly based on largely unpredictable results coming out of clinical trials. All a biotech company needs to stay in the black is often a single major drug getting approval, so the companies don't have the sort of reliable returns coming from industries with lower risk thresholds.
However, getting in on the right biotech stocks early on can be incredibly profitable. One need look no further than Pharmasset (VRUS) to find a prime example. Pharmasset, which makes hepatitis C treatments, hit it big when several of their drugs performed well in clinical trials and was ultimately bought out by Gilead Science (GILD) for an 89 percent premium. All told, any investor who bought into Pharmasset in January of 2010 would have seen a return of over 1200 percent by the time the sale was finalized.
So, here are five midcap biotech stocks that, while a risky investment, appear to have the potential to grow. Each one has a market cap between $2 billion and $10 billion and has projected EPS growth to grow by more than 25 percent annually over the next five years.
Amylin Pharmaceuticals (AMLN)
Market Cap: $2.5 billion Projected Annual EPS Growth Next Five Years: 50.40 percent
Amylin is a San Diego, CA-based biotech company that is primarily focused on developing and marketing treatments for diabetes and obesity. The company was founded in 1987 to seek ways to develop treatments from the newly discovered peptide hormone called amylin. By 2005, Amylin was launching two first-in-class medicines treating diabetes. On Friday, Amylin and Eli Lilly (LLY) celebrated that their joint-venture diabetes drug Byetta was getting recommended for approval by a panel reporting to the European Medicines Agency.
BioMarin Pharmaceutical (BMRN)
Market Cap: $4.06 billion Projected Annual EPS Growth Next Five Years: 36 percent
BioMarin is a biopharma company based in Novato, CA, was founded in 1997, and is developing treatments for serious diseases and medical conditions. The company currently has four approved products, Naglazyme (galsulfase) for mucopolysaccharidosis VI (MPS VI), Aldurazyme (laronidase) for mucopolysaccharidosis I (MPS I), KUVAN (sapropterin dihydrochloride) Tablets, for phenylketonuria (PKU), and Firdapse (amifampridine phosphate), which has been approved by the European Commission for the treatment of Lambert Eaton Myasthenic Syndrome (LEMS). BioMarin is projecting a loss in 2012 according to guidance issued on February 17, but this comes after the company announced the beginning of Phase-I trials for BMN-111, an analog of C-type Natriuretic Peptide (CNP), for the treatment of achondroplasia just a day earlier.
Questcor Pharmaceuticals (QCOR)
Market Cap: $2.49 billion Projected Annual EPS Growth Next Five Years: 35.25 percent
Based out of Anaheim Hills, CA, Questcor is committed to developing treatments for serious diseases and illnesses. Its primary product is H.P. Acthar Gel (repository corticotropin injection), or Acthar, an injectable drug initially developed for treatment of acute exacerbations of multiple sclerosis in adults, and as monotherapy for infantile spasms in babies and children under the age of two. The company posted its Q4 earnings on February 22 and once again trounced analysts expectations for revenue and EPS.
Onyx Pharmaceuticals (ONXX)
Market Cap: $2.35 billion Projected Annual EPS Growth Next Five Years: 33.27 percent
Onyx was founded in 1992 by Dr. Frank McCormick to seek out cancer therapeutics and gets was out of a merger between Cetus Corporation and Chiron Corporation as a privately held company. Onyx is now a biotech focused on the development of therapies targeting the molecular mechanisms that can cause cancer.
Jazz Pharmaceuticals (JAZZ)
Market Cap: $2.92 billion Projected Annual EPS Growth Next Five Years: 27.4 percent
Jazz is a biotech company that is focused on developing products to treat perviously unmet medical needs. Headquartered in Dublin, Ireland, Jazz's current products include Xyrem, FazaClo (clozapine, USP) LD and FazaClo HD products, Luvox CR extended-release capsules, and Prialt.
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