The technology sector has been booming for the last 30 years, and no part of it is stronger than biotechnology. All across the pharmaceutical industry, biotech is playing a major role in growth.
So it’s no surprise that biotech companies are thriving, creating profitable opportunities for those who invest in them. Two biotech companies with promise for investors are Amgen (AMGN) and Gilead Sciences (GILD).
The world’s largest biotech company reported that net income climbed 9.8 percent in the fourth quarter to $1.02 billion from $931 million in the year-earlier period.
Amgen benefited from strong sales for its top two drugs — Neulasta, which prevents a lack of certain white blood cells caused by chemotherapy, and Enbrel, which treats rheumatoid and psoriatic arthritis. The company also boosted its profit through lower expenses for research and taxes.
In March, Amgen bought Biovex, a closely held developer of experimental cancer drugs, for up to $1 billion. (The final price hasn’t been determined.) Counting $17.4 billion in cash at the end of 2010, Amgen has plenty of ammunition for more purchases.
“Despite near-term headwinds from U.S. healthcare reform, we expect the market roll out of denosumab for post-menopausal osteoporosis — as Prolia — and cancer indications — as Xgeva — to shift investor focus to AMGN's long-term pipeline,” writes Standard & Poor’s analyst Steven Silver, who has a four-star buy rating on the stock.
Gilead specializes in drugs for infectious diseases, particularly HIV/AIDS. It registered profit of $2.9 billion last year, up 9.8 percent from $2.64 billion in 2009.
New health guidelines that recommend increased screening for and treatment of AIDS have buoyed Gilead's sales of AIDS drugs. The company has very high profit margins on those medicines.
Gilead lifted prices on several of its drugs at the beginning of April, including its top seller, HIV medicine Atripla, by 5.1 percent. It raised prices for two other HIV drugs and a lung disease medicine, too.
In January, Gilead announced that its board authorized a new three-year, $5 billion share repurchase program. “GILD appears undervalued based on its trailing 12-month price-earnings ratio of 12.30, which is less than the healthcare sector’s bottom quintile value of 14.27,” write analysts at Ned Davis Research.
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