People in Canada doing online stock trading in US stocks need to watch out for key stocks in unlikely areas. The biotech industry is an example.
Biotech Industry May be Risky but Currently Has Potential
The risky biotech industry has gone through some tough times this year and is 30% down from its peak from the previous summer as per the measurement of the iShares Nasdaq Biotech ETF. But when looking at the grand scheme of things, there are a good deal of mergers and acquisitions happening, making this industry quite vibrant. Looking at the bigger picture, biotech stocks have risen 141% in the past 5 years beating the S&P 500 returns.
And if you look at the present situation, it may be a great opportunity to buy some stocks from the industry. Now why would this be the right time? One of the reasons is the increase in the number of aging baby boomers. And then, the Affordable Care Act has expanded insurance coverage significantly, making those treatments accessible to a greater section of people.
Then there’s the timing brought about by the Human Genome Project which decoded the genetic makeup of people and gave scientists plenty of new data. That enabled biotech companies to develop drugs based on this information. These drugs are now in the final stages of their approval and testing, and could soon enter the market.
Through all these there is one biotech stock that comes really cheap but seems to have massive potential in the coming 12 months.
United Therapeutics (NASDAQ: UTHR) is the stock we’re talking about. As we mentioned before, it’s really cheap with forward P/E below 8 and trailing price-to-sales ratio only under 3. The company is a leading player in pulmonary arterial hypertension (PAH) treatment. PAH is a life-threatening ailment that affects around 500,000 individuals each year all over the world. Unlike other orphan drugs, United does not keep raising prices continually just to boost revenue. Had it followed this strategy, it would have made life very difficult for many consumers around the world and also infused the company with risk since politicians have recently been scrutinizing drug prices. Instead, the company chooses to enlarge its market and raise its revenue.
While late-stage PAH treatment only keeps growing marginally each year, demand for drugs for early stage treatment is rising astronomically. And while the PAH drug industry also has competition from other pharmaceutical manufacturers including Bayer AG, United Therapeutics is moving past PAH as well. Most notably, it has released the only therapy approved by the FDA for neuroblastoma, the childhood cancer. It’s therefore a great stock to have now.
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