Three Biotech Stocks to Buy After More-Than-Solid Quarters

As the markets continue to thrive following last week’s post-election rally, the S&P 500 index has recently crossed the significant milestone of 6,000. Investors are feeling optimistic, with stocks pushing deeper into uncharted territory based on a variety of valuation metrics. In light of this, I’ve decided to reallocate more funds from short-term treasuries into the equity market, albeit with a more conservative approach through lower strike prices in my covered-call orders, which provide better downside protection despite capping potential returns.

Today, we’ll explore three biotech stocks that have consistently generated solid returns through a strategy of “rinse, wash, and repeat” covered-call trades in my portfolio. Each of these companies recently reported outstanding third-quarter results, signaling positive trends for potential investors.

1. Dynavax Technologies (DVAX)

Dynavax has made impressive strides in building its cash reserves during the pandemic by supplying adjuvants to various COVID vaccine manufacturers. This financial stability has empowered the company to capitalize on its hepatitis-B vaccine, leading to a substantial market position. Currently, Dynavax holds approximately 44% of the U.S. hepatitis-B vaccine market, which is projected to reach $900 million annually by 2030. The company has also indicated a move towards consistent profitability and promising cash flow positivity.

In addition to reporting strong Q3 numbers, Dynavax’s leadership announced the initiation of a $200 million stock buyback authorization, representing over 10% of the stock’s float at current trading levels. This strategic move could enhance shareholder value while reflecting their confidence in the company’s growth trajectory.

2. Aurinia Pharmaceuticals (AUPH)

Aurinia Pharmaceuticals has made headlines for beating both top and bottom-line expectations in its recent Q3 report. The company has successfully transitioned to profitability while undertaking significant staff reductions aimed at sharpening its focus on commercialization efforts for its flagship product, LUPKYNIS. Moreover, Aurinia is also working on advancing another asset within its pipeline.

The company boasts a substantial cash balance, and the restructuring initiative is projected to yield at least $40 million in additional annual cash flow. Considering that its operational cash flow in the first half of the year was just over $30 million, this restructuring represents a notable event for Aurinia. Additionally, the company has been speculated as a potential acquisition target, and this strategic realignment might enhance its attractiveness to potential buyers.

3. ACADIA Pharmaceuticals (ACAD)

Finally, we have ACADIA Pharmaceuticals, which delighted its investors with a stellar third-quarter earnings report that surpassed both earnings and sales projections. The company’s flagship drug, Nuplazid, achieved 10% year-over-year growth during the quarter, while its recently launched product, Daybue, experienced a remarkable 36% increase in sales compared to the same period last year.

With its pipeline advancing and annual sales nearing the $1 billion mark, ACADIA is now searching for opportunities to build on this momentum as it has transitioned into profitability. With a market cap of just under $3 billion and over $550 million in net cash on the balance sheet, ACADIA remains an appealing option for investment, especially considering last week’s impressive 20% rally following the publication of its Q3 results.

Conclusion

In summary, these three biotech stocks—Dynavax Technologies, Aurinia Pharmaceuticals, and ACADIA Pharmaceuticals—have all demonstrated strong performance and sound fundamentals in their most recent quarterly reports. With prudent investment strategies in play, including covered-call trades, these companies offer promising avenues for growth as the biotech sector continues to thrive in a robust market environment. Thus, for investors looking to delve into the burgeoning biotech landscape, these stocks warrant serious consideration.