This Biotech Name Looks Ready for a Breakout in 2025
Several biotech and biopharma stocks that should prosper in the coming year, particularly one with a leading hepatitis B vaccine.
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In my Friday column, I tagged ACADIA Pharmaceuticals ACAD, as my stock pick in the coming year. Acadia’s combination of growth, valuation, under appreciated assets and pristine balance should make the stock and its shareholders a winner in 2025.
However, it is hardly the only small biotech or biopharma company that looks set up well to prosper in the coming year. Investors also have some better entry points thanks to last week’s sell off across the small biotech space which saw the SPDR S&P Biotech ETF XBI drop by more than 5% on the week.
In today’s column, I will highlight three names that should be trading nicely higher by this time next year. Let’s start with Jazz Pharmaceuticals (JAZZ). The stock has gone nowhere in 2024 as its shares are almost exactly flat to where they started the year. That said, the equity has functioned well within my own portfolio in 2024 as a covered-call position. The stock of this mid-cap biopharma is almost absurdly cheap at just over six times this year’s earnings. The company is seeing mid-single digit revenue growth with slightly better growth from earnings. Its bispecific antibody Ziihera, which was developed in partnership with Zymeworks ZYME, was approved a month ago as a late-line treatment for certain adults with biliary tract cancer (BTC). Hopefully that proves to be a good omen and catalyst for much better performance for shareholders in 2025.
Dynavax Technologies DVAX is another name whose stock has traded flat in 2024 but that has been solid covered-call trade for my portfolio for years now. 2025 feels like the year the stock will break out and better reflect the true value of the company. Dynavax continues to take market share with its best-of-breed hepatitis B vaccine, "Heplisav-B." The vaccine should achieve approximately 60% market share in what is likely to be a $800 million market in the United States by 2027.
Dynavax has recently become profitable and looks like it will grow revenues by some 20% in FY2024. Similar sales growth is projected for 2025. Management is finally putting to work the huge cash hoard on its balance sheet. Leadership announced a $200 million buyback authorization in November. Given the stock’s market cap is around $1.7 billion, this is significant. Hopefully, 2025 treats this growth and value play with more appreciation.
Finally, we have Ardelyx, Inc. ARDX, which I profiled earlier this month. The company and stock suffered a setback recently when the Centers for Medicare and Medicaid Services decided to move one of core product offerings into bundle pricing for dialysis patients on Medicare from separate reimbursement. This change does take effect at the first of the year and will negatively impact sales. However, this decision is also likely to be reversed by bipartisan legislation currently making its way through congress. Resolution of this issue should provide a major boost for the stock at some point in 2025.
At the time of publication, Jensen was long ACAD, ARDX, JAZZ and XBI.
