Biotechnology uses living organisms to develop advanced medical treatments and drugs to treat disease and alleviate human suffering. Biotechnological sciences include genetics, genetic engineering, gene therapy, applied immunology, and bioengineering. Companies that innovate in these areas can benefit greatly. Those who don’t can suffer financially.
The difficulty of predicting the path these companies will take makes the biotech industry notoriously more volatile than the broader stock market. Therefore, investors willing to accept more risk, for the promise of excessively high returns, may wish to diversify their stock portfolio with a stable of biotech stocks.
Biggest Biotech Stocks
The largest biotech companies by market capitalization currently listed on U.S. stock exchanges as of January 11, 2021 are:
|Company||Teleprinter||Specialization / Focus||Market capitalization (in billions of US dollars)|
|Novo Nordisk||NGO||Hemophilia, diabetes, obesity||163|
|Vertex Pharmaceuticals||VRTX||Cystic fibrosis||61.0|
|Regeneron Pharmaceuticals||RAIN||Cancer, allergic and inflammatory diseases, cardiovascular and metabolic diseases||53.4|
|Modern||mRNA||Infectious and rare diseases, cancer, cardiovascular diseases||46.4|
|Alexion||ALXN||Serious and ultra-rare disorders||34.2|
|Pharmaceutical royalty||RPRX||Biotechnology royalties||32.1|
|Genmab A/S||GMAB||Antibody products for cancer patients||27.3|
Source: Yahoo! Finance
Biotech stocks can go up or down, depending on a host of company-specific factors, such as research announcements and clinical trial results from the Food and Drug Administration (FDA). Therefore, investors may wish to diversify their biotech exposure by allocating portions of their portfolios to biotech mutual funds or biotech exchange-traded funds (ETFs) such as SPDR S&P Biotech ETF (XBI), iShares Biotechnology Index (IBB), Market Vectors Biotech ETF (BBH) and PowerShares Dynamic Biotech & Genome ETF (PBE).
Biotechnology is at the forefront of medical research and technology. Investing in biotechnology companies can be very profitable, given the high profit potential of the industry, but the high risks associated with these companies can lead to substantial losses. An investor can mitigate this risk by investing in mutual funds or ETFs to diversify their biotech holdings.