Are these the best ASX biotech stocks to watch?
A short description of biotech stocks, followed by seven of the largest ASX biotech shares to watch in 2023. These stocks are chosen for their market size on the ASX.
Biotech — or Life Sciences — stocks are shares in companies involved in the research, development, and commercialisation of technology driving advances in areas such as genetics, biology, healthcare and agriculture.
This usually involves developing new drugs, vaccines or diagnostic tools that are either completely novel, or more commonly an improvement on the current standard of care. Naturally, this is R&D intensive — and accordingly, most biotechs have high levels of cash burn.
Further to this, even larger biotechs are usually relatively volatile, as their value fluctuates according to various criteria including patent expirations, ongoing clinical trial success and regulatory approvals. In particular, biotechs with a weak pipeline of new treatments, and whose current treatments are close to expiry, will often see huge volatility.
This volatility is enhanced by market speculation — especially when an ASX biotech company has a flagship asset going through clinical trials which will either deliver huge financial rewards in the event of success or share price collapse if not.
Due to this inherent volatility, investors sometimes prefer the relative safety of the larger blue chip ASX biotech shares, which can often be classed as defensive due to the inelasticity of demand for their proven treatments, and their constantly developing treatment pipelines.
However, it’s worth remembering that the sector itself is more volatile than several others, and further, that past performance is not an indicator of future returns.
Best ASX biotech stocks to watch
CSL is by far the largest ASX biotech stock — akin to AstraZeneca in the UK. The company is a global behemoth, with a focus on vaccines and novel biotherapies. In particular, CSL has carefully carved out a niche in plasma-derived therapies to produce human-use molecules such as immunoglobulins, albumin, or clotting factors. These are then used to treat patients for whom there are currently few treatments, such as those with haemophilia or immune system disorders.
Unlike small cap ASX biotechs, CSL can usually as a defensive stock for its oversized market position and captive market for its patented treatments.
CSL has a market capitalization of $121.8 billion as of 27 September 2023.
ResMed provides cloud-connectable medical devices for the treatment of sleep apnoea, chronic obstructive pulmonary disease (COPD), and other respiratory conditions. As a global leader in sleep and respiratory care, its product lines include continuous positive airway pressure (CPAP) devices which allow users to breathe properly when they sleep.
Moreover, its cloud-connected platforms allow users to monitor their devices and also adjust them to suit individual needs.
ResMed has a market capitalization of $21.1 billion as of 27 September 2023.
3. Fisher & Paykel Healthcare
Fisher & Paykel Healthcare also works in the respiratory care and sleep disorder space, manufacturing advanced devices including ventilators, masks and advanced humification systems designed to improve the lives and sleep of users.
These devices are predominantly used to help patients with COPD or sleep apnoea, sleep better — and are sold in 120 countries around the world.
Fisher & Paykel Healthcare has a market capitalization of NZ$12.9 billion as of 27 September 2023.
4. Telix Pharmaceuticals
Telix Pharmaceuticals is a popular ASX biotech stock which is dedicated to targeted molecular radiation therapies for improved oncology treatment. Its patented radiopharmaceuticals merge radioactive isotopes with molecules specifically designed to target cancer cells — a form of targeted treatment therapy which helps to destroy tumours with less damage to healthy tissue than is currently typical.
This treatment could vastly improve cancer patients’ outcomes and quality of life.
Telix Pharmaceuticals has a market capitalization of $3.7 billion as of 27 September 2023.
Polynovo has also carved out a biotech niche, specialising in creating regenerative solutions for advanced tissue repair and wound healing. It’s Novosorb BTM (Biodegradable Temporising Mix) platform uses biodegradable polymers which both reduce scarring and aid the body in producing new tissue. Importantly, the matrix does not use any biologic materials, avoiding the increased risk of bacterial infection that comes with other treatments.
This therapy has obvious application uses in surgery and generic wound treatment.
Polynovo has a market capitalization of $908 million as of 27 September 2023.
6. Clinuvel Pharmaceuticals
Clinuvel Pharmaceuticals focuses on treatments for rare and severe skin conditions where the skin is damaged by exposure to sunlight and/or artificial light. Its flagship is the Scenesse implant, which provides patients with enhanced protection from ‘light’ damage by increasing melanin production in the skin.
This offers a one-of-a-kind treatment for sufferers of specific conditions with essentially no other viable options.
Clinuvel Pharmaceuticals has a market capitalization of $764 million as of 27 September 2023.
7. Avita Medical
Avita Medica is a regenerative medicine company leading the development and commercialisation of devices and cellular therapies for skin restoration. Its FDA-approved RECELL System technology platform treats patients with full-thickness skin defects and thermal burn wounds, and is also used for re-pigmentation of depigmented vitiligo lesions by harnessing the regenerative properties of a patient’s own skin.
This has the potential to both reduce healing times and improve outcomes for patients.
Avita Medical has a market capitalization of $565 million as of 27 September 2023.
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