Did you know growth stocks in the biotechnology industry have generated explosive returns faster than any other sector since the financial crisis?
This new approach to developing medicines from living organisms rather than chemical bases has allowed the pharmaceutical industry to make giant leaps. But its uses are not limited to just medicine. Biotechnology companies have developed pest-resistant crops, biofuels for vehicles, and even gene cloning.
This diverse range of applications and continual discoveries have created an enormous opportunity for these two biotech companies, in an industry expected to reach $500bn by 2026.
Oxford Biomedica – A hidden industry leader?
Oxford Biomedica (LSE:OXB) specialises in gene and cell therapy. This segment of the biotechnology sector is relatively new, with only eight FDA-approved treatments on the market today. However, by 2025 it’s expected that 10-20 new therapies will be approved — every year.
Why do I think Oxford Biomedica is a leader? It’s simple. Developing gene and cell therapies is a costly process that most pharmaceutical companies would deem too risky to pursue. However, this stock has developed a proprietary platform called LentiVector.
It allows Oxford Biomedica to utilise its expertise to assist large pharma companies in developing new drugs. The firm charges bioprocessing and development fees for clients using the platform. This approach to drug development is considerably cheaper for clients and subsequently reduces the investment risk.
Attracting the likes of Novartis and Bristol Myers Squibb, the platform has become a centre point for bio-drug development. What’s more, is even after completion and approval of a new treatment, Oxford Biomedica continue to receive royalties from each sale. Needless to say, this business model creates an incredible stream of recurring revenue and cash flow – a key requirement for explosive returns.
Bioventix – An industry diagnostics expert
Bioventix (LSE:BVXP) operates in a different segment of the industry. It designs and manufactures specialised antibodies for blood testing machines. Today blood tests are used to diagnose almost every disease — including Covid-19.
This continual rise in demand has drastically increased the price of antibodies. To put it in perspective, Bioventix currently sells between 10-20 grams each year at around £4m.
Currently, the supply does not meet the demand, and while this won’t be the case forever, it may not matter over the long term.
Just like Oxford Biomedica, Bioventix works directly with large pharma companies to sell or develop new antibody solutions. The firm also continues to receive royalties on each subsequent sale of a product designed with its antibodies. Almost 70% of the revenue stream originates from these multi-year royalty payments.
Growth stocks with a recipe for explosive returns?
With one business diagnosing the problems, and the other finding treatments, they capture a large portion of the industry pipeline. Combined, the companies amount to a $1.12bn market cap, thus there is a lot of room for growth.
I’ve owned shares in Oxford Biomedica for many years, and recently I’ve bought more. Bioventix is a far smaller company, but it’s looking ever-more promising in my eyes. Fused in one portfolio, I believe these biotech growth stocks have the potential to create explosive returns for myself and other shareholders.
The post I’d buy these 2 growth stocks for explosive returns! appeared first on The Motley Fool UK.
Zaven Boyrazian owns shares in Oxford Biomedica. The Motley Fool UK has recommended Bioventix. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.
Motley Fool UK 2020