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NPS Pharmaceuticals, Inc. (NPSP), Vertex Pharmaceuticals Incorporated (VRTX): Double-Digit Returns from the Biotechnology Strategy

Continuing in descending order of holdings in the SPDR S&P Biotech ETF,  Regeneron Pharmaceuticals Inc (NASDAQ:REGN) makes up 3.1% of the ETF.  Regeneron Pharmaceuticals Inc (NASDAQ:REGN) has given a one-year return of 101.05% (see the chart below). The current price range supports the perceived value of this stock. In the fourth quarter of 2012 earnings were reported at $1.47 per share (diluted). The same quarter of 2011 reported $0.37 per share, diluted. The main driver of this growth appears to be sales from EYLEA, which was recently approved by the FDA, for the treatment of macular edema, an eye condition. This is a far more stable biotechnology company than those I’ve previously mentioned. There are 11 programs that are in clinical studies, and some of these are in partnership with Sanofi SA (ADR) (NYSE:SNY). I like the prospects of this stock since there are multiple drugs in development.

Rounding out the top four stocks in the SPDR S&P Biotech ETF is Theravance Inc (NASDAQ:THRX), with a weighting of 3.0%. See the chart below and some of the very recent price action has been the driver of the one-year return of 55.25%. “Theravance Inc (NASDAQ:THRX) is off to a strong start in 2013 highlighted by the recent FDA Advisory Committee meeting which recommended approval of BREO ELLIPTA for the treatment of COPD,” said Rick E Winningham, Chief Executive Officer.  In the Q1 2013 earnings report the company announced a net loss of $0.39 per share, versus a loss of $0.93 per share in the same quarter of 2012. There a numerous products in the developmental stage, and the above comments appear to be the driver of the share price movement, making this another stock moving on positive yet unrealized expectations.

Biotechnology has always been a tough sector to follow. The SPDR S&P Biotech ETF makes it easy through the use of a passive index in the expectation that some of the stocks contained within will be the driver of the ETF’s overall performance. Without researching each and every stock held in this ETF, I believe that I will find quite a few of non-contributing stocks. If only a handful out of the entire 53 drive this strategy, the simple odds of finding the right stocks to pick makes it seem harder.

The article Double-Digit Returns from the Biotechnology Strategy originally appeared on Fool.com and is written by Jeff Stouffer.

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