Cutting Edge Biotech Stocks to Buy Now

November 3, 2009

All throughout the recession, large-cap biotech companies held their own despite the difficult economic circumstances. Why? Because medicine and treatments simply will not be cut out of family budgets even in hard times.

Now that the recovery is under way, it seems Wall Street is more interested in the little guys–one-drug biotech stocks that could rally double-digits on a single breakthrough, or up-and-comers that are in a prime position to be bought out by a big pharma powerhouse and see shares soar on a takeover bid. These companies are on the cutting-edge of innovation, researching and developing treatments for everything from Anthrax and Swine Flu to Lupus and cancer–and Wall Street is watching them closely.

With all of this added attention, it's important to know which biotechs are the safest bets for your money. That's why I've put together a list of five biotech stocks to buy now.

Biotech Stock #1: Dendreon (DNDN)

Dendreon Corp. (DNDN) is a biotech stock that researches and develops pharmaceuticals and therapeutics to give patients living with cancer more treatment options.

The company's main product is Provenge, a vaccine for the treatment of prostate cancer. In fact, DNDN just submitted this drug candidate to the Food and Drug Administration for approval and things are looking up. If the therapy is licensed by the FDA, not only would it make Provenge the first treatment of its kind available in the U.S., it would also provide a financial windfall to Dendreon.

Speaking of windfalls, DNDN reports earnings on Nov. 11. The analyst community is expecting a loss of 19 cents a share for the quarter. If the Provenge treatment is approved, DNDN's fundamentals will firm up going forward. Right now, the stock is benefiting from a surge in buying pressure in anticipation of earnings, which is helping to drive shares higher. But if DNDN reports a wider-than-expected profit, things could really take off.

This biotech company's fundamentals are very strong right now, and I anticipate nice profits from DNDN in the next few months.

Biotech Stock #2: Emergent Biosolutions (EBS)

Emergent Biosolutions (EBS) is a company that develops and produces drugs that treat or protect against infectious diseases and bio-agents such as typhoid, strep and hepatitis.

Remember the anthrax panic that gripped the nation just seven years ago? Well, Emergent is the U.S.'s only supplier of BioThrax, an FDA-approved anthrax vaccine. In the last 10 years, the company has sold 30 million dosages! It's true–the government is buying the vaccine up as fast as Emergent can make it. In the past year alone, Emergent has signed two large contracts with the departments of Defense and Health and Human Services to deliver more than 33 million additional dosages of the BioThrax vaccine over the next three years. The government's long term commitment to combating anthrax is clear, and this bodes extremely well for Emergent.

This biotech stock shattered Wall Street estimates with a 60% earnings surprise and a 22% sales surprise in the second quarter. Shares gapped up 17% in one day alone on the news. The company reports its next round of earnings on Nov. 5 and I expect a strong showing from Emergent Biosolutions.

EBS is one of my top Emerging Growth stocks right now.