Forget Gilead Sciences Inc.: These 3 Stocks Are Better Buys

By Markets Fool.com

If you're a growth-oriented investor, Gilead Sciences (NASDAQ: GILD) may no longer be a particularly good fit for your portfolio. This blue-chip biotech, after all, has seen the sales of its top-selling hepatitis C drug Harvoni fall dramatically in the last quarter, and its top line is expected to drop by nearly 7% this year as a direct result.

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If explosive growth potential was what originally attracted you to Gilead, you may want to consider grabbing shares of Amarin Corp. (NASDAQ: AMRN), Kite Pharma (NASDAQ: KITE), orNovavax (NASDAQ: NVAX)right now. Here's why.

Does Amarin have a blockbuster drug on its hands?

Amarin's consensus 12-month price target implies that this small-cap stock has an upside potential of 114%. While this uber-bullish assessment may sound outlandish at first, a deeper dive suggests that the Street may not be that far off the mark.

Right now, Amarin's shareholders are waiting on pins and needles for Vascepa's interim data readout for its ongoing cardiovascular-outcomes trial that could occur this month. In a nutshell, if this trial shows that this highly refined fish-oil pill significantly reduces the rate of deadly cardiovascular events, then the drug should be able to eventually achieve blockbuster status.

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At a minimum, this would lend credence to the notion that Amarin's shares really are trading at a mere 3 times the company's 2017 revenue estimate. The flip side is that if Vascepa flames out in this large cardiovascular-outcomes trial, doctors may be hesitant to continue prescribing it, causing the drug's sales to crater.

Of course, there are some cautionary tales suggesting that omega-3 treatments like Vascepa don't actually improve cardiovascular health, despite their ability to lower bad cholesterol -- which is probably why Amarin's shares haven't taken flight just yet.

Kite should emerge as the CAR-T industry leader

Kite is participating in a handful of conferences this month, where investors are hoping they may reveal a positive clinical update for a chimeric antigen receptor T cell (or CAR-T) therapy called KTE-C19 in aggressive non-Hodgkin's lymphoma. The long and short of it is that Kite is currently leading the field of CAR-T developers in the race to bring one of these novel adoptive cell-based therapies to market.

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If all goes as planned and KTE-C19 makes it to market in the 2017 to 2018 time frame, the therapy is projected to haul in a noteworthy $1.7 billion in peak sales. That's not bad for a first-approved product, and would mean that Kite's shares are currently trading at less than two times KTE-C19's commercial potential.

One major downside risk, though, is that this entire class of therapies has been plagued by serious safety concerns, which may limit their use to later lines of treatment where patients have few, if any, options remaining. And the scalability of these therapies on a commercial level is far from a certainty at this point.

Another worrisome development is Novartis' (NYSE: NVS) recent decision to dissolve its cell and gene therapy unit that housed its CAR-T program. Although Novartis reportedly plans to continue developing its CAR-T candidate,CTL019, for acute lymphoblastic leukemia, the fact that the biggest player on the scene saw fit to reduce the amount of resources devoted to this effort may be a harbinger of things to come. In short, CAR-Ts may turn out to be too difficult to commercialize, or their well-known safety issues could prevent them from becoming blockbuster-type products.

Novavax might be developing the world's next best-selling vaccine

Pfizer's (NYSE: PFE) best-sellingpneumococcus vaccine Prevnar 13 raked in an astounding $6.25 billion in sales last year, and is on track to generate at least $5.5 billion this year. Moreover, most analysts covering this space think that Prevnar 13 will retain the top spot among vaccine products until at least 2020. However, there's good reason to believe they could be wrong -- and badly so.

Novavax is presently marching toward a late-stage trial readout assessing its respiratory syncytial virus(RSV) F vaccine candidate in older adults. The reason this experimental vaccine is noteworthy is because this first indication alone could generate upwards of $6 billion in sales, given the dire need for a preventive treatment for this at-risk population and the generally high immunization rates among older adults. But that's just the first part of the story.

The company also has another ongoing late-stage trial evaluating this vaccine's ability to confer immunity to newborn babies. And further down the line, Novavax is hoping to combine its RSV product with an internally developed influenza vaccine. Depending on its pricing structure and clinical results, this experimental RSV vaccine could end up usurping Prevnar 13 by a wide margin.

Are these stocks worth buying right now?

Growth stocks, by their very nature, tend to be high-risk assets, and these three clinical-stage biotechs are certainly no exception. Then again, Gilead wasn't exactly "risk free" after it emptied its coffers to buy Pharmasset in order to build the foundation for its hepatitis C franchise. Yet the brave souls who bought Gilead around this pivotal event have enjoyed something along the lines of a 300% return in less than five years. In short, risk is inherent when unusual growth opportunities abound.

With this in mind, Amarin, Kite, and Novavax may indeed be worth buying right now. Each of these stocks could double or even triple within a year or so from now -- that is, if their respective catalysts turn out to be positive. But because of their risky nature, investors probably shouldn't go hog wild with any of these speculative growth stocks.

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George Budwell has no position in any stocks mentioned. The Motley Fool owns shares of and recommends Gilead Sciences. The Motley Fool has the following options: short October 2016 $85 calls on Gilead Sciences. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.