Significant investments in R&D, fast-rising healthcare needs, expansion of drug pipelines, and a growing demand for personalized drugs bolster the biotech industry.
Given this backdrop, investors could consider buying biotech stocks such as Esperion Therapeutics, Inc. (ESPR), Corcept Therapeutics Incorporated (CORT), and Shionogi & Co., Ltd. (SGIOY).
The biotech industry witnessed a strong performance in the first quarter of 2024, as nine companies raised over $1.30 billion through IPOs, marking a substantial increase of almost three times from the $375 million raised in the year-ago quarter. The influx of fresh capital will enable biotech companies to bolster the development of their drug pipelines.
The sector's outlook also looks optimistic due to expectations of interest rate cuts later this year. The rise in the aging population, increase in chronic diseases, and rapid investment in research and development (R&D) drive the sector’s growth. Furthermore, the expanding need for tailored treatments to improve patient outcomes drives the demand for personalized and precision medicine.
The biotech industry is expanding through technologies like AI to bolster manufacturing processes and drug development. Consequently, the global biotechnology market is projected to reach $3.88 trillion by 2030, growing at a CAGR of 14%.
Considering these conducive trends, let’s examine the fundamentals of the three featured Biotech stocks, beginning with the third choice.
Stock #3: Esperion Therapeutics, Inc. (ESPR)
ESPR develops and commercializes medicines for the treatment of patients with elevated low-density lipoprotein cholesterol (LDL-C). Its marketed products include NEXLETOL and NEXLIZET tablets for the treatment of primary hyperlipidemia in adults who require additional LDL-C lowering.
On May 22, 2024, ESPR and Daiichi Sankyo Europe GmbH jointly announced that the European Commission (EC) approved the label update of both NILEMDO and NUSTENDI as treatments for hypercholesterolemia and to reduce the risk of adverse cardiovascular events.
The EC’s decisions to update the labels made them the first and only LDL-C lowering treatments indicated for primary and secondary prevention of cardiovascular events.
ESPR’s trailing-12-month asset turnover ratio of 0.74x is 83% higher than the industry average of 0.40x.
ESPR’s total revenues for the fiscal first quarter that ended March 31, 2024, increased 466.1% year-over-year to $137.74 million. The company’s net income stood at $61.02 million, compared to a net loss of $61.72 million in the prior year quarter. Also, its net income per common share came in at $0.34, compared to a net loss per common share of $0.79 in the year-ago quarter.
As of March 31, 2024, ESPR’s total assets amounted to $373.06 million, compared to $205.80 million as of December 31, 2023.
Analysts expect ESPR’s revenue for the quarter ending June 30, 2024, to increase 81.5% year-over-year to $46.79 million. The company surpassed Street revenue estimates in each of the trailing four quarters, which is impressive. Over the past year, the stock has gained 72.6%, closing the last trading session at $2.33.
ESPR’s POWR Ratings reflect this positive outlook. It has an overall rating of B, equating to Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 distinct factors, with each factor weighted to an optimal degree.
ESPR has an A grade for Growth and a B for Value and Quality. It is ranked #18 out of 356 stocks in the Biotech industry. Click here to see ESPR’s ratings for Momentum, Stability, and Sentiment.
Stock #2: Corcept Therapeutics Incorporated (CORT)
CORT discovers and develops drugs for the treatment of severe endocrinologic, oncologic, metabolic, and neurologic disorders in the U.S. It offers Korlym tablets medication for the treatment of hyperglycemia secondary to hypercortisolism in adult patients and to those who have type 2 diabetes mellitus or glucose intolerance.
CORT’s trailing-12-month asset turnover ratio of 0.82x is 104.5% higher than the industry average of 0.40x. Similarly, its trailing-12-month EBIT margin and levered FCF margin of 23.29% and 23.66% are considerably higher than the industry averages of 1.52% and 1.12%, respectively.
For the fiscal first quarter that ended March 31, 2024, CORT’s net product revenue and income from operations stood at $146.81 million and $29.50 million, up 39% and 98.6% year-over-year, respectively. For the same quarter, its net income attributable to common stockholders and net income per common share increased 74.1% and 78.6% from the year-ago quarter to $27.51 million and $0.25, respectively.
Street expects CORT’s fiscal 2025 EPS to increase 46.2% year-over-year to $1.35. Its revenue for the quarter ending June 30, 2024, is expected to grow 31.9% year-over-year to $155.22 million. The company surpassed consensus EPS and revenue estimates in each of the trailing four quarters. CORT has gained 48.6% over the past three months, closing the last trading session at $34.44.
CORT’s strong fundamentals are reflected in its POWR Ratings. It has an overall rating of B, equating to Buy in our proprietary rating system.
It has an A grade for Quality and a B for Value. It is ranked #16 in the same industry. Get CORT’s Growth, Momentum, Stability, and Sentiment ratings here.
Stock #1: Shionogi & Co., Ltd. (SGIOY)
Headquartered in Osaka, Japan, SGIOY researches, develops, manufactures, and distributes pharmaceuticals, diagnostic reagents, and medical devices in Japan. It offers Fetroja, Cabenuva and Apretude, Xocova, Finibax, Xofluza, and Tivicay.
On June 6, 2024, SGIOY announced an option agreement with Cilcare DEV SAS to exclusively license, develop, manufacture, and commercialize hearing loss treatment candidates CIL001 and/or CIL003 worldwide, with an initial payment of €15 million ($16.31 million).
On June 4, 2024, SGIOY announced the establishment of its first U.S. research facility, the Shionogi Qpex Lab in San Diego, to enhance antimicrobial drug discovery and development. This initiative addresses urgent global antimicrobial needs and supports future public health and security concerns.
SGIOY’s trailing-12-month EBIT margin of 35.24% is considerably higher than the industry average of 1.52%. Likewise, its trailing-12-month gross profit margin and EBITDA margin of 86.76% and 39.36% are 51.6% and 590.3% higher than the industry averages of 57.22% and 5.70%, respectively.
SGIOY’s revenue for the fiscal year that ended March 31, 2024, amounted to ¥410.07 billion ($2.63 billion). Its EBITDA grew 7.5% from the year-ago value to ¥188.75 billion ($1.21 billion). In addition, its profit attributable to owners of parent stood at ¥162.03 billion ($1.04 billion) and ¥558.32 per share, respectively.
For the quarter ending December 31, 2024, SGIOY’s revenue is expected to increase 1.6% year-over-year to $733.72 million. Its EPS for fiscal 2025 is expected to rise marginally year-over-year to $0.90. It surpassed consensus revenue estimates in three of the trailing four quarters. The stock has gained 5.5% over the past nine months to close the last trading session at $11.52.
SGIOY’s POWR Ratings reflect its robust prospects. It has an overall B rating, equating to Buy in our proprietary rating system.
SGIOY has a B grade for Value, Stability, and Quality. Within the Biotech industry, it is ranked #7. Click here for the additional POWR Ratings of SGIOY (Growth, Momentum, and Sentiment).
What To Do Next?
43 year investment veteran, Steve Reitmeister, has just released his 2024 market outlook along with trading plan and top 11 picks for the year ahead.
SGIOY shares were trading at $10.88 per share on Thursday morning, down $0.66 (-5.68%). Year-to-date, SGIOY has declined -9.12%, versus a 12.81% rise in the benchmark S&P 500 index during the same period.
About the Author: Neha Panjwani
From her school days, Neha harbored a profound fascination for finance, a passion that steered her toward a career as an investment analyst following the completion of her bachelor's degree in commerce. Currently enrolled in the CFA program, Neha is dedicated to further enriching her comprehension of investment fundamentals. Neha's primary objective is to aid retail investors in discerning optimal investment opportunities by diligently evaluating crucial aspects of financial instruments, with a primary focus on stocks and ETFs. Her commitment lies in empowering individuals to make informed and strategic investment decisions in the dynamic world of finance.
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