The biotech industry has generated steady growth amid the COVID-19 pandemic thanks to its effectiveness in the world’s fight against the pandemic through vaccines and other therapies. Furthermore, the rapid spread of the highly contagious COVID-19 Delta variant could attract further investor interest in the industry.
In addition to the need to fight the COVID-19 virus more effectively, biotech companies’ increased focus on finding cures for other rare diseases should help the industry grow. According to a report by Vision Research Reports, the global biotechnology market is expected to grow at a 16.83% CAGR between 2021 - 2030.
With most biotech stocks being high-risk/high-reward investment propositions, we think it is wise to bet on quality biotech stocks Takeda Pharmaceutical Company Limited (TAK), Exelixis, Inc. (EXEL), and Vanda Pharmaceuticals Inc. (VNDA). They have overall A (Strong Buy) ratings in our proprietary POWR Ratings system, along with A grades for Value, among other categories. So, if one is open to investing $2,000 in some no-brainer stocks, we believe these three stocks are ideal choices now.
Click here to checkout our Healthcare Sector Report for 2021
Takeda Pharmaceutical Company Limited (TAK)
Headquartered in Tokyo, Japan, TAK researches, develops, manufactures, markets, and out-licensing pharmaceutical products worldwide. It offers pharmaceutical products in gastroenterology, oncology, neuroscience, and rare diseases under Entyvio, Alofisel, Natpara, Takhzyro, and other brands.
TAK and Frazier Healthcare Partners announced a collaboration on July 30 to launch HilleVax, Inc. to develop a clinical-stage norovirus vaccine candidate. Ursula Belinda Myles, General Manager of TAK’s Access Market Cluster, said, “These investments are critical to secure economic development as Africa implements flagship projects around the 2030 Africa Health Strategy."
TAK’s revenue soared 18.4% year-over-year to 949.60 billion yen ($8.66 billion) for the fiscal first quarter ended June 30, 2021. Its operating profit grew 48.6% year-over-year to 248.60 billion yen ($2.27 billion). Its net profit came in at 200.40 billion yen ($1.83 billion), representing a 142.8% year-over-year increase. Its EPS came in at 128 yen ($1.17), up 141.9% year-over-year.
In terms of forward EV/S, TAK’s 2.82x is 55.9% lower than the 6.40x industry average. In addition, the stock’s forward EV/EBIT and P/S of 18.84x and 1.71x, respectively, are also lower than the 21x and 7.76x industry averages.
Analysts expect TAK’s EPS to come in at $0.45 for the current quarter, ending September 30, 2021, representing a 3,313.1% year-over-year increase. In addition, the company’s revenue is expected to increase 455.3% year-over-year to $30.79 billion in its fiscal year 2021. The stock has gained 8.8% since hitting its 52-week low of $15.30 on October 30, 2020, to close Friday’s trading session at $16.75.
TAK’s POWR Ratings reflect solid prospects. The company has an overall A rating, which translates to Strong Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 distinct factors, each with its own weighting.
It has an A grade for Growth and Value, and a B grade for Stability and Sentiment. Click here to see the additional POWR Ratings for TAK (Momentum and Quality). TAK is ranked #3 of 502 stocks in the Biotech industry.
Exelixis, Inc. (EXEL)
EXEL is an oncology-focused biotechnology company focused on discovering, developing, and commercializing new medicines to treat cancer. The San Francisco-based company's products include CABOMETYX tablets, COMETRIQ capsules, COTELLIC, and MINNEBRO. In addition, it is developing XL092.
On August 05, 2021, EXEL announced that the U.S. FDA had accepted the company’s supplemental New Drug Application for CABOMETYX. Michael M. Morrissey, the company’s President and CEO said, "The FDA’s acceptance of our sNDA with Priority Review is an important step toward our goal of bringing CABOMETYX to patients with previously treated radioactive iodine-refractory differentiated thyroid cancer."
The company’s total revenues surged 48.4% year-over-year to $385.20 million for its fiscal second quarter, ended June 30, 2021. EXEL’s non-GAAP net income came in at $117.90 million, representing a 48.5% year-over-year increase. Its EPS was $0.37, up 48% year-over-year.
In terms of forward EV/EBIT, EXEL’s 18.83x is 10.3% lower than the 21x industry average. Also, its 4.17x forward P/S is 46.3% lower than the 7.76x industry average.
Analysts expect EXEL’s EPS and revenue to increase 240% and 58.8%, respectively, year-over-year to $0.14 and $341.83 million for the quarter ending September 30, 2021. The stock has gained 3.2% over the past month to close Friday’s trading session at $18.28.
It’s no surprise that EXEL has an overall A rating, which equates to Strong Buy in our POWR Rating system. In addition, the stock has an A grade for Value, and a B grade for Growth, Sentiment, and Quality.
Click here to see EXEL’s ratings for Stability and Momentum as well. Again, EXEL is ranked #4 in the Biotech industry.
Vanda Pharmaceuticals Inc. (VNDA)
Washington, D.C.-based biopharmaceutical company VNDA is focused on the development and commercialization of therapies to address high unmet medical needs. While its marketed products include HETLIOZ and Fanapt oral tablets, its products under development include VTR-297, VQW-765, BPO-27, and Tradipitant (VLY-686).
Mihael H. Polymeropoulos, VNDA's President, CEO, and Chairman of the Board, said, “Our tradipitant in gastroparesis program is nearing completion, bringing us closer to a much-needed new treatment option for patients with gastroparesis and a potentially transformational commercial opportunity for Vanda."
VNDA’s total revenues surged 9% year-over-year to $67.90 million for its fiscal second quarter, ended June 30, 2021. The company’s income before taxes grew 13.5% year-over-year to $12.60 million. While its net income came in at $9.70 million, representing an 11.5% year-over-year increase, its EPS increased 6.2% year-over-year to $0.17.
In terms of forward non-GAAP PEG, VNDA’s 0.32x is 83.2% lower than the 1.91x industry average. Its forward EV/S and P/S of 1.88x and 3.23x, respectively, are lower than the 6.40x and 7.76x industry averages.
For the current quarter, ending September 30, 2021, analysts expect VNDA’s EPS to be $0.16, representing a 45.5% year-over-year increase. It surpassed the Street’s EPS estimates in three of the trailing four quarters. In addition, the company’s revenue is expected to increase 19.2% year-over-year to $338.68 million in its fiscal year 2022. The stock has gained 38.6% over the past year to close Friday’s trading session at $16.47.
VNDA’s POWR Ratings reflect this promising outlook. The company has an overall A rating, which translates to Strong Buy in our proprietary rating system. In addition, the stock has an A grade for Value, and a B grade for Quality.
Within the Biotech industry, VNDA is ranked #1. Click here to see the additional POWR Ratings for VNDA (Growth, Momentum, Stability, and Sentiment).
Click here to checkout our Healthcare Sector Report for 2021
TAK shares were trading at $16.67 per share on Monday morning, down $0.08 (-0.48%). Year-to-date, TAK has declined -8.41%, versus a 19.44% rise in the benchmark S&P 500 index during the same period.
About the Author: Nimesh Jaiswal
Nimesh Jaiswal's fervent interest in analyzing and interpreting financial data led him to a career as a financial analyst and journalist. The importance of financial statements in driving a stock’s price is the key approach that he follows while advising investors in his articles.
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