The biotech market looks poised for a robust expansion in the long term, owing to the rising need for personalized drugs, a strong drug pipeline, the use of advanced technologies like AI to aid drug development, and growing healthcare needs.
Amid this backdrop, investors could consider buying fundamentally strong biotech stocks such as Amgen Inc. (AMGN), Jazz Pharmaceuticals plc (JAZZ), and ANI Pharmaceuticals, Inc. (ANIP). Before exploring the fundamentals of these stocks, let’s first understand what’s shaping the biotech industry’s prospects.
Innovation is critical for the biotech sector, and with the introduction of new cell therapies and customized treatments for novel diseases, the industry looks well-positioned for growth. Interest in the industry is evident from the number of IPOs hitting the market.
Biotech IPOs performed well during the first quarter of 2024, with about nine companies raising over $1.30 billion, nearly three times more than the $375 million raised in the year-ago quarter. Biotech companies raising money from IPOs provide them with the funding to develop the drugs in their pipeline. Expectations of rate cuts later this year further bolster the sector’s outlook.
Moreover, the sector’s growth prospects are driven by a rapidly aging population and a rise in chronic and life-threatening diseases. The industry is investing heavily in research and development (R&D) and leveraging the power of AI, big data analytics, and machine learning to make breakthroughs in drug development and enhance manufacturing.
The global AI for the pharma and biotech market is expected to grow at a CAGR of 30.2% and reach $5.44 billion by 2028. The global biotechnology market is projected to grow at a 9.7% CAGR, reaching $1.98 trillion by 2031.
Considering these conducive trends, let’s examine the fundamentals of the three Biotech sector stock picks, beginning with the third choice.
Stock #3: Amgen Inc. (AMGN)
AMGN discovers, develops, manufactures, and delivers human therapeutics worldwide. It focuses on inflammation, oncology/hematology, bone health, cardiovascular disease, nephrology, and neuroscience. Its product portfolio includes Enbrel, Neulasta, Prolia, and Xgeva.
On May 16, 2024, AMGN announced that the FDA approved IMDELLTRA for treating adult patients with extensive-stage small-cell lung cancer with disease progression on or after platinum-based chemotherapy. This is a significant advancement for patients with this aggressive disease.
On February 26, 2024, AMGN announced the opening of its advanced manufacturing site, Amgen, Ohio, in Central Ohio. The site showcases cutting-edge technology for safe medicine production and emphasizes collaboration, sustainability, and community support.
AMGN’s trailing-12-month gross profit margin of 66.49% is 17.5% higher than the industry average of 56.58%. Likewise, its trailing-12-month EBIT margin and levered FCF margin of 24.49% and 13.01% are considerably higher than the industry averages of 1.43% and 1.07%, respectively.
AMGN’s total revenues and non-GAAP operating income for the fiscal first quarter that ended March 31, 2024, increased 22% and 9.1% year-over-year to $7.45 billion and $3.08 billion, respectively. Its free cash flow stood at $459 million. Moreover, its non-GAAP net income amounted to $2.14 billion. Also, its non-GAAP earnings per share came in at $3.96.
Analysts expect AMGN’s revenue for the quarter ending June 30, 2024, to increase 19.1% year-over-year to $8.32 billion. Its EPS for the quarter ending September 30, 2024, is expected to grow marginally year-over-year to $4.98. The company surpassed the Street EPS estimates in each of the trailing four quarters, which is impressive. Over the past year, the stock has gained 38.1%, closing the last trading session at $314.72.
AMGN’s POWR Ratings reflect its positive prospects. It has an overall B rating, 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.
AMGN has a B grade for Quality. Within the Biotech industry, it is ranked #20 out of 361 stocks. Click here for the additional POWR Ratings of AMGN (Growth, Value, Momentum, Stability, and Sentiment).
Stock #2: Jazz Pharmaceuticals plc (JAZZ)
Headquartered in Dublin, Ireland, JAZZ identifies, develops, and commercializes pharmaceutical products for unmet medical needs in the U.S., Europe, and internationally.
On February 7, JAZZ acquired Redx's KRAS inhibitor program, including G12D selective and pan-KRAS molecules. They aim to advance KRAS (Kirsten rat sarcoma virus) candidates through IND-enabling studies, expand JAZZ's oncology pipeline, and address high unmet needs in cancer treatment.
JAZZ’s trailing-12-month EBITDA margin of 35.73% is 507% higher than the industry average of 5.89%. Similarly, its trailing-12-month EBIT margin and levered FCF margin of 18.95% and 27.02% are considerably higher than the industry averages of 1.43% and 1.07%, respectively.
For the fiscal first quarter that ended December 31, 2023, JAZZ’s total revenues increased 1% year-over-year to $901.98 million. Its income from operations stood at $66.21 million. For the same quarter, its non-GAAP net income and EPS stood at $182.22 million and $2.68, respectively.
In addition, as of March 31, 2024, JAZZ’s total current assets amounted to $3.54 billion, compared to $3.44 billion as of December 31, 2023.
Street expects JAZZ’s EPS and revenue for the quarter ending June 30, 2024, to increase 5.1% and 4.9% year-over-year to $4.74 and $1 billion, respectively. The company surpassed consensus revenue estimates in three of the trailing four quarters. JAZZ’s stock has gained 1.5% over the past month, closing the last trading session at $110.49.
JAZZ’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 Value and a B for Quality. It is ranked #16 in the same industry. To see JAZZ’s Growth, Momentum, Stability, and Sentiment ratings, click here.
Stock #1: ANI Pharmaceuticals, Inc. (ANIP)
ANIP develops, manufactures, and markets branded and generic prescription pharmaceuticals in the U.S. and Canada. It manufactures oral solid dose products, semi-solids, liquids, topicals, controlled substances, and potent products, as well as performs contract development and manufacturing of pharmaceutical products.
On April 9, 2024, ANIP announced the launch of Baclofen Oral Suspension, a generic version of the reference-listed drug (RLD) Fleqsuvy. The launch has helped provide ANIP’s customers with the best-suited packing configurations to match their requirements in a timely manner.
ANIP’s trailing-12-month asset turnover ratio of 0.62x is 54% higher than the industry average of 0.40x. Its trailing-12-month gross profit margin and EBITDA margin of 62.71% and 21.72% are 10.8% and 269% higher than the industry averages of 56.58% and 5.89%, respectively.
ANIP’s net revenues for the fiscal first quarter that ended March 31, 2024, increased 28.7% year-over-year to $137.43 million. The company’s operating income rose 105.3% from the year-ago value to $20.31 million. ANIP’s adjusted net income available to common shareholders stood at $23.47 million or $1.21 per share, up 21.3% and 3.4% over the prior-year quarter, respectively.
For the quarter ending June 30, 2024, ANIP’s revenue is expected to increase 12% year-over-year to $130.58 million. Its EPS for the quarter ending December 30, 2024, is expected to grow 21.2% year-over-year to $1.21. It surpassed consensus revenue and EPS estimates in each of the trailing four quarters. The stock has gained 44% over the past year to close the last trading session at $63.77.
ANIP’s POWR Ratings reflect this promising outlook. It has an overall rating of B, equating to Buy in our proprietary rating system.
ANIP has a B grade for Growth, Value, and Sentiment. It is ranked #12 in the Biotech industry. Click here to see the additional POWR Ratings of ANIP for Momentum, Stability, and Quality.
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AMGN shares were trading at $311.04 per share on Friday morning, down $3.68 (-1.17%). Year-to-date, AMGN has gained 9.61%, versus a 11.62% 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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