The growth of the biotech industry hinges on innovation, demand, and technological breakthroughs. The expansion of personalized medicine, orphan drug formulations, and cutting-edge technologies further contribute to the industry's momentum. So, let us explore quality biotech stocks ProQR Therapeutics N.V. (PRQR), Foghorn Therapeutics Inc. (FHTX), Harmony Biosciences Holdings, Inc. (HRMY), and Organogenesis Holdings Inc. (ORGO) with massive buy potential.
In 2023, the U.S. Food and Drug Administration approved almost 50% more novel drugs compared to 2022, aligning with historical approval rates. The FDA approved 55 innovative therapies, marking an increase from 37 in 2022 and 51 in 2021, with historical data indicating an annual average of 45-50 new drug approvals, reaching a peak of 59 in 2018. This positive trend could spark new investments in the sector.
Moreover, the increasing adoption of plant-based meat alternatives and lab-grown meat, along with other protein-rich offerings, is driving a significant need for food biotechnology. The rapid progress in biotechnology and genetics, particularly in tailoring diets and nutrition plans, is poised to further contribute to the growth of the market.
The global biotechnology market is projected to grow at a CAGR of 14% until 2030.
In addition, government initiatives continue to boost the industry with increased support for research and development. In the 2023 Budget, $5 billion was allocated to the Advanced Research Projects Agency for Health (ARPA-H). This funding aims to catalyze biomedical advancements at various levels, ranging from the molecular to the societal, with the goal of creating groundbreaking patient treatments.
Furthermore, the expansion of personalized medicine and the introduction of orphan drug formulations are presenting fresh opportunities for biotech companies. Besides, state-of-the-art medical technologies like 3D bioprinting are being utilized, playing a crucial role in the growth and progress of the biotech industry.
The 3D bioprinting market is estimated to be worth $1.44 billion this year. It is expected to reach $3 billion by 2029, growing at a CAGR of 15.9%.
With these favorable trends in mind, let’s delve into the fundamentals of the four best Biotech stock picks mentioned above.
Stock #4: ProQR Therapeutics N.V. (PRQR)
Headquartered in Leiden, the Netherlands, PRQR focuses on discovering and developing novel therapeutic medicines. The company’s products pipeline includes AX-0810 for cholestatic diseases targeting Na-taurocholate cotransporting polypeptide (NTCP); and AX-1412 for cardiovascular diseases (CVDs) targeting Beta-1,4-galactosyltransferase 1 (B4GALT1).
PRQR’s trailing-12-month gross profit margin of 100% is 75.6% higher than the 56.94% industry average. Its 15.23% trailing-12-month Capex/Sales is 259.1% higher than the 4.24% industry average.
On January 11, PRQR partnered with the Rett Syndrome Research Trust (RSRT) to develop editing oligonucleotides (EONs) using ProQR's Axiomer RNA editing technology. The collaboration aims to address mutations related to the transcription factor MECP2 in Rett syndrome, a rare neurodevelopmental disorder.
During the fiscal third quarter that ended September 30, 2023, PRQR’s revenues rose 68.3% year-over-year to €1.37 million ($1.48 million). Its total operating costs declined 57.7% from the prior-year quarter to €8.76 million (9.49 million). As of September 30, 2023, PRQR held cash and cash equivalents of €120.60 million ($130.59 million), compared to €94.8 million ($102.65 million) on December 31, 2022.
Street expects PRQR’s revenue for the fiscal year 2023 to increase 274.7% year-over-year to $19.49 million. Its EPS for the same year is expected to rise 73% year-over-year.
Over the past three months, the stock has gained 78.6% to close the last trading session at $2.09.
PRQR’s POWR Ratings reflect its promising outlook. The stock has an overall rating of B, which translates to a Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
It also has an A grade for Growth and a B for Sentiment. It is ranked #32 in the 349-stock Biotech industry.
In addition to the POWR Ratings stated above, one can see PRQR’s ratings for Value, Momentum, Stability, and Quality here.
Stock #3: Foghorn Therapeutics Inc. (FHTX)
FHTX is a clinical-stage biopharmaceutical company that engages in the discovery and development of medicines targeting genetically determined dependencies within the chromatin regulatory system. The company uses its proprietary Gene Traffic Control platform to identify, validate, and potentially drug targets within the system.
FHTX’s trailing-12-month CAPEX/Sales of 4.47% is 5.4% higher than the 4.24% industry average. The stock’s trailing-12-month cash per share of $1.67 is 31.5% higher than the industry average of $1.27.
In the fiscal third quarter, which ended on September 30, 2023, FHTX’s collaboration revenue increased 163.5% from the year-ago quarter to $17.48 million, while its total operating expenses declined marginally from the prior-year quarter to $34.56 million. Moreover, the company’s cash and cash equivalents stood at $70.31 million, increasing 34.6% compared to $52.21 million as of December 31, 2022.
Analysts expect FHTX’s revenue to improve 71.9% year-over-year to $9.13 million in the fiscal first quarter, ending March 2024.
Over the past three months, the stock has gained 11.9% to close the last trading session at $3.75.
FHTX’s POWR Ratings reflect this robust outlook. The stock has an overall B rating, translating to a Buy in our proprietary rating system.
It has a B grade for Sentiment and Quality. In the same industry, it is ranked #31.
Click here to see FHTX’s ratings for Growth, Value, Momentum, and Stability.
Stock #2: Harmony Biosciences Holdings, Inc. (HRMY)
HRMY is a commercial-stage pharmaceutical company that focuses on developing and commercializing therapies for patients in the United States with rare and other neurological diseases. It offers WAKIX (pitolisant), a molecule with a novel mechanism of action for the treatment of excessive daytime sleepiness in adult patients with narcolepsy.
HRMY’s trailing-12-month EBITDA margin of 41.29% is 710.6% higher than the 5.09% industry average. Its trailing-12-month EBIT margin of 36.80% is significantly higher than the 0.54% industry average.
On December 7, 2023, HRMY announced positive topline results from its Phase 2 signal detection study evaluating the safety and efficacy of pitolisant in adult patients with myotonic dystrophy type 1 (DM1).
HRMY’s net product revenue increased 36.4% year-over-year to $160.27 million in the third quarter, which ended September 30, 2023. The company’s gross profit increased 35.8% year-over-year to $127.97 million, and its earnings per share came in at $0.64.
HRMY’s revenue is likely to increase 28.6% year-over-year to $153.17 million in the fiscal first quarter ending March 2024. Its EPS is expected to rise 39.2% from the prior year to $0.67 in the same quarter. Also, it has surpassed revenue estimates in three of the trailing four quarters, which is impressive.
The stock has gained 68.1% over the past three months to close the last trading session at $32.27.
HRMY’s POWR Ratings reflect its solid outlook. The stock has an overall rating of B, which translates to a Buy in our proprietary rating system.
HRMY also has an A grade for Value and Quality. It is ranked #27 in the same industry.
To access additional ratings for HRMY’s Growth, Sentiment, Stability, and Momentum, click here.
Stock #1: Organogenesis Holdings Inc. (ORGO)
ORGO develops, manufactures, and markets solutions for advanced wound care, surgical, and sports medicine sectors. Its clientele includes hospitals, wound care centers, government facilities, ambulatory service centers, and physician offices, served through adept direct sales representatives and independent agencies.
ORGO’s trailing-12-month EBIT margin of 5.02% is 829.3% higher than the industry average of 0.54%. Its trailing-12-month EBITDA margin of 8.11% is 59.3% higher than the 5.09% industry average.
For the fiscal 2023 third quarter that ended September 30, 2023, ORGO’s income from operations rose 352.5% year-over-year to $8.05 million. Its adjusted EBITDA grew 37.6% from the year-ago value to $15.97 million. The company’s adjusted net income increased 4.1% from the prior year’s quarter to $5.30 million, while net income per share stood at $0.02.
As of September 30, 2023, ORGO’s total assets amounted to $462.65 million, up from $449.36 million as of December 31, 2022.
The consensus revenue estimate of $457.07 million for the fiscal year ending December 2024 indicates a 3.8% year-over-year rise. The consensus EPS estimate of $0.05 for the ongoing year reflects a 25% growth from the prior year. Moreover, the company surpassed the consensus EPS estimates in three of four trailing quarters.
Shares of ORGO have gained 77.6% over the past nine months and 40% over the past year, closing the last trading session at $3.64.
ORGO’s bright fundamentals are reflected in its POWR Ratings. The stock has an overall rating of B, which translates to Buy in our proprietary rating system.
ORGO has an A grade for Value and a B for Quality. It is ranked #25 in the same industry.
Access ORGO’s Growth, Momentum, Stability, and Sentiment ratings here.
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HRMY shares were unchanged in premarket trading Tuesday. Year-to-date, HRMY has declined -0.09%, versus a 3.36% rise in the benchmark S&P 500 index during the same period.
About the Author: Kritika Sarmah
Her interest in risky instruments and passion for writing made Kritika an analyst and financial journalist. She earned her bachelor's degree in commerce and is currently pursuing the CFA program. With her fundamental approach, she aims to help investors identify untapped investment opportunities.
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