The biotech industry shows solid growth, mainly driven by the influx of emerging and innovative technology and government-backed investments.
Moreover, as the industry enjoys inelastic demand, I think investors could consider quality biotech stocks, Vertex Pharmaceuticals Incorporated (VRTX), Regeneron Pharmaceuticals, Inc. (REGN), and United Therapeutics Corporation (UTHR). These stocks are A (Strong Buy) rated in our POWR Ratings system.
The rising incidences of target diseases and genetic disorders, as well as continuous technological advancements in Polymerase Chain Reaction (PCR) technologies and the development of miniaturized portable instruments, are driving the growth of the biotechnology market.
The global biotechnology market is poised to grow at a noteworthy CAGR of 8.7% until 2030.
Moreover, the growing foothold of personalized medicine and an increasing number of orphan drug formulations are opening new avenues for biotechnology applications and are driving the influx of emerging and innovative biotechnology companies, further boosting the market revenue of the biotech industry.
The global personalized medicine market is projected to grow at a CAGR of 7.2% until 2030.
Also, the government has supported many biotech initiatives to modernize the regulatory framework, improve the processes for treatment approvals and reimbursements, and standardize clinical studies. As a result, the biotech industry should proliferate.
Let’s discuss the stocks mentioned above in detail:
Vertex Pharmaceuticals Incorporated (VRTX)
VRTX is a biotechnology company that develops and commercializes therapies for treating cystic fibrosis.
On June 8, VRTX and CRISPR Therapeutics AG (CRSP) announced that the U.S. Food and Drug Administration had accepted the Biologics License Applications for the investigational treatment exagamglogene autotemcel for severe sickle cell disease and transfusion-dependent beta thalassemia.
Its trailing-12-month asset turnover ratio of 0.55x is 57.6% higher than the 0.35x industry average. Its trailing-12-month EBITDA margin of 50.16% is significantly higher than the 3.24% industry average.
During the fiscal first quarter ended March 31, 2023, VRTX’s net product revenues increased 13.2% year-over-year to $2.37 billion. Non-GAAP net income came in at $794 million, while its non-GAAP net income per common share amounted to $3.05. Also, non-GAAP operating income came in at $902.30 million.
VRTX’s revenue is expected to increase 10.3% year-over-year to $2.42 billion for the fiscal second quarter ending June 2023. Its EPS is expected to increase 7.7% year-over-year to $3.88 in the same quarter. Also, it has surpassed EPS estimates in each of the trailing four quarters, which is impressive.
Shares of VRTX have gained 27.1% over the past year to close the last trading session at $343.28.
VRTX’s POWR Ratings reflect its promising outlook. The stock has an overall rating of A, which translates to a Strong Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
The stock has an A grade for Quality and a B in Value. It is ranked #7 out of 387 stocks in the Biotech industry.
Beyond what is stated above, we’ve also rated VRTX for Growth, Momentum, Sentiment, and Stability. Get all VRTX ratings here.
Regeneron Pharmaceuticals, Inc. (REGN)
REGN discovers, invents, develops, manufactures, and commercializes medicines for treating various diseases worldwide.
On May 25, 2023, REGN announced positive data from three independent cohorts evaluating an investigational combination of LAG-3 inhibitor fianlimab and PD-1 inhibitor Libtayo (cemiplimab) in adults with advanced melanoma.
Omid Hamid, M.D., Director, Clinical Research and Immunotherapy at The Angeles Clinic and Research Institute, and principal investigator of the trial, said, “LAG-3 inhibitors are known to complement PD-1 inhibitors in the treatment of advanced melanoma. There exists an unmet need to further improve the benefit to patients, including those with liver metastases and other high-risk prognostic markers.”
REGN’s trailing-12-month asset turnover ratio of 0.44x is 24% higher than the 0.35x industry average. Its trailing-12-month EBITDA margin of 41.04% is significantly higher than the 3.24% industry average.
REGN’s revenues increased 6.6% year-over-year to $3.16 billion for the fiscal first quarter that ended March 31, 2023. Its non-GAAP net income came to $1.17 billion and non-GAAP net income per share came in at $10.09.
Street expects REGN’s revenue to increase 7.1% year-over-year to $3.06 billion in the fiscal second quarter (ending June 2023). Its EPS is expected to increase 4.5% year-over-year to $10.21 in the same quarter. Additionally, it has topped consensus EPS and revenue estimates in each of the trailing four quarters.
The stock gained 32.5% over the past year to close its last trading session at $778.77.
It’s no surprise that REGN has an overall rating of A, which translates to a Strong Buy in our POWR Ratings system.
REGN also has a B grade for Value and Quality. It is ranked #12 in the same industry.
For additional ratings for REGN for Growth, Momentum, Sentiment, and Stability, click here.
United Therapeutics Corporation (UTHR)
UTHR is a biotechnology company that engages in the development and commercialization of products to address the unmet medical needs of patients with chronic and life-threatening diseases in the United States and internationally.
UTHR’s trailing-12-month gross profit margin of 91.02% is 63.2% higher than the 55.78% industry average. Its trailing-12-month EBITDA margin of 52.36% is significantly higher than the 3.24% industry average.
UTHR’s total revenues rose 9.7% year-over-year to $506.90 million in the fiscal first quarter that ended March 31, 2023. Net income increased marginally year-over-year to $240.90 million and its income per share came in at $4.86. Moreover, the company’s operating income amounted to $284.40 million.
Analysts expect UTHR’s revenue to increase 12.5% year-over-year to $525.27 million for the fiscal second quarter ending June 2023. Its EPS is expected to increase 38.9% year-over-year to $4.81 for the same quarter.
The stock has gained 8.5% over the past nine months to close the last trading session at $223.07.
UTHR’s robust prospects are reflected in its POWR Ratings. The stock has an overall A rating, equating to a Strong Buy in our proprietary rating system.
UTHR has a B grade for Value and Quality. It is ranked #8 in the same industry.
Click here to see UTHR’s additional POWR Ratings for Growth, Momentum, Stability, and Sentiment.
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VRTX shares were trading at $343.78 per share on Thursday afternoon, up $0.50 (+0.15%). Year-to-date, VRTX has gained 19.05%, versus a 14.65% rise in the benchmark S&P 500 index during the same period.
About the Author: Nidhi Agarwal
Nidhi is passionate about the capital market and wealth management, which led her to pursue a career as an investment analyst. She holds a bachelor's degree in finance and marketing and is pursuing the CFA program. Her fundamental approach to analyzing stocks helps investors identify the best investment opportunities.
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