The biotech industry is poised for significant growth due to the growing popularity of personalized medicines and the rising use of AI in the biotech market. Given the industry’s steady growth prospects, investors could consider biotech stocks Shionogi & Co., Ltd. (SGIOY), Alkermes plc (ALKS), and Incyte Corporation (INCY) for March profits.
The growing demand for biotechnology in agricultural applications like tissue culturing, molecular breeding, and micro-propagation is projected to boost the biotech market growth. Besides, the surge in popularity of genetically modified crops, seeds, and herbicide-tolerant crops is projected to contribute further to the expansion of the market. The global biotechnology market is expected to grow at a CAGR of 13.4% until 2032.
Moreover, biotech companies use cutting-edge technologies like artificial intelligence, big data analytics, and machine learning to accelerate drug discovery and vaccine development, identify targeted diseases, come up with breakthrough treatments, and enhance clinical trials. The use of artificial intelligence in the biotechnology market is anticipated to grow at a CAGR of 29.7% until 2032.
Another factor that makes the biotech industry attractive is the growing popularity of personalized medicines. Personalized medicines provide tailored treatments to a patient, which helps improve the efficacy and reduce side effects at the same time. The global personalized medicine market was estimated at $2.48 trillion in 2023 and is expected to grow at a CAGR of 11.2% until 2032.
Considering these conducive trends, let’s take a look at the fundamentals of the three best Biotech stocks, beginning with the third choice.
Stock #3: Shionogi & Co., Ltd. (SGIOY)
SGIOY engages in the research, development, manufacture, and distribution of pharmaceuticals, diagnostic reagents, and medical devices in Japan.
On December 7, 2023, SGIOY announced the acquisition of 1,230,100 common shares, totalling ¥8.65 billion, from November 1, 2023, to November 30, 2023, through discretionary trading on the Tokyo Stock Exchange. The total number of shares acquired under the resolution of July 31, 2023, is 5.84 million, with a total value of ¥38.65 billion.
SGIOY’s trailing-12-month gross profit margin of 85.87% is 50.8% higher than the industry average of 56.95%. Its trailing-12-month EBITDA margin of 39.79% is 641.5% higher than the industry average of 5.37%.
SGIOY’s revenue for the six months that ended September 30, 2023, increased 52.9% year-over-year to ¥230.54 billion ($1.54 billion). The company’s operating profit rose 247.6% year-over-year to ¥98.11 billion ($653.98 million). In addition, profit attributable to owners of the parent rose 58.2% over the prior-year quarter to ¥90.59 million ($603.85 million). Also, its EPS came in at ¥308.54, up 62.3% year-over-year.
Analysts expect SGIOY’s EPS to be $0.90 for the fiscal year ending March 2024, while its revenue is expected to improve 6.4% year-over-year to $2.93 billion for the same year. The company surpassed the revenue estimates in each of the trailing four quarters, which is impressive.
The stock has soared 12.7% over the past six months to close the last trading session at $12.22.
SGIOY’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 has a B grade for Value and Quality. It is ranked #17 in the 357-stock Biotech industry.
Beyond what is stated above, we’ve also rated SGIOY for Growth, Momentum, Stability, and Sentiment. Get all SGIOY ratings here.
Stock #2: Alkermes plc (ALKS)
Headquartered in Dublin, Ireland, ALKS is a biopharmaceutical company that researches, develops, and commercializes pharmaceutical products to address unmet medical needs of patients in the fields of neuroscience and oncology in the United States, Ireland, and internationally.
The stock’s trailing-12-month ROCE margin of 46.22% is significantly higher than the industry average of negative 42.56%. Its ROTC margin of 17.52% is significantly higher than the negative 22.27% industry average.
For the fiscal fourth quarter that ended December 31, 2023, ALKS’s total revenues increased 23.9% year-over-year to $241.97 million. Its net income came in at $112.78 million, compared to a loss of $28.25 million in the previous-year quarter. Also, its earnings per share came in at $0.68, compared to negative $0.17 in the previous-year quarter.
The company’s revenue for the fiscal first quarter ending March 2024 is expected to increase 30.1% year-over-year to $374.15 million. The company’s EPS is estimated to grow significantly year-over-year to $0.69 for the same quarter. Moreover, the company has surpassed the consensus revenue estimates in each of the trailing four quarters, which is remarkable.
Shares of ALKS have gained 23.2% over the past three months to close the last trading session at $30.04.
It’s no surprise that ALKS has an overall rating of B, which equates to Buy in our proprietary rating system.
ALKS has an A grade for Value and Quality and a B in Growth. It is ranked #13 in the same industry.
In addition to the POWR Ratings highlighted above, one can access ALKS’s ratings for Sentiment, Momentum, and Stability, here.
Stock #1: Incyte Corporation (INCY)
INCY is a company specializing in the development of therapies for hematology /oncology and inflammation. With a portfolio including clinical-stage products, the company engages in collaborative agreements to advance its research initiatives on a global scale.
INCY’s trailing-12-month EBIT margin of 17.65% is significantly higher than the industry average of 0.09%, while its trailing-12-month EBITDA margin of 19.98% is 272.4% higher than the industry average of 5.37%.
During the fourth quarter, which ended December 31, 2023, INCY’s total revenues grew 9.3% year-over-year to $1.01 million. The company’s non-GAAP operating income increased 75.6% from the previous-year quarter to $267.70 million. It generated non-GAAP net income and net income per share of $239.12 million and $1.07, up 71.2% and 69.8% from the prior-year quarter, respectively.
Analyst expects revenue to increase 15.4% year-over-year to $933.10 million for the fiscal first quarter ending March 2024. Its EPS is expected to increase 131.9% year-over-year to $0.86 for the same quarter.
Shares of INCY have gained 12.6% over the past three months, closing the last trading session at $60.53.
INCY’s strong fundamentals are reflected in its POWR Ratings. It has an overall rating of A, which equates to Strong Buy in our proprietary rating system.
INCY has an A grade for Quality and Value and a B in Growth. It is ranked #4 in the same industry.
Click here to access the additional INCY ratings (Momentum, Sentiment, and Stability).
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 $12.34 per share on Tuesday morning, up $0.12 (+0.95%). Year-to-date, SGIOY has gained 3.07%, versus a 6.42% 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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