Innovative biotech companies are making remarkable progress in creating novel medications and therapies for a diverse array of conditions, such as cancer, heart disease, and rare ailments. Encouraging trial outcomes and enhanced patient well-being are spurring the demand for continuous medical support and interventions.
In this context, I have evaluated three biotech stocks, namely, Genfit S.A. (GNFT), Entrada Therapeutics, Inc. (TRDA) and MacroGenics, Inc. (MGNX), currently trading at attractive valuations. But before delving into the fundamentals of these stocks, let’s first understand the industry and its prospects.
The biotech sector’s growth is supported by the growth in the geriatric population. The number of people aged 60 and older is expected to grow to 1.4 billion in 2030, equating to one in six people worldwide. Moreover, new treatment methods are becoming popular, opening up further growth avenues for the sector.
For instance, personalized medications accounted for only 5% of new drugs approved by the U.S. Food and Drug Administration (FDA) in 2005, while it reached 34% in 2022. Moreover, the global personalized medicine market reached $538.93 billion last year and is expected to expand at a CAGR of 7.2% from 2023 to 2030.
With the rising demand for clinical solutions to combat chronic diseases such as cancer, diabetes, liver diseases, neurological disorders, and cardiovascular diseases, the global biotechnology market was valued at $1.37 trillion in 2022 and is expected to grow at a CAGR of 14% over the next seven years.
Let’s dive deeper into the fundamentals of these Biotech industry stocks mentioned above to look into this investment opportunity offers, starting with number 3.
Stock #3: Genfit S.A. (GNFT)
Headquartered in Loos, France, GNFT is a biopharmaceutical company that engages in discovering and developing drug candidates and diagnostic solutions for metabolic and liver-related diseases.
On September 26, GNFT announced that its NIS4® diagnostic technology demonstrated significant effectiveness in diagnosing at-risk NASH (non-alcoholic steatohepatitis). This development is a significant step toward regulatory approval and potential business expansion for GNFT's liver disease diagnostic technology.
On August 10, GNFT published data on the clinical performance of NIS2+™ for detecting at-risk NASH in older patients. These findings support potential CMS reimbursement and enhance the clinical value of GNFT's liver disease diagnostic technology, potentially expanding its market reach and business opportunities.
In terms of forward EV/Sales, GNFT is trading at 1.63x, 49.3% lower than the industry average of 3.21x. The stock’s forward Price/Sales multiple of 2.14 is 38.8% lower than the 3.50 industry average.
GNFT’s revenue for the fiscal half year ended June 30, 2023, increased 30.6% year-over-year to €11.48 million ($12.10 million), while its other income rose 14.6% from the prior-year period to €3.89 million ($4.10 million).
Its cash and cash equivalents at the end of the period came in at €111.83 million ($117.84 million). Its net cash flows provided by investment activities increased substantially from the prior-year figure to €2.68 million ($2.83 million).
For the fiscal year ending December 2023, GNFT’s revenue is estimated to reach $75.26 million, indicating an increment of 156.4% year-over-year. Meanwhile, EPS for the next fiscal year (ending December 2024) is estimated to increase 394.7% from the prior year to $0.50.
The company’s stock has declined marginally intraday to close its last trading session at $3.16.
GNFT’s strong fundamentals are reflected in its POWR Ratings. It has an overall rating of B, which equates to 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 Value and a B for Sentiment. It is ranked #31 in the Biotech industry. In addition to the aforementioned POWR Ratings, we have also given GNFT ratings for Growth, Momentum, Stability and Quality. Get all GNFT ratings here.
Stock #2: Entrada Therapeutics, Inc. (TRDA)
TRDA is a biotechnology company that develops Endosomal Escape Vehicle (EEV) therapeutics for various neuromuscular diseases, with a portfolio of programs, including candidates for Duchenne muscular dystrophy and myotonic dystrophy type 1.
On September 21, TRDA announced the initiation of a Phase 1 clinical trial for ENTR-601-44, a potential treatment for individuals with Duchenne muscular dystrophy who are exon 44 skipping amenable. This marks TRDA's transition into a clinical company. It expects to report data from the Phase 1 trial in the second half of 2024, marking a critical milestone in its developmental efforts.
On August 1, TRDA declared that it had received authorization from the Medicines and Healthcare Products Regulatory Agency (MHRA) for a Phase 1 clinical trial of ENTR-601-44 in healthy volunteers for potential Duchenne muscular dystrophy treatment. This milestone positions TRDA to advance its Duchenne franchise, potentially impacting the company's growth and progress in intracellular therapeutics.
TRDA’s forward EV/Sales of 2.68x is 16.6% lower than the 3.21x industry average. Its trailing-12-month Price/Cash Flow multiple of 4.34 is 74.6% lower than the industry average of 17.12.
During the second quarter that ended June 30, 2023, TRDA’s collaboration revenue came in at $18.17 million. The company’s loss from operations declined 30.9% from the year-ago quarter to $16.30 million. In addition, as of June 30, 2023, the company’s cash and cash equivalents and marketable securities stood at $376.79 million, compared to $188.71 million as of December 31, 2022.
Analysts expect TRDA’s revenue for the fiscal fourth quarter (ending December 2023) to stand at $9.72 million. Its EPS for the same period is projected to increase 19.2% year-over-year.
The stock has gained 13.2% intraday and 9.7% year-to-date to close the last trading session at $14.83.
It’s no surprise that TRDA has an overall B rating, equating to a Buy in our POWR Ratings system. It has a B grade for Value. It is ranked #29 within the same industry.
Beyond what is stated above, we’ve also rated TRDA for Growth, Momentum, Stability, Sentiment, and Quality. Get all TRDA ratings here.
Stock #1: MacroGenics, Inc. (MGNX)
MGNX is a biopharmaceutical company that develops and commercializes antibody-based therapeutics to treat cancer. The company’s approved product MARGENZA (margetuximab-cmkb) is used to treat adult patients with metastatic HER2-positive breast cancer who have received two or more prior anti-HER2 regimens.
On September 5, MGNX and Gilead Sciences, Inc. (GILD) announced the nomination of the first research program using MGNX' DART and TRIDENT platforms for bispecific antibodies, granting GILD exclusive rights upon meeting preclinical milestones.
MGNX will receive $15 million for this nomination and stands to earn up to $1.7 billion in fees and royalties under the agreement. This collaboration enhances MGNX’s revenue potential and highlights its position as a key player in developing innovative antibody-based therapeutics for cancer treatment.
In terms of forward EV/Sales, MGNX is trading at 0.98x, 69.5% lower than the industry average of 3.21x. The stock’s forward Price/Sales multiple of 2.66 is 24% lower than the 3.50 industry average.
For the fiscal second quarter that ended June 30, 2023, MGNX’s total revenues came in at $13.14 million. Net income of the company increased substantially year-over-year to $57.47 million, while its net income per common share also increased significantly from the previous year value to $0.92.
Additionally, the company’s cash, cash equivalents and marketable securities as of June 30, 2023, stood at $240.35 million, compared to $154.35 million as of December 31, 2022.
The consensus revenue estimate of $52.12 million for the third quarter (ended September 2023) represents a 24.9% increase year-over-year. The consensus EPS estimate for the same quarter indicates a 97.2% improvement year-over-year.
Shares of MGNX have risen 46.9% over the past year, closing the last trading session at $5.17. The stock has increased 10.9% over the past month.
MGNX’s strong fundamentals are reflected in its POWR Ratings. It has an overall rating of B, which equates to Buy in our proprietary rating system.
It has an A grade in Value and a B in Quality. Within the same industry, it is ranked #25. Click here to find MGNX ratings for Growth, Momentum, Stability, and Sentiment.
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.
TRDA shares were trading at $15.85 per share on Tuesday afternoon, up $1.02 (+6.88%). Year-to-date, TRDA has gained 17.23%, versus a 15.45% rise in the benchmark S&P 500 index during the same period.
About the Author: Anushka Dutta
Anushka is an analyst whose interest in understanding the impact of broader economic changes on financial markets motivated her to pursue a career in investment research.
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