As the global population continues to age and healthcare spending rises due to the rising frequency of infectious and chronic diseases, the demand for advanced healthcare solutions remains steadfast. Given the industry’s steady growth prospects, investors could buy quality biotech stocks Innoviva, Inc. (INVA), Genmab A/S (GMAB), and Alnylam Pharmaceuticals, Inc. (ALNY).
The expansion of healthcare infrastructure in emerging countries and the rapid growth of healthcare facilities and modernization is boosting the industry. The global biotechnology market is expected to grow at a CAGR of 12.8% until 2030.
Moreover, by region, the U.S. is the leading market for artificial intelligence in biotechnology owing to the relentless research and development of drug discovery using AI tools and models. Based on application, drug target identification registered a significant growth, attributed to the immense use of AI tools for large-scale anticancer drug development programs.
As a result, the AI in biotechnology market share is expected to grow at a 29.7% CAGR until 2032.
Moreover, the development of efficient and advanced technology, increased public awareness about personalized medicine, increasing government initiatives around the world, and the growing development of genetic databases are driving the global personalized medicine market.
The global personalized medicine market is projected to grow at a CAGR of 7.6% until 2030.
With these favourable trends in mind, let's delve into the fundamentals of the three best Biotech stocks, beginning with the third choice.
Stock #3: Innoviva, Inc. (INVA)
INVA is involved in the development and commercialization of pharmaceutical products globally. The company’s products include relvar/breo ellipta, anoro ellipta, and trelegy ellipta.
On November 1, INVA, in collaboration with The Global Antibiotic Research & Development Partnership (GARDP), announced positive results of its phase 3 clinical study of oral zoliflodacin to treat uncomplicated Gonorrhea.
This is a groundbreaking instance in antibiotic research and development as it paves the way for developing other antibiotics to address the impact of antimicrobial resistance (AMR).
On September 18, INVA’s wholly-owned subsidiary, Innoviva Specialty Therapeutics, launched XACDURO, co-packaged for intravenous use in patients of 18 years or above in the U.S.
This is for treating hospital-acquired bacterial pneumonia and ventilator-associated bacterial pneumonia (HABP/VABP) caused by susceptible isolates of Acinetobacter baumannii-calcoaceticus complex (Acinetobacter). XACDURO is the first and only pathogen-targeted antibiotic, and this launch is expected to drive the company’s sales and growth.
INVA’s trailing-12-month EBIT margin of 42.10% is significantly higher than the industry average of 0.78%. Its trailing-12-month EBITDA margin of 48.80% is 822.1% higher than the industry average of 5.29%.
During the third quarter that ended September 30, 2023, INVA reported a total revenue of $67.26 million. The company’s net product sales were $13.70 million, up 168.3% from the previous year’s quarter. Also, net income attributable to INVA’s stockholders came in at $82.05 million, or $0.98 per share for the third quarter.
In addition, the company’s cash and cash equivalents stood at $180 million as of September 30, 2023.
Analysts expect INVA’s revenue for the fourth quarter (ending December 2023) to increase 14.8% year-over-year to $75.52 million. Further, for the fiscal year 2023, the company’s EPS is estimated to grow 534.5% year-over-year to $1.67. Additionally, INVA topped the consensus revenue estimates in three of the trailing four quarters, which is impressive.
Over the past three months, the stock has gained 16.8%, closing the last trading session at $14.69.
INVA’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 an A grade for Value and a B in Value. It is ranked #14 in the 356-stock Biotech industry.
Beyond what is stated above, we’ve also rated INVA for Momentum, Stability, Growth, and Sentiment. Get all INVA ratings here.
Stock #2: Genmab A/S (GMAB)
Headquartered in Copenhagen, Denmark, GMAB develops antibody therapeutics for treating cancer and other diseases, primarily in Denmark. The company’s offerings include DARZALEX, a human monoclonal antibody; teprotumumab for treating thyroid eye disease; and Amivantamab for advanced or metastatic gastric or oesophageal cancer.
On October 22, 2023, GMAB announced additional results from the Phase 3 innovaTV 301 randomized global trial, which showed treatment with TIVDAK demonstrated a statistically significant and clinically meaningful 30 percent reduction in the risk of death in recurrent or metastatic cervical cancer patients with disease progression on or after front-line therapy, compared with chemotherapy.
On October 17, 2023, GMAB announced worldwide net trade sales of DARZALEX (daratumumab) for the third quarter of 2023, totalling $2,499 million. GMAB receives royalties on these sales from Janssen Biotech, Inc.
In terms of the trailing-12-month EBITDA margin, GMAB’s 39.56% is 647.6% higher than the 5.29% industry average. Likewise, its 99.41% trailing-12-month gross profit margin is 76.3% higher than the 56.39% industry average. Its 0.52x trailing-12-month asset turnover ratio is 32.6% higher than the 0.39x industry average.
GMAB’s revenue for the third quarter that ended September 30, 2023, increased 16.1% year-over-year to DKK4.74 billion ($687.67 million). Its operating profit came in at DKK1.72 billion ($249.53 million). Also, the company’s net profit and net profit per share came in at DKK2.13 billion ($309.02 million) and DKK32.32, respectively.
Street expects GMAB’s EPS for the fiscal fourth quarter ending December 2023 to increase 143.2% year-over-year to $0.31. Its revenue for the quarter ending March 31, 2024, is expected to increase 34.7% year-over-year to $567.17 million.
Shares of GMAB have gained 7.6% over the past month to close the last trading session at $31.29.
It’s no surprise that GMAB has an overall rating of B, which equates to Buy in our proprietary rating system.
GMAB has an A grade for Sentiment and a B in Value and Quality. It is ranked #16 in the same industry.
In addition to the POWR Ratings highlighted above, one can access GMAB’s ratings for Stability, Momentum, and Growth here.
Stock #1: Alnylam Pharmaceuticals, Inc. (ALNY)
ALNY is a biopharmaceutical company that focuses on discovering, developing, and commercializing novel therapeutics based on ribonucleic acid interference. The company's pipeline of investigational RNAi therapeutics focuses on genetic medicines, cardio-metabolic diseases, hepatic infectious diseases, and central nervous system (CNS)/ocular diseases.
On November 11, ALNY announced positive results from the KARDIA-1 Phase 2 study of zilebesiran, which is an investigational RNAi therapeutic targeting liver-expressed angiotensinogen (AGT) in development for the treatment of patients with hypertension and high cardiovascular risk. The study results were presented during the American Heart Association (AHA) Scientific Sessions.
ALNY’s trailing-12-month gross profit margin of 84% is 49% higher than the industry average of 56.39%. Its trailing-12-month asset turnover ratio of 0.47x is 20% higher than the industry average of 0.39x.
For the fiscal third quarter that ended September 30, 2023, ALNY’s net product revenues increased 34.8% year-over-year to $313.15 million. Its non-GAAP net income came in at $228.53 million, compared to a loss of $193.37 million in the previous-year quarter. Also, its non-GAAP net income per common share came in at $1.83, compared to negative $1.58 in the previous-year quarter.
The company’s revenue for the fiscal fourth quarter ending December 2023 is expected to increase 31.4% year-over-year to $440.17 million. Moreover, the company has surpassed the consensus revenue estimates in three of the trailing four quarters.
Over the past month, the stock has gained 1.8%, closing the last trading session at $170.37.
ALNY’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.
ALNY has a B grade for Growth, Quality, and Sentiment. It is ranked #20 in the same industry.
Click here to access the additional ALNY ratings (Momentum, Value, 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.
ALNY shares were trading at $174.09 per share on Wednesday morning, up $3.72 (+2.18%). Year-to-date, ALNY has declined -26.75%, versus a 20.86% 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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