The biotech industry is growing with government support, benefitting from the standardization of clinical research and improving the approval process. Moreover, the growing emphasis on food safety and quality, including the rising awareness and adoption of personalized medicines, is driving substantial expansion. Against this backdrop, investors might consider quality biotech stocks Genfit S.A. (GNFT), Equillium, Inc. (EQ), and Innoviva, Inc. (INVA) to boost portfolios in 2024.
The increasing adoption of organic food products necessitates the use of biotechnology in the agriculture sector, which is expected to drive the biotechnology market revenue growth. Also, the market is propelled by significant government support in the form of measures targeted at modernizing the regulatory framework, improving approval processes and reimbursement policies, and standardizing clinical research.
The global biotechnology market is expected to grow at a CAGR of 15.5% until 2030.
Furthermore, the rising awareness and adoption of personalized medicines, increased automation and digitalization within the life sciences industry, and a growing emphasis on food safety and quality, and advancements in genomics and proteomics are expected to contribute to growth in the market.
Moreover, the growing demand for the discovery and development of novel drug therapies and increasing manufacturing capacities of the life science industry are driving the demand for artificial intelligence (AI) empowered solutions in the drug discovery processes.
The global artificial intelligence in drug discovery market is expected to expand at a CAGR of 29.6% 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: Genfit S.A. (GNFT)
Headquartered in Loos, France, GNFT is a biopharmaceutical company that discovers and develops drug candidates and diagnostic solutions for metabolic and liver-related diseases. The company has a licensing agreement with Labcorp for the commercialization of NASHnext, a blood-based molecular diagnostic test; and Genoscience Pharma to develop and commercialize the investigational treatment GNS561 for CCA.
On December 6, 2023, GNFT announced the publication in the Journal of hepatology of a paper on the performance of NIS2+ as a screening tool for the enrollment of patients in Metabolic Dysfunction–Associated Steatohepatitis (MASH) clinical trials.
GNFT’s trailing-12-month gross profit margin of 100% is 75.9% higher than the industry average of 56.84%. Its trailing-12-month cash per share of 2.45x is 102.6% higher than the industry average of 1.21%.
During the six months ended June 30, 2023, GNFT’s revenues and other income increased % year-over-year to €15.37 million ($16.95 million). The company’s operating loss came in at €19.30 million ($21.28 million) and net profit stood at €20.44 million (22.54 million). Loss per share stood at €0.42.
Analysts expect GNFT’s EPS to be $0.10 for the fiscal year ending December 2023, while its revenue is expected to improve 104.8% year-over-year to $60.12 million for the same year.
The stock has soared 16.1% over the past month to close the last trading session at $3.75.
GNFT’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 Sentiment. It is ranked #31 in the 387-stock Biotech industry.
Beyond what is stated above, we’ve also rated GNFT for Momentum, Stability, Growth, and Quality. Get all GNFT ratings here.
Stock #2: Equillium, Inc. (EQ)
EQ is a biotech company specializing in treatments for severe autoimmune disorders. The company’s lead product, itolizumab (EQ001), is in Phase III trials for acute graft-versus-host disease. It also has projects for conditions like cutaneous T cell lymphoma and alopecia areata.
On November 13, EQ presented promising results from the EQUALISE study at the American College of Rheumatology’s annual meeting. The study, evaluating itolizumab for lupus nephritis, demonstrated high response rates, rapid reduction in proteinuria, and a favorable safety profile.
This data, part of a strategic partnership with Ono Pharmaceutical, suggests potential efficacy and tolerability in treating lupus nephritis compared to standard care, with noteworthy comparisons to a voclosporin study.
EQ’s trailing-12-month gross profit margin of 100% is 75.9% higher than the industry average of 56.84%. Its trailing-12-month levered FCF margin of 27.4% is significantly higher than the industry average of 0.29%.
For the third quarter ended September 30, 2023, EQ reported revenue of $8.87 million. The company’s general and administrative expenses and total operating expenses decreased 21.2% and 5.6% from the previous-year quarter to $3.52 million and $12.49 million, respectively. As of September 30, 2023, its total liabilities amounted to $31.12 million, compared to $46.48 million as of December 31, 2022.
Street expects EQ’s revenue to grow 108.2% year-over-year to $32.82 million for the fiscal year ending December 2023. Its EPS is expected to improve 77.6% from the previous year. The company surpassed the revenue estimates in each of the trailing four quarters, which is impressive.
EQ’s shares have gained 26.8% over the past month to close the last trading session at $0.63.
It’s no surprise that EQ has an overall rating of B, which equates to Buy in our proprietary rating system.
EQ has a B grade for Quality, Growth, Sentiment, and Value. It is ranked #20 in the same industry.
In addition to the POWR Ratings highlighted above, one can access EQ’s ratings for Stability and Momentum here.
Stock #1: 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).
INVA’s trailing-12-month EBIT margin of 42.10% is significantly higher than the industry average of 0.81%. Its trailing-12-month EEBITDA margin of 48.80% is 804% higher than the industry average of 5.40%.
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.
Over the past three months, the stock has gained 26.1%, closing the last trading session at $14.27.
INVA’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.
INVA has an A grade for Value and a B in Quality. It is ranked #18 in the same industry.
Click here to access the additional INVA ratings (Momentum, Growth and Sentiment Stability).
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GNFT shares were trading at $3.88 per share on Wednesday morning, up $0.13 (+3.47%). Year-to-date, GNFT has declined -11.60%, versus a 26.33% 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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