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, Incyte Corporation (INCY), Vertex Pharmaceuticals Incorporated (VRTX), and Amgen Inc. (AMGN). Given their solid financials and groundbreaking developments, these stocks could be your ticket to having a healthy and wealthy portfolio.
But before delving into the fundamentals of these stocks, let’s first understand the industry and its future prospects.
The realm of biotechnology has emerged as a prominent player, jostling shoulder-to-shoulder with rapidly advancing sectors. The advent of COVID-19 has further elevated the pivotal role of biotechnology, thrusting it into the limelight.
With the rising demand for clinical solutions to combat chronic diseases such as cancer, diabetes, neurological disorders, and cardiovascular diseases, the global biotechnology market is expected to grow at a CAGR of 14% over the next seven years.
Government initiatives focused on regulatory modernization, streamlined approval processes, enhanced reimbursement policies, and standardized clinical study protocols are propelling the market further.
Moreover, the growing foothold of personalized medicine and an increasing number of drug formulations attract innovative companies to contribute to the market’s growth. 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.
Moreover, the convergence of generative AI and biotechnology shows considerable potential in substantially strengthening the biotech sector. As per Precedence Research, the global generative AI in the healthcare market is expected to expand around $21.74 billion by 2032 with an impressive CAGR of 35.1%.
Furthermore, investors’ enthusiasm for biotech stocks is underscored by the First Trust NYSE Arca Biotechnology Index Fund ETF’s (FBT) impressive 11.2% gains over the past year.
Given such promising prospects, let’s dive deeper into the fundamentals of the Biotech stocks mentioned above to fully grasp everything this investment opportunity offers, starting with number 3.
Stock #3: Incyte Corporation (INCY)
INCY focuses on developing and commercializing therapies for hematology/oncology and inflammation and autoimmunity areas. It offers JAKAFI (ruxolitinib), MONJUVI (tafasitamab-cxix)/MINJUVI (tafasitamab), PEMAZYRE (pemigatinib), and ICLUSIG and other clinical-stage products.
On July 31, Replimune Group, Inc. (REPL) and INCY entered into a clinical trial collaboration and supply agreement to study REPL’s lead product candidate, RP1, in combination with INCY’s small molecule oral PD-L1 inhibitor, INCB99280.
The collaboration aims to explore RP1’s potential impact in the neoadjuvant setting for cutaneous squamous cell carcinoma (CSCC) and other cancer types, leveraging its tumor-directed oncolytic immunotherapy approach.
This trial’s positive response has the potential to revolutionize the patient experience and clinical outcomes completely and can prove to be a breakthrough in oncolytic immunotherapy.
In the same month, Syndax Pharmaceuticals, Inc. (SNDX) and INCY reported positive topline data from the AGAVE-201 trial of axatilimab, an anti-CSF-1R antibody, in patients with chronic Graft-Versus-Host Disease (GVHD) who have received two or more prior therapies. The trial achieved its primary endpoint, showing Overall Response Rates (ORR) of 74%, 67%, and 50% for different dosing regimens.
Such results should encourage and further support using axatilimab as a potentially curative option for patients.
For the fiscal second quarter that ended June 30, 2023, INCY’s total revenues increased 4.7% year-over-year to $954.61 million, while its income from operations stood at $193.78 million. The company’s net income and net income per share came in at $203.55 million and $0.90, representing increases of 26.1% and 25%, respectively, from the prior-year quarter.
In addition, as of June 30, 2023, INCY’s cash, cash equivalents, and marketable securities increased 5.7% compared to $3.42 billion for the period ended December 31, 2022.
The consensus revenue estimate of $968.14 million for the third quarter (ending September 2023) represents a 17.6% increase year-over-year. The consensus EPS estimate of $1.08 for the current quarter indicates an 80.2% improvement year-over-year.
INCY’s shares have gained 3.1% over the past three months to close the last trading session at $64.83.
INCY’s POWR Ratings reflect solid prospects. The stock has an overall rating of B, which equates to Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
INCY also has an A grade for Value and Quality. It is ranked #8 out of 375 stocks in the Biotech industry. Click here to see the other ratings of INCY for Growth, Momentum, Stability, and Sentiment.
Stock #2: Vertex Pharmaceuticals Incorporated (VRTX)
VRTX develops and commercializes Cystic Fibrosis (CF) therapies, including TRIKAFTA/KAFTRIO, SYMDEKO/SYMKEVI, ORKAMBI, and KALYDECO. It has a robust pipeline of investigational small molecule, cell, and genetic therapies in other serious diseases, including sickle cell disease, beta thalassemia, APOL1-mediated kidney disease, type 1 diabetes, alpha-1 antitrypsin deficiency, and muscular dystrophies.
On July 5, VRTX received European Commission approval for the use of ORKAMBI® (lumacaftor/ivacaftor) in children aged 1 to less than two years old who have two copies of the F508del mutation in the CFTR gene. With this approval, approximately 300 children with CF are eligible for the first time for a medicine that can treat the underlying cause of their disease.
Further, this expansion enables early intervention and improved outcomes for young CF patients. VRTX aims to address the underlying cause of CF in all patients through such advancements.
On June 26, VRTX and Lonza announced a strategic collaboration to manufacture VRTX’s stem cell-derived insulin-producing therapies for type 1 diabetes (T1D). Following the promising clinical results of the VX-880 and VX-264 programs, the partnership focuses on building a dedicated facility in New Hampshire to accelerate the development and commercialization of these transformative therapies. This should bode well for the company’s T1D cell therapy portfolio.
VRTX’s net product revenues increased 13.5% to $2.49 billion for the second quarter that ended on June 30, 2023. Its non-GAAP operating income stood at $1.15 billion. The company’s adjusted net income came in at $1.01 billion and $3.89 per share, representing increases of 9% and 8.1%, respectively, from the prior-year quarter.
Moreover, as of June 30, 2023, its cash, cash equivalents, and marketable securities, and total current assets amounted to $11.24 billion and 13.87 billion compared to $10.78 billion and $13.23 billion, respectively, for the period ended December 31, 2022.
Analysts expect VRTX’s revenue to increase 9.4% year-over-year to $2.52 billion in the fourth quarter (ending December 2023). Its EPS for the next quarter is projected to grow 2.4% from the prior year period to $3.85. Additionally, it surpassed the consensus EPS estimates in each of the trailing four quarters.
Over the past year, the stock has gained 24.8% to close the last trading session at $351.60.
VRTX’s strong fundamentals are reflected in its POWR Ratings. It has an overall rating of A, which translates to a Strong Buy in our proprietary rating system. It has an A grade for Quality and a B for Value, Stability, and Sentiment.
Within the same industry, it is ranked #7. Click here to view VRTX’s ratings for Growth and Momentum.
Stock #1: Amgen Inc. (AMGN)
AMGN is a global biotechnology company focusing on therapeutics for inflammation, oncology, bone health, cardiovascular disease, nephrology, and neuroscience. Its product portfolio includes Enbrel, Neulasta, Prolia, and Xgeva.
On August 1, backed by its strong financials, AMGN declared a dividend of $2.13 per share for the third quarter of 2023, payable to its shareholders on September 8, 2023.
AMGN’s annual dividend of $8.52 yields 3.32% at the current price level, while its four-year average dividend yield is 2.94%. Its dividend payouts have increased at a 10.1% CAGR over the past three years and a 10.3% CAGR over the past five years. Also, it has a record of 11 years of consecutive dividend growth.
On June 21, the company received approval from the U.S. Food and Drug Administration (FDA) for BLINCYTO® (blinatumomab) to treat CD19-positive B-cell precursor acute lymphoblastic leukemia (B-ALL) in first or second complete remission with Minimal Residual Disease (MRD) greater than or equal to 0.1%.
AMGN continues developing BLINCYTO for MRD-negative B-ALL and exploring subcutaneous formulations to minimize chemotherapy and address unmet patient needs. Such approvals should help AMGN in the successful trials and commercialization of BLINCYTO therapy globally.
During the fiscal second quarter that ended June 30, 2023, AMGN’s total revenues increased 5.9% year-over-year to $6.99 billion, while its non-GAAP operating income grew 5.4% from the year-ago value to $3.52 billion. Its non-GAAP net income increased 7.5% year-over-year to $2.68 billion. The company’s non-GAAP EPS came in at $5, reflecting a 7.5% increase from the prior-year quarter.
In addition, AMGN’s net cash provided by operating activities improved 112.9% year-over-year to $4.11 billion, while its cash and cash equivalents at the end of the period increased substantially year-over-year to $34.25 billion.
Street expects AMGN’s revenue and EPS to increase 3.7% and 13.4% year-over-year to $7.10 billion and $4.64, respectively, in the fourth quarter (ending December 31, 2023). The company has an impressive surprise history, surpassing the revenue and EPS estimates in three of the trailing four quarters.
The stock has gained 18.3% over the past three months to close the last trading session at $256.55.
It’s no surprise that AMGN has an overall rating of A, which equates to a Strong Buy in our proprietary rating system. It also has an A grade for Quality and a B for Stability and Sentiment. Of 375 stocks in the same industry, it is ranked #5.
In addition to the POWR Ratings we’ve stated above, we also have AMGN’s ratings for Growth, Value, and Momentum. Get all AMGN ratings here.
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AMGN shares were trading at $258.97 per share on Tuesday afternoon, up $2.42 (+0.94%). Year-to-date, AMGN has gained 1.22%, versus a 18.17% rise in the benchmark S&P 500 index during the same period.
About the Author: Shweta Kumari
Shweta's profound interest in financial research and quantitative analysis led her to pursue a career as an investment analyst. She uses her knowledge to help retail investors make educated investment decisions.
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