In this article, I have evaluated prominent biotech stocks, Moderna, Inc. (MRNA) and Exelixis, Inc. (EXEL), to predict which stock is worth buying. After thoroughly evaluating these stocks, I think EXEL is a superior choice to MRNA for the reasons discussed in this article.
The increasing research and development in personalized medicine, advancements in genetic engineering, and escalating demand for sustainable agriculture are some of the major factors propelling the biotechnology market. Apart from this, the convergence of biotechnology with information technology, known as bioinformatics, that enhances data-driven insights for research and development is propelling the market growth.
The global biotechnology market is expected to grow at a CAGR of 7.4% until 2028.
The growth of personalized medicine and the emergence of orphan drug formulations are offering new avenues for biotech firms. Additionally, cutting-edge medical technologies such as 3D bioprinting are being harnessed, contributing to the expansion and advancement of the biotech industry.
While MRNA declined 19.2% over the past six months compared to EXEL’s 15.4% gain, MRNA also declined 30.5% over the past six months compared to EXEL’s 16.4% gain.
Therefore, here are the reasons why I think EXEL might perform better in the near term:
Recent Developments
On December 15, 2023, MRNA announced the publication of positive Phase 3 clinical study results evaluating mRNA-1345, its vaccine candidate for respiratory syncytial virus (RSV), in The New England Journal of Medicine.
Conversely, on January 18, 2024, EXEL announced it had successfully defended European Patent number EP2593090 (c-MET Modulator Pharmaceutical Compositions) against three opponents, STADA Arzneimittel AG, Teva Pharmaceutical Industries Ltd., and Generics (U.K.) Ltd. in a hearing before the Opposition Division of the European Patent Office. The three-member panel of the Opposition Division rejected all grounds of opposition, thus upholding the patent as granted.
Recent Financial Results
MRNA’s total revenue for the fiscal third quarter that ended September 30, 2023 declined 45.5% year-over-year to $1.83 billion. Its net loss came in at $3.63 billion, compared to a net income of $1.04 billion in the previous-year quarter. Also, its loss per share came in at $9.53, compared to EPS of $2.67 in the previous-year quarter.
On the contrary, for the fiscal third quarter (ended September 30, 2023), EXEL’s total revenues increased 14.6% year-over-year to $471.92 million. Its non-GAAP net income and non-GAAP net income per share stood at $32.10 million and $0.10, respectively. For the nine months ended September 30, EXEL generated total revenues of $1.35 billion, up 13.8% year-over-year.
Past And Expected Financial Performance
MRNA’s revenue has increased at a CAGR of 233.4% over the past three years. Its revenue is expected to decline 66.6% in the year ended December 2023 and 53.2 in the fourth quarter ended December 2023. Its EPS is expected to be negative $13.76 in the year ended December 2023, negative $1.33 in the fourth quarter ended December 2023, and negative $2.99 in the current quarter ending March 2024.
Conversely, Over the past three years, EXEL’s revenue grew at a 22.8% CAGR. Analysts expect EXEL’s revenue to increase by 13.8% in the year ended December 2023, and 13.8% in the fourth quarter ended December 2023. Its EPS is expected to increase 8.7% in the year ended December 2023 and 97.2% in the current quarter ending March 2024.
Valuation
MRNA’s forward P/S multiple of 5.95 is higher than EXEL’s 3.82. Additionally, MRNA’s forward EV/Sales multiple of 4.18x is higher than EXEL’s 3.33x.
Thus, EXEL is more affordable.
Profitability
MRNA's trailing-12-month EBIT margin of negative 29.22% is lower than EXEL’s 2.31%. In addition, MRNA’s trailing-12-month net income margin of negative 38% is lower than EXEL’s 5.19%.
Thus, EXEL is more profitable.
POWR Ratings
MRNA has an overall rating of D, which equates to a Sell in our proprietary POWR Ratings system. Conversely, EXEL has an overall rating of A, translating to a Strong Buy. The POWR Ratings are calculated considering 118 different factors, with each factor weighted to an optimal degree.
Our proprietary rating system also evaluates each stock based on eight distinct categories. MRNA's D grade for Growth is in sync with its poor performance in the most recent quarter. On the other hand, EXEL's B grade for Growth is in sync with robust performance in the quarter.
Moreover, MRNA has a F grade for Stability, which is justified by its 24-month beta of 1.46. On the other hand, EXEL has a C grade for Stability, which is in sync with its 24-month beta of 0.70.
Among the 347 stocks in the B-rated Biotech industry, MRNA is ranked #221, while EXEL is ranked #4.
Beyond what we’ve stated above, we have also rated both stocks for Value, Momentum, Sentiment, and Quality. Get all MRNA ratings here. Click here to view EXEL ratings.
The Winner
With 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, the biotech industry is expected to see robust growth. Industry players such as MRNA and EXEL are well-positioned to benefit from these industry tailwinds.
However, EXEL's high profitability and low valuation multiples makes it the better buy.
Our research shows that the odds of success increase when one invests in stocks with an Overall Rating of Strong Buy or Buy. View all the top-rated stocks in the Biotech industry here.
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.
EXEL shares were trading at $22.37 per share on Friday morning, up $0.10 (+0.45%). Year-to-date, EXEL has declined -6.75%, versus a 0.66% 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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