Progress in the personalized medicines sector and the adoption of new avenues for biotechnology applications are boosting the biotech industry. However, concerns such as economic slowdowns and geopolitical risks might hamper its growth.
Therefore, while I think quality biotech stocks Gilead Sciences, Inc. (GILD) and Regeneron Pharmaceuticals, Inc. (REGN) might be solid buys, Titan Pharmaceuticals, Inc. (TTNP) might be best avoided.
The biotech market is driven by strong government support through initiatives aimed at the modernization of regulatory framework, improvements in approval processes & reimbursement policies, as well as standardization of clinical studies. The global biotechnology market is expected to grow at a CAGR of 13.4% until 2030.
Moreover, the growing foothold of personalized medicine and an increasing number of orphan drug formulations are opening new avenues for biotechnology applications and are driving the influx of emerging and innovative biotechnology companies, further boosting market revenue.
The global personalized medicine market is projected to grow at a CAGR of 7.2% until 2030.
However, concerns about the global economic slowdown, the impact of war in Ukraine, and the risks of stagflation envisaging numerous market scenarios are expected to affect Industrial biotechnology industry players.
In addition, robust changes brought in by the COVID-19 pandemic in the industrial biotechnology supply chain and the burgeoning drive for a cleaner and sustainable environment are expected to alter the industry’s strategies.
Stocks to Buy:
Gilead Sciences, Inc. (GILD)
GILD is a biopharmaceutical company that discovers, develops, and commercializes medicines in the areas of unmet medical need in the United States, Europe, and internationally.
On June 7, 2023, GILD and AbTherx, Inc., a privately held biotech company focused on accelerating the discovery and development of antibody therapeutics, announced a license agreement, which will provide AbTherx rights to GILD's recently acquired novel transgenic mouse technologies, which were developed by three of the AbTherx founders.
On May 15, 2023, GILD and Arcus Biosciences, Inc. (RCUS) announced that the companies had expanded the previously announced research collaboration focused on oncology to include therapies for the treatment of inflammatory diseases.
The expanded collaboration builds upon GILD’s growing presence in inflammatory disease and serves as a step towards broadening RCUS’ capabilities and portfolio beyond oncology and into inflammation.
On April 27, 2023, the company declared a quarterly cash dividend of $0.75 per share, payable on June 29, 2023. GILD pays $3 annually as dividends. This translates to a yield of 3.84% at the current market price, compared to the 4-year average dividend yield of 4%.
GILD’s forward EV/EBITDA of 8.70x is 33.6% lower than the industry average of 13.09x. Its forward P/S multiple of 3.65 is 15.8% lower than the industry average of 4.33.
During the fiscal first quarter ended March 31, 2023, GILD’s total revenues came in at $6.35 billion. Its net income increased significantly year-over-year to $985 million, whereas its earnings per share attributable to GILD increased significantly year-over-year to $0.80.
GILD’s revenue is expected to increase 3.3% year-over-year to $6.47 billion during the fiscal second quarter ending June 2023. Its EPS is expected to increase 7.5% year-over-year to $1.70 for the same quarter. Additionally, it has topped consensus revenue estimates in each of the trailing four quarters, which is impressive.
The stock has gained 27.7% over the past year to close the last trading session at $78.12.
GILD’s POWR Ratings reflect this promising outlook. The stock has an overall rating of A, which translates to a Strong Buy in our proprietary rating system. The POWR Ratings are calculated considering 118 distinct factors, with each factor weighted to an optimal degree.
It has an A grade in Value and a B in Stability and Quality. The stock is ranked #3 out of 382 stocks in the Biotech industry.
Click here to see the POWR Ratings of GILD (Growth, Momentum, and Sentiment).
Regeneron Pharmaceuticals, Inc. (REGN)
REGN discovers, invents, develops, manufactures, and commercializes medicines for treating various diseases worldwide.
On May 25, 2023, REGN announced positive data from three independent cohorts evaluating an investigational combination of LAG-3 inhibitor fianlimab and PD-1 inhibitor Libtayo (cemiplimab) in adults with advanced melanoma.
Omid Hamid, M.D., Director, Clinical Research and Immunotherapy at The Angeles Clinic and Research Institute and principal investigator of the trial, said, “LAG-3 inhibitors are known to complement PD-1 inhibitors in the treatment of advanced melanoma. There exists an unmet need to further improve the benefit to patients, including those with liver metastases and other high-risk prognostic markers.”
REGN’s forward EV/EBITDA of 11.97x is 8.6% lower than the industry average of 13.09x. Its forward EV/EBIT multiple of 13.11 is 19.5% lower than the industry average of 16.28.
REGN’s revenues increased 6.6% year-over-year to $3.16 billion for the fiscal first quarter that ended March 31, 2023. Non-GAAP net income came to $1.17 billion and non-GAAP net income per share stood at $10.09.
Street expects REGN’s revenue to increase 6.6% year-over-year to $3.06 billion in the fiscal second quarter (ending June 2023). Its EPS is expected to increase 4.5% year-over-year to $10.21 for the same quarter. Additionally, it has topped consensus EPS and revenue estimates in each of the trailing four quarters.
The stock gained 29.7% over the past year to close its last trading session at $746.52.
It’s no surprise that REGN has an overall rating of A, which translates to a Strong Buy in our POWR Ratings system.
REGN also has a B grade for Value, Momentum, and Quality. It is ranked #10 in the same industry.
For additional ratings for REGN for Growth, Sentiment, and Stability, click here.
Stock to Sell:
Titan Pharmaceuticals, Inc. (TTNP)
TTNP is a pharmaceutical company that develops therapeutics for the treatment of chronic diseases. It produces products based on ProNeura, a proprietary long-term drug delivery platform.
TTNP’s trailing-12-months EV/Sales of 22.54x is 443.8% higher than the industry average of 4.14x. It's trailing-12-month P/S multiple of 23.81 is 466.5% higher than the industry average of 4.20.
During the fiscal third quarter that ended March 31, 2023, TTNP’s total revenue declined 1.7% year-over-year to $98 thousand. Net loss reached $1.68 million, while its net loss per common share stood at $0.11. Also, its loss from operations came in at $1.70 million.
The stock has plunged 47.2% over the past nine months to close the last trading session at $0.76.
TTNP’s grim prospects are reflected in its POWR Ratings. The stock has an overall D rating, translating to a Sell in our POWR Ratings system.
TTNP also has a D grade for Stability and Momentum. It is ranked #256 in the same industry.
Beyond what is stated above, we’ve also rated TTNP for Value, Growth, Sentiment, and Momentum. Get all TTNP ratings here.
What To Do Next?
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GILD shares were trading at $77.75 per share on Monday morning, down $0.37 (-0.47%). Year-to-date, GILD has declined -8.57%, versus a 13.03% 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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