The biotech industry has exhibited resilience and versatility, particularly throughout the pandemic, thanks to its advanced innovations and relentless pursuit of mitigating the hazardous virus. Its strong position is further bolstered by a consistent demand that secures the industry's stability in the foreseeable future.
Against this backdrop, investors might want to direct their attention to quality biotech stocks Organogenesis Holdings Inc. (ORGO), Theratechnologies Inc. (THTX), and Vertex Pharmaceuticals Incorporated (VRTX) to elevate and invigorate their portfolios.
Biotechnology, a rapidly evolving scientific sector, has already demonstrated its profound influence across various facets of daily human existence, such as public health, pharmaceuticals, food and agriculture, industry, bioenergetics, and information technology.
Indisputably, the biotech industry is one of the most pioneering and vital segments in the global economy, as evidenced during the global pandemic. The extensive array of lucrative applications further cements the industry's resilient standing for potential growth and advancement.
Government initiatives are pivotal in fostering the industry’s sustainability, notably enhancing research and development activities. The proposed 2023 Budget earmarks $5 billion for the Advanced Research Projects Agency for Health (ARPA-H) to catalyze biomedical advancements on multitudinous scales – from the molecular to the societal – ensuring the creation of ground-breaking patient treatments.
The University of Maryland, Baltimore, received a four-year, $4 million Research Evaluation and Commercialization Hubs (REACH) grant from the National Institutes of Health (NIH), which would bolster collective efforts to foster the biomedical entrepreneurship and innovation sector in West Baltimore and the Greater Baltimore. Moreover, it could facilitate the development of one of the country's most diverse workforces within biomedical science and entrepreneurship.
The financial injections streamline the regulatory path for medical products and standardize clinical study methodologies, accelerating new vaccines and treatment approval.
Generative AI’s incorporation into the biotech industry supports the industry, setting the stage for rapid drug discovery, efficient disease diagnosis, tailored medication plans, and sophisticated alterations in gene editing.
The global biotechnology market is expected to grow at a CAGR of 20.4% to reach $4.15 trillion by 2030. Furthermore, investors’ interest in biotech stocks is evident by the First Trust NYSE Arca Biotechnology Index Fund ETF’s (FBT) impressive 9.7% gains over the past month.
In light of these encouraging trends, let's look at the fundamentals of the three Biotech stocks, beginning with number 3.
Stock #3: Organogenesis Holdings Inc. (ORGO)
ORGO is a regenerative medicine company that develops, manufactures, and commercializes solutions for the advanced wound care and surgical and sports medicine markets in the United States.
ORGO’s trailing-12-month asset turnover ratio of 0.98x is 145.7% higher than the industry average of 0.40x. Its trailing-12-month gross profit and EBITDA margins of 76.43% and 8.11% are 34.5% and 50.3% higher than the industry averages of 56.84% and 5.40%, respectively.
In the fiscal third quarter that ended September 30, 2023, ORGO’s net revenue and gross profit stood at $108.53 million and $82.74 million, respectively. The company’s income from operations rose 352.5% year-over-year to $8.05 million.
Moreover, its adjusted EBITDA increased 37.6% year-over-year to $15.97 million. For the same quarter, adjusted net income stood at $5.30 million, up 4.1% from the prior-year quarter, while net income per share stood at $0.02.
Street expects ORGO’s revenue and EPS in the fiscal year ending December 2023 to be $440.35 million and $0.04, respectively. The company surpassed consensus EPS estimates in each of the trailing four quarters, which is impressive.
The stock has gained 87.5% over the past nine months to close the last trading session at $3.75. Over the past three months, it has gained 60.3%.
ORGO’s POWR Ratings reflect its positive prospects. The stock has an overall B rating, equating to Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 distinct factors, with each factor weighted to an optimal degree.
The stock has an A grade for Value and a B for Quality. Within the Biotech industry, it is ranked #25 out of 343 stocks.
To see additional POWR Ratings for Growth, Momentum, Stability, and Sentiment for ORGO, click here.
Stock #2: Theratechnologies Inc. (THTX)
Headquartered in Montreal, Canada, THTX is a biopharmaceutical company focused on developing and commercializing various therapies addressing unmet medical needs. The company commercializes two medicines in Human Immunodeficiency Viruses (HIV) and has research programs in Non-Alcoholic Steatohepatitis (NASH), Oncology, and HIV.
On December 13, THTX received the United States Food and Drug Administration (FDA) approval for the company’s Labelling Prior Approval Supplement to include a 2000-mg intravenous (IV) push loading dose for Trogarzo (ibalizumab-uiyk). Complete IV push method enables easier and more convenient administration of Trogarzo for heavily treatment-experienced adults with HIV.
THTX’s trailing-12-month levered FCF margin of 10.97% is significantly higher than the industry average of 0.29%, while its trailing-12-month asset turnover ratio of 1.05x is 163.1% higher than the industry average of 0.40x.
In the fiscal third quarter that ended August 31, 2023, THTX’s revenue increased marginally year-over-year to $20.86 million. For the same quarter, adjusted EBITDA stood at $2.16 million, compared to an adjusted EBITDA of negative $3.85 million in the prior-year quarter.
Moreover, cash flows from operating activities stood at $5.33 million, compared to cash flows used in operating activities of $2.76 million in the year-ago quarter. As of August 31, 2023, THTX’s total current liabilities came at $97.66 million, compared to $114.28 million as of November 30, 2022.
Street expects THTX’s revenue for the fiscal fourth quarter ending November 2023 to increase 9.5% year-over-year to $23.36 million.
The stock has gained 18.8% over the past month to close the last trading session at $1.58.
THTX’s solid fundamentals are reflected in its POWR Ratings. The stock has an overall rating of B, translating to Buy in our proprietary rating system.
THTX has a B grade for Value, Sentiment, and Quality. Within the same industry, it is ranked #17.
Beyond what we’ve stated above, we have also rated the stock for Growth, Momentum, and Stability. Get all ratings of THTX here.
Stock #1: Vertex Pharmaceuticals Incorporated (VRTX)
VRTX is a biotech company focused on developing and commercializing therapies for Cystic Fibrosis (CF). The company portfolio includes products like TRIKAFTA/KAFTRIO, SYMDEKO/SYMKEVI, ORKAMBI, and KALYDECO. Its pipeline covers treatments for CF, pain, sickle cell disease, beta thalassemia, AAT deficiency, Type 1 Diabetes, and cancer.
On December 11, VRTX presented positive and durable results for CASGEVY™, a CRISPR/Cas9 gene-edited therapy, in global trials for sickle cell disease and transfusion-dependent beta-thalassemia, with FDA approval for severe SCD and ongoing investigation for TDT.
The European Medicines Agency’s (EMA) Committee for Medicinal Products for Human Use (CHMP) adopted a positive opinion for the conditional approval of CASGEVY. This should bode well for the company.
VRTX’s trailing-12-month cash per share of $43.09 is significantly higher than the industry average of $1.21. Its trailing-12-month EBIT and levered FCF margins of 45.67% and 40.60% are significantly higher than the industry averages of 0.81% and 0.29%, respectively.
In the fiscal third quarter that ended September 30, 2023, VRTX’s net product revenues stood at $2.48 billion, up 6.4% year-over-year, while non-GAAP operating income stood at $1.17 billion.
For the same quarter, non-GAAP net income and non-GAAP net income per common share increased 2.3% and 1.7% from the prior-year quarter to $1.06 billion and $4.08, respectively. As of September 30, 2023, VRTX’s total current assets came at $14.70 billion, compared to $13.23 billion as of December 31, 2022.
Street expects VRTX’s revenue and EPS in the fiscal fourth quarter ending December 2023 to increase 9.4% and 8.3% year-over-year to $2.52 billion and $4.07, respectively. The company surpassed consensus EPS estimates in each of the trailing four quarters.
The stock has gained 40.1% year-to-date to close the last trading session at $404.65. Over the past nine months, it has gained 36.8%.
VRTX’s robust prospects are reflected in its POWR Ratings. The stock has an overall A rating, equating to a Strong Buy in our proprietary rating system.
VRTX has an A grade for Quality and a B for Value. It is ranked #9 within the same industry.
Click here for the additional POWR Ratings for VRTX (Growth, Momentum, Stability, and Sentiment).
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.
VRTX shares were unchanged in premarket trading Tuesday. Year-to-date, VRTX has gained 40.12%, versus a 24.78% rise in the benchmark S&P 500 index during the same period.
About the Author: Sristi Suman Jayaswal
The stock market dynamics sparked Sristi's interest during her school days, which led her to become a financial journalist. Investing in undervalued stocks with solid long-term growth prospects is her preferred strategy. Having earned a master's degree in Accounting and Finance, Sristi hopes to deepen her investment research experience and better guide investors.
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