The biotech sector plays a pivotal role in advancing healthcare by leading the development of innovative drugs designed to address unmet medical needs. Additionally, the rising U.S. Food and Drug Administration (FDA) approvals further brighten up the industry prospects.
With these factors in mind, in this piece, I have highlighted the fundamentals of three sound biotech stocks, Foghorn Therapeutics Inc. (FHTX), Jazz Pharmaceuticals plc (JAZZ), and Gilead Sciences, Inc. (GILD), which might benefit from the prevailing industry prospects. Let’s understand in detail.
Despite the biotech industry's reputation for resilience amid economic turbulence, investments in biotech companies have been notably lower than historical levels over the past two years.
However, there is anticipation for a potential recovery within the biotech industry, fueled by a resurgence in approvals from the FDA witnessed in 2023. Last year, the FDA granted approval to almost 50% more novel drugs compared to 2022, restoring approval rates to historic levels.
Meanwhile, approvals for innovative therapies featuring an active ingredient or molecule not previously sanctioned increased to 55 in 2023, a rise from 37 in 2022 and 51 in 2021. Analysts and investors believe these improvements could potentially trigger increased investments in biotech firms.
Furthermore, biotech companies are expected to ramp up spending, aiming to expedite research and development. According to an ICON plc (ICLR) survey of 130 biotech executives, 60% of respondents expected to increase R&D spending.
With increased emphasis on research and development expenditures, the surge in FDA approvals, and rising expectations of significant investments in the sector, the global biotechnology market is anticipated to achieve an impressive 14% CAGR spanning 2024 to 2030.
Overall, the biotech industry appears poised for a dynamic and prosperous future. Thus, it could be an opportune time to consider investing in the shares of FHTX, JAZZ, and GILD. With that being said, let’s examine the fundamentals of these aforementioned Biotech stocks in detail, beginning with number three.
Stock #3: Foghorn Therapeutics Inc. (FHTX)
FHTX is a clinical-stage biopharmaceutical company that engages in the discovery and development of medicines targeting genetically determined dependencies within the chromatin regulatory system. The company uses its proprietary Gene Traffic Control platform to identify, validate, and potentially drug targets within the system.
FHTX’s trailing-12-month CAPEX/Sales of 4.47% is 5.7% higher than the 4.23% industry average. Likewise, the stock’s trailing-12-month cash per share of $1.67 is 31.6% higher than the industry average of $1.27.
For the fiscal third quarter, which ended on September 30, 2023, FHTX’s collaboration revenue increased 163.5% from the year-ago value to $17.48 million, while its total operating expenses declined marginally from the prior-year quarter to $34.56 million.
Moreover, during the same quarter, the company’s cash and cash equivalents stood at $70.31 million, increasing 34.6% compared to $52.21 million as of December 31, 2022.
Street expects FHTX’s revenue for the fiscal year ended December 2023 to increase 68.7% year-over-year to $32.44 million. Meanwhile, its EPS for the same period is expected to register a 10.1% year-over-year improvement.
Over the past three months, the stock has gained 5.2% to close the last trading session at $3.25.
FHTX’s POWR Ratings reflect this promising outlook. The stock has an overall B rating, translating to a Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
It has a B grade for Sentiment and Quality. In the 347-stock Biotech industry, it is ranked #30. Click here to see FHTX’s ratings for Growth, Value, Momentum, and Stability.
Stock #2: Jazz Pharmaceuticals plc (JAZZ)
Headquartered in Dublin, Ireland, JAZZ is a biopharmaceutical company engaged in identifying, developing, and commercializing pharmaceutical products for unmet medical needs internationally. The company has a portfolio of products and product candidates with a focus on the areas of neuroscience and oncology.
On November 7, 2023, JAZZ and The University of Texas MD Anderson Cancer Center entered into a strategic research collaboration agreement for a five-year duration. The collaboration aims to assess zanidatamab, JAZZ’s investigational bispecific antibody targeting HER2, in various cancers expressing HER2.
The partnership leverages MD Anderson's expertise in translational medicine and clinical research alongside JAZZ’s growing capabilities in oncology drug development. Together, they aim to explore zanidatamab's potential as both monotherapy and in combination with other treatments across diverse tumor types and stages.
JAZZ’s trailing-12-month levered FCF margin of 28.98% compares to the negative industry average of 0.05%. Its trailing-12-month gross margin of 91.92% is 62.2% higher than the industry average of 57.02%. Furthermore, the stock’s trailing-12-month cash per share of $21.22 is significantly higher than the industry average of $1.27.
For the fiscal third quarter, which ended on September 30, 2023, JAZZ’s total revenues increased 3.3% year-over-year to $972.14 million. Its income from operations rose 596.2% from the year-ago value to $172.39 million.
Additionally, the company’s net income stood at $146.82 million and $2.14 per share versus a net loss of $19.65 million and $0.31 per share in the prior-year quarter, respectively.
The consensus revenue estimate of $3.83 billion for the fiscal year ended December 2023 represents a 4.7% improvement year-over-year. Meanwhile, the consensus EPS estimate of $18.44 for the same period reflects a 39.7% year-over-year rise.
The stock gained marginally intraday to close the last trading session at $120.11.
JAZZ’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.
It has an A grade for Value and a B for Growth and Quality. Within the same industry, it is ranked #11. Click here to see the other ratings of JAZZ for Momentum, Stability, and Sentiment.
Stock #1: 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 December 11, 2023, GILD announced that it had been acknowledged for the third consecutive year as one of the most sustainable pharmaceutical companies by the Dow Jones Sustainability World Index (DJSI World). Additionally, the company secured a spot on the Dow Jones Sustainability North America Index (DJSI North America).
These recognitions are a testament to GILD’s enduring commitment to sustainable business practices, transparency on environmental, social, and governance (ESG) matters, as well as its consistent performance in these areas.
GILD’s trailing-12-month gross profit margin of 78.81% is 38.2% higher than the industry average of 57.02%. Its trailing-12-month EBIT margin of 33.61% is significantly higher than the 0.04% industry average. Furthermore, the stock’s trailing-12-month cash per share of $4.57 is 261.4% higher than the industry average of $1.27.
In the fiscal third quarter, which ended on September 30, 2023, GILD’s total revenues increased marginally year-over-year to $7.05 billion, while its non-GAAP operating income stood at $3.22 billion. The company’s attributable non-GAAP net income and non-GAAP EPS came in at $2.88 billion and $2.29, up 20.4% and 20.5% from the year-ago value, respectively.
Analysts predict GILD’s EPS for the fiscal fourth quarter (ended December 2023) to increase 6.2% year-over-year to $1.77, while its revenue for the same quarter is expected to be $7.08 billion. Moreover, the company surpassed its revenue estimates in each of the trailing four quarters, which is excellent.
GILD’s shares have surged 2.5% over the past three months to close the last trading session at $79.48.
It’s no surprise that GILD has an overall rating of A, which equates to a Strong Buy in our proprietary rating system. It has an A grade for Value and a B for Quality. Out of 347 stocks in the same industry, it is ranked #5.
In addition to the POWR Ratings we’ve stated above, we also have GILD’s ratings for Growth, Momentum, Stability, and Sentiment. Get all GILD ratings 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.
GILD shares were trading at $79.10 per share on Wednesday morning, down $0.38 (-0.48%). Year-to-date, GILD has declined -2.36%, versus a 2.73% rise in the benchmark S&P 500 index during the same period.
About the Author: Anushka Mukherjee
Anushka's ultimate aim is to equip investors with essential knowledge that empowers them to make well-informed investment choices and attain sustained financial prosperity in the long run.
3 Biotech Stock Gems Bursting With Buy Opportunities StockNews.com
