The biotech industry flourishes with the rising adoption of personalized medicines and the integration of cutting-edge technologies. Against this backdrop, investors might consider quality biotech stocks, Shionogi & Co., Ltd. (SGIOY), Equillium, Inc. (EQ), and BioMarin Pharmaceutical Inc. (BMRN) making major moves on wall street.
Government initiatives promoting regulatory modernization, streamlined approval processes, and enhanced reimbursement policies, along with standardized clinical studies, propel the biotech market. The rise of personalized medicine and the expanding portfolio of orphan drug formulations create opportunities for biotechnology applications, attracting emerging innovative companies and contributing to market revenue growth.
The global biotechnology market is expected to grow at a CAGR of 13.4% until 2032.
Furthermore, the rising awareness, increased automation and digitalization within the life sciences industry, and a growing emphasis on food safety and quality, including advancements in genomics and proteomics, are expected to boost the industry.
Biotech companies use cutting-edge technologies like artificial intelligence, big data analytics, and machine learning to accelerate drug discovery and vaccine development, identify targeted diseases, come up with breakthrough treatments, and enhance clinical trials. The use of artificial intelligence in the biotechnology market is anticipated to grow at a CAGR of 29.7% until 2032.
With these favorable trends in mind, let's delve into the fundamentals of the three best Biotech stocks, beginning with the third choice.
Stock #3: Shionogi & Co., Ltd. (SGIOY)
SGIOY engages in the research, development, manufacture, and distribution of pharmaceuticals, diagnostic reagents, and medical devices in Japan.
On December 7, 2023, SGIOY announced the acquisition of 1,230,100 common shares, totaling ¥8.65 billion, from November 1, 2023, to November 30, 2023, through discretionary trading on the Tokyo Stock Exchange. The total number of shares acquired under the resolution of July 31, 2023, is 5.84 million, with a total value of ¥38.65 billion.
SGIOY’s trailing-12-month gross profit margin of 84.99% is 49.1% higher than the industry average of 57%. Its trailing-12-month EBITDA margin of 33.47% is 545.1% higher than the industry average of 5.19%.
SGIOY’s revenue for the six months that ended September 30, 2023, increased 52.9% year-over-year to ¥230.54 billion ($1.54 billion). The company’s operating profit rose 247.6% year-over-year to ¥98.11 billion ($653.98 million). In addition, profit attributable to owners of the parent rose 58.2% over the prior-year quarter to ¥90.59 million ($603.85 million). Also, its EPS came in at ¥308.54, up 62.3% year-over-year.
Analysts expect SGIOY’s EPS to be $0.96 for the fiscal year ending March 2024, while its revenue is expected to improve 7.9% year-over-year to $2.97 billion for the same year. The company surpassed the revenue estimates in each of the trailing four quarters, which is impressive.
The stock has soared 10.4% over the past six months to close the last trading session at $11.88.
SGIOY’s POWR Ratings reflect its promising outlook. The stock has an overall rating of B, which translates to a Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
It has a B grade for Value and Quality. It is ranked #20 in the 355-stock Biotech industry.
Beyond what is stated above, we’ve also rated SGIOY for Momentum, Stability, Growth, and Sentiment. Get all SGIOY ratings here.
Stock #2: Equillium, Inc. (EQ)
EQ is a biotech company specializing in treatments for severe autoimmune disorders. The company’s lead product, itolizumab (EQ001), is in Phase III trials for acute graft-versus-host disease. It also has projects for conditions like cutaneous T cell lymphoma and alopecia areata.
EQ’s trailing-12-month gross profit margin of 100% is 75.9% higher than the industry average of 56.84%. Its trailing-12-month levered FCF margin of 27.4% is significantly higher than the industry average of negative 0.03%.
For the third quarter, which ended September 30, 2023, EQ reported revenue of $8.87 million. The company’s general and administrative expenses and total operating expenses decreased 21.2% and 5.6% from the previous-year quarter to $3.52 million and $12.49 million, respectively. As of September 30, 2023, its total liabilities amounted to $31.12 million, compared to $46.48 million as of December 31, 2022.
Street expects EQ’s revenue to grow 108.2% year-over-year to $32.82 million for the fiscal year ended December 2023. Its EPS is expected to improve 77.6% from the previous year. The company surpassed the revenue estimates in each of the trailing four quarters.
EQ’s shares have gained 214.8% over the past three months to close the last trading session at $1.56.
It’s no surprise that EQ has an overall rating of B, which equates to Buy in our proprietary rating system.
EQ has a B grade for Quality, Growth, Sentiment, and Value. It is ranked #17 in the same industry.
In addition to the POWR Ratings highlighted above, one can access EQ’s ratings for Stability and Momentum here.
Stock #1: BioMarin Pharmaceutical Inc. (BMRN)
BMRN develops and commercializes therapies for people with serious and life-threatening rare diseases and medical conditions. The company’s commercial products include Vimizim, Naglazyme, Kuvan, Palynziq, Brineura, Roctavian, Aldurazyme, and Voxzogo.
BMRN’s trailing-12-month CAPEX/Sales of 4.48% is 6.1% higher than the industry average of 4.22%. Its trailing-12-month EBITDA margin of 9.61% is 85.26% higher than the industry average of 5.19%.
For the fiscal third quarter that ended September 30, 2023, BMRN’s revenues increased 15% year-over-year to $581.33 million. Its non-GAAP income increased 72.1% year-over-year to $89.50 million. The company’s income from operations came in at $25.66 million, compared to a loss from operations of $2.42 million in prior-year quarter.
Additionally, its non-GAAP EPS came in at $0.46, registering an increase of 70.4% over the prior year quarter.
Analysts expect BMRN’s revenue for the fourth quarter (ended December 2023) to increase 17.9% year-over-year to $633.49 million. Further, the company’s EPS is estimated to grow 23.5% year-over-year to $0.45.
Over the past three months, the stock has gained 3.3%, closing the last trading session at $86.13.
BMRN’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.
BMRN has an A grade for Growth and a B in Value. It is ranked #16 in the same industry.
Click here to access the additional BMRN ratings (Momentum, Quality, and Sentiment Stability).
What To Do Next?
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SGIOY shares were trading at $11.80 per share on Wednesday afternoon, down $0.09 (-0.72%). Year-to-date, SGIOY has declined -1.44%, versus a 4.36% 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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