The biotechnology industry has emerged at the forefront as a vital industry harboring potential for innovation, economic development, and enhanced healthcare deliverables. Having flourished immensely, particularly during the pandemic, the industry attributes its resilience to cutting-edge breakthroughs and unrelenting efforts in fighting the fatal virus. The industry's stable demand further reinforces its vitality, positioning it sturdily for sustained growth in the foreseeable future.
Given this backdrop, I think fundamentally strong biotech stocks Gilead Sciences, Inc. (GILD), Regeneron Pharmaceuticals, Inc. (REGN), and United Therapeutics Corporation (UTHR) could be wise portfolio additions for August.
Before delving deeper into the fundamentals of these stocks, let's first cast some light on the factors that are molding the future of the biotech industry.
The biotechnology industry holds vast potential to create extensive opportunities that stand to benefit society at large.
Biotechnology exhibits a wide array of profitable applications that are set to ensure sustained growth within the sector. One key area where biotech is poised to effect significant change is healthcare. Experts project it to be instrumental in groundbreaking advances in precision medicine, gene therapies, and regenerative medicines.
The expanding benefits of personalized treatments have incited a surge in the implementation of genomic and proteomics technologies as well as precision medicine. The precision medicine market is projected to grow at a CAGR of 11% by 2033.
Meanwhile, the essential role of government initiatives and investments in bolstering research and development efforts within the industry is undeniable. By streamlining the regulatory pathway for medications and the standardization process for clinical studies, these investments expedite the approval process for new vaccines and treatments.
Furthermore, the convergence of Generative AI and biotechnology is creating a faster pathway for drug discovery, streamlined disease diagnosis, customization of medication, and structural modifications in gene editing. These advancements have the potential to fortify the biotech industry in the impending future robustly.
The global biotechnology market is expected to grow at a CAGR of 12.8% to reach $3.21 trillion by 2030.
Hence, investors could capitalize on the industrial tailwinds by adding GILD, REGN, and UTHR to their portfolios.
Gilead Sciences, Inc. (GILD)
Biopharmaceutical company GILD discovers, develops, and commercializes medicines in the areas of unmet medical need in the United States, Europe, and internationally.
Recently, European Commission approved GILD’s Trodelvy® (sacituzumab govitecan) as a monotherapy for the treatment of adult patients with unresectable or metastatic hormone receptor (HR)-positive, HER2-negative breast cancer who have received endocrine-based therapy, and at least two additional systemic therapies in the advanced setting. This is an essential milestone for GILD and should bode well for the company.
On April 27, 2023, the company declared a quarterly dividend of $0.75 per share, which was paid to the shareholders on June 29. GILD pays $3 annually as dividends. This translates to a yield of 3.96% at the current market price.
Its four-year average dividend yield is 4%. The company’s dividend payouts have grown at a CAGR of 4.2% over the past three years and 6.3% over the past five years.
In terms of forward non-GAAP P/E, GILD is trading at 11.25x, 44.7% lower than the industry average of 20.33x. Its forward EV/EBITDA multiple of 8.47 is 37.6% lower than the 13.56 industry average.
GILD’s trailing-12-month EBITDA margin of 46.07% is significantly higher than the 3.93% industry average. Its trailing-12-month ROCE, ROTC, and ROTA of 27.28%, 13.87%, and 9.02% compare to the industry averages of negative 42.17%, 22.79%, and 33.06%, respectively.
During the fiscal first quarter that ended March 31, 2023, GILD’s total revenues stood at $6.35 billion, while its operating income rose significantly to $1.71 billion. The company’s 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.
For the fiscal quarter ending September 2023, Street expects GILD’s revenue and EPS to come at $6.81 billion and $1.87, respectively. It surpassed consensus revenue estimates in each of the four trailing quarters, which is impressive.
The stock has gained 27% over the past year to close the last trading session at $75.68.
This promising outlook is reflected in GILD’s POWR Ratings. The stock has an overall A rating, equating to a Strong Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
GILD has an A grade for Value and a B for Quality and Stability. Within the 394-stock Biotech industry, it is ranked #5.
Beyond what we have mentioned above, one can see GILD’s additional grades for Growth, Sentiment, and Momentum here.
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 multiple of 11.24 is 17.1% lower than the industry average of 13.56. Its forward non-GAAP P/E multiple of 18.30 is 10% lower than the industry average of 20.33.
REGN’s trailing-12-month EBITDA margin of 41.04% is significantly higher than the 3.93% industry average. Its trailing-12-month ROCE, ROTC, and ROTA of 19.27%, 12.06%, and 13.91% compare to the industry averages of negative 42.17%, 22.79%, and 33.06%, respectively.
For the fiscal first quarter that ended March 31, 2023, REGN’s total revenues increased 6.6% year-over-year to $3.16 billion. Its non-GAAP net income and net income per share stood at $1.17 billion and $10.09, respectively. Moreover, its free cash flow for the quarter stood at $1.19 billion.
The consensus revenue estimate of $3.15 billion for the fiscal third quarter ending September 2023 represents a 7.1% improvement year-over-year. Its EPS is expected to be $10.57 for the same quarter. Moreover, it surpassed the consensus EPS and revenues estimates in each of the trailing four quarters, which is impressive.
The stock has gained 28.2% over the past year to close the last trading session at $739.07. Over the past month, it gained 2.9%.
REGN’s solid fundamentals are reflected in its POWR Ratings. It has an overall rating of B, equating to a Buy in our POWR Ratings system.
REGN has a B grade for Value and Quality. It is ranked #9 within the Biotech industry.
Click here to see REGN’s additional POWR Ratings (Growth, Momentum, Stability, and Sentiment).
United Therapeutics Corporation (UTHR)
UTHR is a biotechnology company that develops and commercializes products to address the unmet medical needs of patients with chronic and life-threatening diseases internationally.
UTHR’s forward EV/EBITDA of 6.21x is 54.2% lower than the industry average of 13.56x. Its forward EV/EBIT multiple of 6.59 is 61.7% lower than the industry average of 17.20.
UTHR’s trailing-12-month EBITDA margin of 52.36% is significantly higher than the 3.93% industry average. Its trailing-12-month ROCE, ROTC, and ROTA of 15.66%, 11.30%, and 11.48% compare to the industry averages of negative 42.17%, 22.79%, and 33.06%, respectively.
UTHR’s revenues increased 9.7% year-over-year to $506.90 million in the fiscal first quarter that ended March 31, 2023, while its operating income stood at $284.40 million. Its net income and net income per share were $240.90 million and $4.86, respectively.
Moreover, its cash and cash equivalents for the same quarter came in at $1.16 billion, up 43.1% year-over-year. Also, UTHR’s retained earnings stood at $5.28 billion as of March 31, 2023, compared to $5.04 billion as of December 31, 2022.
The consensus revenue and EPS estimates of $544 million and $5.03 for the fiscal third quarter (ending September 2023) represent 5.4% and 3.3% year-over-year improvements, respectively.
The stock has gained 6.6% over the past year to close the last trading session at $240.13. Over the past month, the stock has gained 8.8%.
It is no surprise that UTHR has an overall rating of B, equating to a Buy in our POWR Ratings system.
UTHR has a B grade for Value and Quality. It is ranked #8 within the same industry.
In addition to the POWR Ratings highlighted above, one can see UTHR’s Growth, Momentum, Stability, and Sentiment ratings here.
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GILD shares were unchanged in premarket trading Wednesday. Year-to-date, GILD has declined -10.15%, versus a 20.26% 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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