The biotech industry is thriving with innovation, demand, adaptability, and technological improvements, displaying resilience. The biotech industry, fueled by groundbreaking discoveries in genetic engineering and personalized treatment, is likely to continue growing.
Therefore, it could be wise to own fundamentally strong biotech stocks Illumina, Inc. (ILMN), Innoviva, Inc. (INVA) and Puma Biotechnology, Inc. (PBYI).
Before delving deeper into their fundamentals, let’s discuss what’s happening in the biotech industry.
Agritech, also referred to as agricultural biotechnology, is the application of scientific techniques and practices to boost plant productivity. The concept is gaining popularity as biotechnology is increasingly used to improve or change the features of plants in terms of yield, diversity, and size. The global agricultural biotechnology industry is predicted to expand at a 9.6% CAGR until 2028.
The global biotechnology market is expected to reach $2.77 trillion by 2030 at a CAGR of 14.2%. The biotechnology market is a powerhouse of scientific innovation, revolutionizing industries such as healthcare, agriculture, and industrial operations. It is driven by research, tailored medicine, and long-term solutions, and it is critical to solving global concerns and encouraging varied applications.
Moreover, investors’ interest in biotech stocks can be gauged from the iShares Nasdaq Biotechnology Index Fund’s (IBB) 17.9% returns over the past three months.
Given these encouraging trends, let’s look at the fundamentals of the three best Biotech stocks, beginning with the third choice.
Stock #3: Illumina, Inc. (ILMN)
ILMN engages in the development, manufacturing, and marketing of life science tools and integrated systems for large-scale analysis of genetic variation and function. It operates through Core Illumina and GRAIL segments. It provides sequencing and array-based instruments and consumables, whole-genome sequencing, genotyping, NIPT, and product support services.
On January 15, 2024, ILMN and Concentric by Ginkgo, the biosecurity and public health unit of Ginkgo Bioworks Holdings, Inc. (DNA), which is developing the leading platform for cell programming and biosecurity, have collaborated to extend biosecurity capabilities around the world.
The partners agreed to demonstrate the use of Illumina products in conjunction with Concentric's bioradar to accelerate the expansion of the pathogen monitoring network, empowering nations and increasing the scale and scope of pathogen genomic surveillance globally.
ILMN’s trailing-12-month gross profit margin of 65.30% is 13.6% higher than the industry average of 57.46%. Its trailing-12-month EBITDA margin of 7.50% is 36.9% higher than the industry average of 5.48%.
In the fourth quarter that ended December 31, 2023, ILMN’s total revenue grew 3.6% year-over-year to $1.12 billion, and its service and other revenue came in at $199 million, an increase of 17.1% year-over-year. The company’s non-GAAP net income and EPS were $22 million and $0.14, respectively.
Analysts expect ILMN’s revenue to come in at $4.53 billion for the year ending December 2024, up marginally year-over-year. Its EPS is expected to grow 15.6% year-over-year to $0.99 for the same period. The company surpassed consensus EPS estimates in all of the trailing four quarters. The stock has gained 46% over the past three months to close the last trading session at $140.98.
ILMN’s POWR Ratings reflect this promising outlook. The stock has an overall rating of B, equating to a Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
ILMN has a B grade for Growth and Quality. Within the Biotech industry, it is ranked #33 out of 395 stocks. To see additional POWR Ratings for Value, Stability, Sentiment and Momentum for ILMN, click here.
Stock #2: Innoviva, Inc. (INVA)
INVA engages in the development and commercialization of pharmaceutical products in the United States and internationally. The company’s products include RELVAR/BREO ELLIPTA, ANORO ELLIPTA, and TRELEGY ELLIPTA.
INVA’s trailing-12-month EBIT margin of 42.10% is significantly higher than the industry average of 0.25%. Its trailing-12-month EBITDA margin of 48.80% is 790.1% higher than the industry average of 5.48%.
INVA’s total revenue for the third quarter that ended September 30, 2023, rose marginally year-over-year to $67.26 million. The company’s net product sales increased 168.3% over the prior-year quarter to $13.70 million. In addition, its net income attributable to INVA’s stockholders and net income per share came in at $82.05 million and $0.98, respectively.
The consensus revenue estimate of $319.47 million for the year ended December 2024 reflects a 6.4% year-over-year improvement. Its EPS is expected to come in at $0.82 for the same period. Shares of INVA has gained 27.2% over the past years to close the last trading session at $15.35.
It’s no surprise that INVA has an overall B rating, equating to a Buy in our POWR Ratings system. It has an A grade for Value and a B for Quality. It is ranked #27 in the same industry.
Beyond what is stated above, we’ve also rated INVA for Growth, Stability, Sentiment and Momentum. Get all INVA ratings here.
Stock #1: Puma Biotechnology, Inc. (PBYI)
PBYI is a biopharmaceutical company that focuses on developing and commercializing products to enhance cancer care in the United States and internationally. The company’s drug candidates include PB272 (neratinib, oral), PB272 (neratinib, intravenous), and PB357.
PBYI’s trailing-12-month EBIT margin of 12.16% is significantly higher than the industry average of 0.25%. Its trailing-12-month EBITDA margin of 16.59% is 202.7% higher than the industry average of 5.48%.
PBYI’s total revenue for the nine months that ended September 30, 2023, increased 0.7% year-over-year to $163.50 million. Its income from operations rose 29.9% year-over-year to $17.80 million. Also, the company’s non-GAAP adjusted net income and net income per share came in at $17.10 million and $0.36, up 15.5% and 9.1% over the prior-year period, respectively.
Street expects PBYI’s revenue to come in at $244.70 million for the year ending December 2024, up 3.2% year-over-year. Its EPS is expected to come in at $0.31 for the same period. Shares of PBYI have gained 106.9% over the past nine months to close the last trading session at $6.60.
PBYI has an overall B rating, equating to a Buy in our POWR Ratings system.
PBYI’s is ranked #9 in the same industry. It has an A grade for Value and a B for Growth and Quality. To see additional PBYI’s ratings for Stability, Sentiment and Momentum, click here.
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ILMN shares were trading at $141.26 per share on Thursday afternoon, up $0.28 (+0.20%). Year-to-date, ILMN has gained 1.45%, versus a 6.77% rise in the benchmark S&P 500 index during the same period.
About the Author: Rashmi Kumari
Rashmi is passionate about capital markets, wealth management, and financial regulatory issues, which led her to pursue a career as an investment analyst. With a master's degree in commerce, she aspires to make complex financial matters understandable for individual investors and help them make appropriate investment decisions.
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