Despite macroeconomic issues, the biotech industry thrives on innovation, demand, and technical breakthroughs. Its durability, flexibility, and ability to attract investment and foster collaborations all help to ensure its success.
Given the industry’s growth prospects, investors could consider buying fundamentally sound biotech stocks Protalix BioTherapeutics, Inc. (PLX), Alnylam Pharmaceuticals, Inc. (ALNY), and Jazz Pharmaceuticals plc (JAZZ) for solid returns in 2024.
Before discussing the fundamentals of these stocks in detail, let’s see what’s driving the prospects of the biotech industry.
Biotechnology significantly impacts various aspects of daily life, including public health, pharmaceuticals, food and agriculture, bioenergetics, industry, and information technology. Despite the global health crisis, the biotech industry remains innovative and important, with lucrative applications demonstrating its potential for growth and advancement.
The global biopharmaceutical market is expected to reach $554.03 billion by 2028, with a 7.7% CAGR. This expansion can be ascribed to a number of factors, including the rising prevalence of chronic diseases and the growing need for tailored care. Also, advances in biotechnology and genetic engineering are propelling innovation in the biopharmaceutical industry, boosting its growth prospects.
Furthermore, the global biotechnology market is expected to reach $5.01 trillion by 2032 at a CAGR of 13.8%. Investors’ interest in biotech stocks can be gauged from iShares Nasdaq Biotechnology Index Fund’s (IBB) 10.7% returns over the past three months.
Considering these conducive trends, let’s take a look at the fundamentals of the three above-mentioned Biotech stocks, starting with the third choice.
Stock #3: Protalix BioTherapeutics, Inc. (PLX)
PLX pioneers the advancement, production, and commercialization of recombinant therapeutic proteins using its exclusive ProCellEx plant cell-based protein expression system. Furthermore, the company provides Elelyso, addressing Gaucher disease, while also advancing PRX-102, a therapeutic protein for Fabry disease treatment.
PLX’s forward EV/Sales of 1.64x is 55% lower than the industry average of 3.63x. Its forward Price/Sales of 1.87x is 53.7% lower than the industry average of 4.04x.
PLX’s trailing-12-month EBIT margin of 21.34% is significantly higher than the industry average of 0.90%. Its trailing-12-month EBITDA margin of 23.16% is 329% higher than the industry average of 5.40%.
For the nine months that ended September 30, 2023, PLX’s total revenue increased 41% year-over-year to $55.01 million. Its operating income stood at $16.08 million, compared to an operating loss of $10.52 million in the prior year’s quarter.
In addition, the company’s net income for the period and earnings per share of common stock came in at $14.36 million and $0.16, compared to a net loss and loss per share of $11.19 million and $0.24 in the previous year’s period, respectively.
The consensus revenue estimate of $62.15 million for the year ending December 2024. Its EPS is expected to grow at 38.1% year-over-year to $0.15 for the same period. It surpassed EPS estimates in all four trailing quarters. PLX’s shares have gained 5.8% over the past three months to close the last trading session at $1.64.
PLX’s POWR Ratings reflect this promising outlook. The stock has an overall B rating, equating to Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
PLX also has an A grade for Value and a B for Sentiment. It is ranked #27 out of 346 stocks in the Biotech industry. Click here for the additional POWR Ratings for Growth, Stability, Momentum and Quality for PLX.
Stock #2: Alnylam Pharmaceuticals, Inc. (ALNY)
ALNY is a biopharmaceutical company, focuses on discovering, developing, and commercializing novel therapeutics based on ribonucleic acid interference.
ALNY’s trailing-12-month gross profit margin of 84% is 47.8% higher than the industry average of 56.84%. Its trailing-12-month asset turnover ratio of 0.47x is 19.3% higher than the industry average of 0.39x.
In the third quarter ended September 30, 2023, ALNY reported total revenues of $750.53 million, up 184% from the previous-year quarter. Its income from operations stood at $213.87 million, compared to a loss from operations of $258.04 million in the prior year’s quarter.
In addition, the company’s net income for the period and earnings per share of common stock came in at $147.75 million and $1.15, compared to a net loss and loss per share of $405.92 million and $3.32 in the previous year’s period, respectively.
Analysts expect ALNY’s revenue to come in at $1.77 billion for the year ending December 2024. The stock has gained 16.2% over the past three months to close the last trading session at $195.08.
ALNY has an overall B rating, equating to a Buy in our POWR Ratings system. It has a B grade for Growth, Sentiment and Quality. It is ranked #15 in the same industry.
Beyond what is stated above, we’ve also rated ALNY for Value, Momentum and Stability. Get all ALNY ratings here.
Stock #1: Jazz Pharmaceuticals plc (JAZZ)
Based in Dublin, Ireland, JAZZ identifies, develops, and commercializes pharmaceutical products to address unmet medical needs. The company’s portfolio centers on neuroscience, encompassing sleep medicine and movement disorders, and oncology, such as hematologic and solid tumors.
JAZZ’s forward EV/Sales of 3.07x is 15.4% lower than the industry average of 3.63x. Its forward Price/Book of 2.15x is 20.9% lower than the industry average of 2.71x.
JAZZ’s trailing-12-month levered FCF margin of 28.98% is significantly higher than the 0.29% industry average. Its trailing-12-month EBIT margin of 27.14% is significantly higher than the 0.90% industry average.
For the third quarter that ended September 30, 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. Also, the company’s adjusted net income and adjusted EPS stood at $340.15 million and $4.84.
Street expects JAZZ’s revenue to increase 6% year-over-year to $4.06 billion for the fiscal year ending December 2024. Its EPS is expected to grow 4.9% year-over-year to $19.34 for the same period. Shares of JAZZ have gained marginally intraday to close the last trading session at $120.40.
JAZZ’s positive outlook is reflected in its POWR Ratings. The stock has an overall rating of A, translating to a Strong Buy in our proprietary rating system.
JAZZ has an A grade for Value and a B for Growth and Quality. It ranks #7 in the same industry. Click here to access additional JAZZ ratings (Stability, Sentiment and Momentum).
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ALNY shares were trading at $193.06 per share on Friday morning, down $2.02 (-1.04%). Year-to-date, ALNY has gained 0.86%, versus a 0.05% 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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