The rising prominence of personalized medicine and an increasing number of orphan drug formulations are spurring the growth in the biotech sector. Moreover, the adoption of revolutionary technologies, such as 3D bioprinting, that use living cells to develop human body parts, such as heart valves, cartilage, and skin, is expected to boost the biotech industry.
As per Data Bridge Market Research, the biotechnology market is expected to grow at a CAGR of 29% from 2023 to 2030.
According to PWC’s Pharmaceutical & life sciences: U.S. Deals 2023 outlook, the market will place a significant premium on therapeutic area leadership this year. Also, the recent reset in valuations may provide opportunities for biotech companies to outperform investor expectations and create shareholder value by focusing on differentiated growth opportunities.
Furthermore, President Joe Biden signed an executive order last year and launched a national initiative to invest more than $2 billion in the U.S. biotechnology sector.
Consequently, the U.S. Department of Energy (DOE) is committed to taking key steps to advance the Biden-Harris Administration’s National Biotechnology and Biomanufacturing Initiative, which should benefit the industry tremendously.
Against this backdrop, quality biotech stocks Vertex Pharmaceuticals Incorporated (VRTX), Biogen Inc. (BIIB), and Jazz Pharmaceuticals plc (JAZZ) might be ideal buys. Moreover, these stocks have an overall A rating, which equates to a Strong Buy in our proprietary POWR Ratings system.
Vertex Pharmaceuticals Incorporated (VRTX)
VRTX engages in developing and commercializing therapies for treating cystic fibrosis; and has multiple current clinical and research activities to expand and extend its treatment. The company uses its understanding of causal human biology to develop exploratory medicines for other severe diseases.
VRTX’s forward non-GAAP PEG of 0.68x is 67.1% lower than the industry average of 2.07x. Its forward P/E multiple of 25.25 is 5.2% lower than the industry average of 26.64.
VRTX’s net product revenue increased 17.7% year-over-year to $2.33 billion in the third quarter ended September 30, 2022. The company’s non-GAAP operating income grew 11% year-over-year to $1.29 billion. Also, its non-GAAP net income increased 14% year-over-year to $1.04 billion, while its non-GAAP net income per share increased 14.3% from its year-ago value to $4.01.
Analysts expect VTRX’s revenue for the fourth quarter ended December 2022 to be $2.30 billion, representing 11% year-over-year growth. The company’s EPS will likely increase 4.3% year-over-year to $3.51 for the same fiscal quarter. The company has an impressive earnings surprise history, as it surpassed the consensus revenue estimates in each of the trailing four quarters.
VRTX has gained 32.9% over the past year to close its last trading session at $323.10.
VRTX’s POWR Ratings reflect its promising outlook. The stock has an overall rating of A, which translates to a Strong Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
VRTX also has an A grade for Quality and B for Value and Sentiment. It is ranked #2 among 400 stocks in the Biotech industry.
To access additional ratings for VRTX’s Growth, Stability, and Momentum, click here.
Biogen Inc. (BIIB)
BIIB discovers, develops, manufactures, and delivers therapies for treating neurological and neurodegenerative diseases.
On January 29, BIIB and Eisai Co Ltd announced that an application for manufacturing and marketing approval for lecanemab, an anti-amyloid-β protofibril* antibody in Japan, had been designated for Priority Review by the Japanese Ministry of Health, Labour and Welfare (MHLW).
In the US, lecanemab was granted accelerated approval as a treatment for AD by the U.S. Food and Drug Administration (FDA) on January 6, 2023.
Eisai and BIIB have been collaborating on the joint development and commercialization of AD treatments since 2014. Eisai serves as the lead of lecanemab development and regulatory submissions globally, with both companies co-commercializing and co-promoting the product.
BIIB’s forward EV/EBIT of 13.33x is 22.4% lower than the industry average of 27.18x. Its forward P/S multiple of 4.16 is 13.4% lower than the industry average of 4.81.
BIIB’s net income increased 244.7% year-over-year to $1.13 billion in the third quarter ended September 30, 2022. Its EPS grew 253.2% from the year-ago value to $7.84, while its total cost and expenses declined 54.3% year-over-year to $1.14 billion.
The consensus EPS estimate of $3.51 for the fourth quarter ended December 2022 represents a 3.1% improvement year-over-year. The company has surpassed the consensus revenue estimates in each of the trailing four quarters, which is impressive.
The stock has gained 40.2% over the past nine months to close the last trading session at $290.90.
BIIB’s POWR Ratings reflect its promising prospects. The stock has an overall rating of A, which translates to a Strong Buy in our proprietary ratings system.
BIIB is graded an A in Value, Sentiment, and Quality. Within the same industry, it is ranked #4
Click here to see additional POWR Ratings for Growth, Stability, and Momentum for BIIB.
Jazz Pharmaceuticals plc (JAZZ)
Headquartered in Dublin, Ireland, JAZZ identifies, develops, and commercializes pharmaceutical products for various unmet medical needs in the United States, Europe, and internationally.
The company has a portfolio of products and product candidates with a focus in the areas of neuroscience, including sleep medicine and movement disorders; and in oncology, including hematologic and solid tumors.
On December 21, 2022, JAZZ and Zymeworks Inc. (ZYME) announced their agreement in which JAZZ will continue with its exclusive development and commercialization rights to ZYME’s zanidatamab in key markets of the U.S., Europe, and Japan.
This milestone strengthens the company’s position in advancing therapy for cancer patients with significant unmet needs.
JAZZ’s forward EV/Sales of 4.03x is 2.3% lower than the industry average of 4.13x. Its forward Price/Sales multiple of 2.69 is 44% lower than the industry average of 4.81.
JAZZ’s total revenue increased 12.2% year-over-year to $940.65 million in the third quarter ended September 30, 2022. The company’s non-GAAP net income increased 41.7% from the year-ago value to $370.44 million, while its non-GAAP EPS grew 23.1% year-over-year to $5.17.
Street expects JAZZ’s revenue to increase 18.4% year-over-year in the fiscal year 2022 to $3.66 billion. The company’s EPS is expected to grow 2.8% year-over-year to $16.69 for the same year. The company has surpassed the consensus EPS and revenue estimates in three of the trailing four quarters.
The stock has gained 9% over the past three months, closing the last trading session at $156.66.
JAZZ’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall rating of A, which equates to a Strong Buy in our POWR Ratings system.
JAZZ also has an A grade for Value and a B grade for Sentiment and Growth. The stock is ranked #6 in the same industry.
Beyond the POWR Ratings grades just highlighted, you can access JAZZ ratings for Quality, Momentum, and Stability here.
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VRTX shares were trading at $318.51 per share on Wednesday morning, down $4.59 (-1.42%). Year-to-date, VRTX has gained 10.30%, versus a 5.80% rise in the benchmark S&P 500 index during the same period.
About the Author: Kritika Sarmah
Her interest in risky instruments and passion for writing made Kritika an analyst and financial journalist. She earned her bachelor's degree in commerce and is currently pursuing the CFA program. With her fundamental approach, she aims to help investors identify untapped investment opportunities.
3 Biotech Stocks to Get in on Before It’s Too Late StockNews.com
