The surge in demand for personalized medicine and the proliferation of orphan drug development are creating new avenues for biotechnology applications and are boosting the influx of emerging and innovative biotech companies. Further, technological innovation and supportive government funding and policies contribute to market growth.
Given the industry’s positive prospects, it could be ideal to keep an eye on quality biotech stocks G1 Therapeutics, Inc. (GTHX), Vanda Pharmaceuticals Inc. (VNDA), and Royalty Pharma PLC (RPRX) for potential gains.
The biotech industry continues its growth spree this year by possibly launching novel cell and gene therapies in 2024. In the current year, up to 21 cell therapies and 31 gene therapies are expected to be launched, of which personalized mRNA vaccines in cancer are expected to be an emerging therapy.
Moreover, the approval of the first CRISPR gene therapy in 2023 has refreshed opportunities in the segment, followed by trade-offs between China and the U.S., pushing major biotech companies to create a local value chain. The global biotechnology market is expected to reach $3.88 trillion by 2030, growing at a CAGR of 14%.
Meanwhile, the U.S. biotechnology market is projected to expand at a CAGR of 12.4% from 2024 to 2030. The market’s growth is further propelled by favorable government initiatives aimed at modernizing the regulatory framework and improving approval processes. Last year, the U.S. FDA approvals rose by approximately 50%.
Also, the generative AI in the biotech market is anticipated to showcase robust growth at a CAGR of 24.9%, resulting in a market volume of $472 million by 2032. The application of AI algorithms in designing novel molecules, proteins, and drugs is revolutionizing the drug discovery and development processes, driving the overall market expansion.
Moreover, investors’ interest in biotech stocks is evident from the SPDR Series Trust SPDR S&P Biotech ETF’s (XBI) 28.7% returns over the past six months.
Given the industry’s bright prospects, let’s delve into the fundamentals of the three best Biotech stock picks, beginning with the third choice.
Stock #3: G1 Therapeutics, Inc. (GTHX)
GTHX is a commercial-stage biopharmaceutical company that engages in the discovery, development, and commercialization of small molecule therapeutics for the treatment of patients with cancer. The company offers COSELA and is developing Trilaciclib, a Phase 3 clinical trial for 1L metastatic triple-negative breast cancer (mTNBC).
On February 13, 2024, GTHX announced the continuation recommendation by the independent Data Monitoring Committee (DMC) of the pivotal Phase 3 trial (PRESERVE 2), evaluating trilaciclib in combination with gemcitabine and carboplatin for the first-line treatment of metastatic triple-negative breast cancer (mTNBC).
The company remains optimistic and confident in the ability of trilaciclib to ultimately achieve the OS primary endpoint, which will eventually benefit patients and make available a meaningful new treatment option.
GTHX’s total revenues increased 45.1% year-over-year to $14.87 million for the fourth quarter ended December 31, 2023, of which its net product sales grew 57% from the year-ago value to $13.92 million. However, the company’s net loss came in at $10.88 million and $0.21 per share for the quarter, respectively.
Also, as of December 31, 2023, the company’s cash and cash equivalents and marketable securities, and total assets totaled $82.16 million and $121.54 million, respectively.
Per the full-year 2024 financial guidance, the company expects COSELA net revenue between $60 million and $70 million.
Street expects GTHX’s revenue for the first quarter (ended March 2024) to increase 16.4% year-over-year to $15.08 billion, but its EPS is expected to be negative $0.20 for the same quarter. For the fiscal year (ending December 2025), the company’s revenue is expected to grow 47.7% year-over-year to $101.70 million.
Over the past six months, GTHX’s stock has climbed 259.2% and 56.2% over the past year to close the last trading session at $4.31.
GTHX’s POWR Ratings reflect its robust outlook. The stock has an overall rating of C, which translates to a Neutral in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
GTHX has a B grade for Value and Growth. Also, the stock has a C grade for Momentum, Sentiment, and Quality. It is ranked #34 out of 363 stocks in the Biotech industry.
In addition to the POWR Ratings we’ve stated above, we also have GTHX’s other ratings. Get all GTHX ratings here.
Stock #2: Vanda Pharmaceuticals Inc. (VNDA)
VNDA is a biopharmaceutical company that focuses on the development and commercialization of therapies addressing high unmet medical needs globally. The company’s pipeline products include HETLIOZ (tasimelteon), Fanapt (iloperidone), and Tradipitant (VLY-686).
On April 2, 2024, VNDA received FDA approval for its Fanapt® (iloperidone) tablets for the acute treatment of manic or mixed episodes associated with bipolar I disorder in adults. Fanapt® is an atypical antipsychotic agent used for treating patients with schizophrenia.
The approval marks a significant Novel Indication for VNDA's Fanapt® franchise and offers patients and service providers a new treatment option for managing bipolar I disorder.
On January 31, VNDA announced that the FDA approved the Investigational New Drug application to evaluate VTR-297 for the treatment of onychomycosis. Onychomycosis, or tinea unguium, is a fungal infection of the nail that can result in discoloration of the nail and onycholysis (nail separation from the nail).
"The initiation of clinical studies with VTR-297 in the treatment of onychomycosis is an important milestone in studying and developing potential new therapies for this common disorder," said Mihael H. Polymeropoulos, M.D., Vanda’s President, CEO, and Chairman of the Board.
Also, on January 23, VNDA received the FDA approval to proceed with the Investigational New Drug (IND) application to evaluate VCA-894A for treating patients with Charcot-Marie-Tooth disease, axonal, type 2S (CMT2S), caused by cryptic splice site variants within the IGHMBP2 gene.
CMT2S is a rare subtype of Charcot-Marie-Tooth disease (CMT), an inherited peripheral neuropathy for which there is no available treatment. The approval marks a significant milestone in the pursuit of personalized medicine.
For the fourth quarter that ended December 31, 2023, VNDA reported total revenues of $45.27 million, while its HETLIOZ® net product sales came in at $21.07 million. Its other income was $5.43 million, up 82.1% year-over-year. As of December 31, 2023, the company’s total assets were $648.44 million, compared to $634.25 million as of December 31, 2022.
Analysts expect VNDA’s revenue for the second quarter (ending June 2024) to increase 3.1% year-over-year to $47.50 million. For the fiscal year 2024, the company’s revenue is expected to grow marginally year-over-year to $194.50 million. Furthermore, Vanda has surpassed the consensus EPS estimates in each of the trailing four quarters.
Shares of VNDA have surged 7.1% over the past month to close the last trading session at $4.06.
VNDA’s bright prospects are reflected in its POWR Ratings. The stock has an overall rating of B, equating to a Buy in our proprietary rating system.
The stock has an A grade for Value. The stock also has a B grade for Sentiment and Quality. VNDA is ranked #32 of 363 stocks in the same industry.
Click here to access additional ratings of VNDA for Momentum, Growth, and Stability.
Stock #1: Royalty Pharma PLC (RPRX)
RPRX is a buyer of biopharmaceutical royalties and a funder of innovations in the biopharmaceutical industry. The company is also involved in the identification, evaluation, and acquisition of royalties on various biopharmaceutical therapies. Its portfolio includes royalties on more than 35 commercial products and 14 development-stage product candidates.
On January 19, 2024, RPRX’s Board of Directors declared a dividend for the first quarter of 2024 of $0.21 per class A share, reflecting a 5% increase over the previous quarter’s dividend. The dividend was paid on March 15, 2024, to shareholders of record at the close of business on February 16, 2024.
RPRX pays an annual dividend of $0.84, which translates to a yield of 2.98% at the current share price. Its four-year average dividend yield is 1.72%. Moreover, the company’s dividend payouts have increased at a CAGR of 19.9% over the past three years.
On November 13, 2023, RPRX and Teva Pharmaceuticals International GmbH, a subsidiary of Teva Pharmaceutical Industries Ltd. (TEVA), collaborated to accelerate the clinical research program for Teva’s olanzapine LAI (TEV-‘749). Under the funding agreement, RPRX provided R&D funding for up to $125 million for olanzapine LAI development.
Olanzapine LAI (TEV-‘749) is a once-monthly subcutaneous long-acting injection of the atypical antipsychotic olanzapine for treating schizophrenia and, once approved, could potentially be the first long-acting olanzapine with a favorable safety profile.
During the fiscal year that ended December 31, 2023, RPRX’s total income and other revenues increased 5.3% year-over-year to $2.35 billion. The company’s operating income came in at $1.49 billion, up 386% from the prior year’s period. Net income attributable to RPRX was $1.13 billion, indicating a growth of 2539.5% year-over-year.
In addition, the company’s adjusted EBITDA rose 9.3% from the previous year’s period to $2.81 billion. And its non-GAAP portfolio cash flow grew 11.8% from the year-ago value to $2.71 billion.
According to its guidance for the full year 2024, RPRX expects portfolio receipts to be between $2.60 billion and $2.70 billion.
Street expects RPRX’s revenue and EPS for the second quarter (ending June 2024) to increase 16.9% and 13.4% year-over-year to $628.80 million and $0.96, respectively. Furthermore, the company surpassed the consensus EPS estimates in three of the trailing four quarters.
Shares of RPRX have gained 1.5% over the past month to close the last trading session at $28.25.
RPRX’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall rating of B, translating to a Buy in our proprietary rating system.
RPRX has a B grade for Sentiment. It is ranked #26 among the list of 363 stocks in the Biotech industry.
To access RPRX’s ratings for Value, Quality, Growth, Stability, and Momentum, click here.
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RPRX shares fell $0.05 (-0.18%) in premarket trading Tuesday. Year-to-date, RPRX has gained 1.08%, versus a 6.68% rise in the benchmark S&P 500 index during the same period.
About the Author: Mangeet Kaur Bouns
Mangeet’s keen interest in the stock market led her to become an investment researcher and financial journalist. Using her fundamental approach to analyzing stocks, Mangeet’s looks to help retail investors understand the underlying factors before making investment decisions.
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