The biotechnology industry is booming, driven by growing demand for novel treatments amid the aging population and surging healthcare needs, technological advances such as CRISPR-Cas9 gene editing, next-generation sequencing, personalized medicine, AI, big data, and synthetic biology. Government support also plays a vital role in the industry’s expansion.
Amid this backdrop, investors could consider fundamentally sound biotech stocks Equillium, Inc. (EQ), SIGA Technologies Inc. (SIGA), and Shionogi & Co., Ltd. (SGIOY) under $20 for potential gains.
Biotech plays a crucial role across several sectors, such as healthcare, agriculture, and industrial manufacturing. The U.S. biotechnology market is expected to reach $1.78 trillion by 2033, growing at a CAGR of 12.5%. Rising investments by pharmaceutical companies, government initiatives, and high demand for medication drive the market growth.
As part of President Biden’s investing in America agenda, the White House recently advanced biotechnology and biomanufacturing leadership with the launch of the National Bioeconomy Board to realize the potential of biotechnology for the U.S. economy. This marked an important step toward the biotech sector’s growth.
The combination of biotech and agriculture is paving the way for various evolutions. Scientists are using modern biotechnology tools, like gene editing, to make precise genetic changes and more quickly develop plants, animals, and microbes with desired traits, leading to increased resiliency and sustainability in agriculture.
Also, the National Security Commission on Emerging Biotechnology is developing policy recommendations to lower barriers to entry for products and potentially allow more researchers to leverage biotechnology for agricultural applications to support U.S. farmers and increase food security, adding new avenues for the market.
The agricultural biotechnology market is expected to exhibit growth at a CAGR of 7.9%, resulting in a revenue value of $232 billion by 2032.
Given these favorable market trends, let’s look at the fundamentals of the top three Biotech stocks, beginning with the third choice.
Stock #3: Equillium, Inc. (EQ)
EQ is a clinical-stage biotechnology company that develops and sells products to treat severe autoimmune and inflammatory or immuno-inflammatory disorders with unmet medical needs. Its lead product candidate is itolizumab (EQ001), a first-in-class monoclonal antibody. It also develops EQ101 and EQ302.
In terms of forward non-GAAP P/E, EQ is trading at 18.38x, 5.2% lower than the industry average of 19.38x. Likewise, the stock’s forward EV/Sales multiple of 0.48 is 86.1% lower than the industry average of 3.47. Also, its forward Price/Sales of 1.23x is 65.6% lower than the industry average of 3.58x.
On May 14, EQ announced that it had surpassed the interim enrollment target for the Phase 3 EQUATOR study of itolizumab in acute graft-versus-host disease (aGVHD). The company expects delivery of the interim data review to Ono Pharmaceutical Co. Ltd. during the third quarter, triggering Ono’s option exercise period.
On April 1, EQ announced positive topline data from the Type B portion of the Phase 1b EQUALISE study evaluating itolizumab in lupus nephritis patients. The report suggested high complete and partial response rates with a fast and deep reduction in urine protein creatinine ratio when itolizumab was added to mycophenolate mofetil/mycophenolic acid and corticosteroids.
For the first quarter that ended March 31, 2024, EQ’s revenue increased 20.4% from the year-ago value to $10.69 million. Cash inflows from operating activities were $8.80 million for the quarter. The company’s cash and cash equivalents and total assets were $32.28 million and $43.60 million as of March 31, 2024, respectively.
Analysts expect EQ’s revenue for the third quarter (ending September 2024) to increase 181% year-over-year to $24.93 million. For the fiscal year 2024, the company’s revenue is expected to grow 16.6% year-over-year to $42.07 million. Furthermore, the company surpassed the consensus revenue and EPS estimates in each of the trailing four quarters.
Shares of EQ have surged 153.5% over the past six months and 128.9% over the past year to close the last trading session at $1.47.
EQ’s bright prospects are reflected in its POWR Ratings. The stock has an overall rating of B, which translates to a Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, each weighted to an optimal degree.
The stock has a B grade for Value, Sentiment, and Quality. Within the Biotech industry, EQ is ranked #24 out of 356 stocks.
Click here to access additional ratings of EQ for Momentum, Growth, and Stability.
Stock #2: SIGA Technologies Inc. (SIGA)
SIGA is a commercial-stage pharmaceutical company that emphasizes health security-related markets. The company’s lead product include TPOXX, an oral formulation antiviral drug for treating human smallpox disease caused by the variola virus.
In terms of forward EV/EBITDA, SIGA is trading at 3.80x, 70.3% lower than the industry average of 12.80x. Similarly, the stock’s forward Price/Sales multiple of 2.98 is lower than the industry average of 3.58. Further, its forward EV/Sales of 2.18x is 37.2% lower than the industry average of 3.47x.
On April 1, SIGA amended its international promotion agreement with Meridian Medical Technologies, Inc., under which SIGA will drive international promotion activities for oral TPOXX® and maintain its contractual relationship with Meridian to maintain continuity for key customer relationships.
The company believes the amendment in the Meridian promotion agreement will be instrumental in driving long-term growth opportunities for oral TPOXX.
On March 12, SIGA’s Board of Directors declared a special cash dividend of $0.60 per share on its common stock, representing an increase of $0.15 per share, or 33%, over the June 2023 special dividend. The dividend increase reflects the company’s robust capital structure and its ability to provide stable growth in the long run.
For the first quarter that ended March 31, 2024, SIGA’s total revenues increased 205.5% year-over-year to $25.43 million, of which its product sales and supportive services revenue grew 318.7% from the year-ago value to $23.88 million, respectively.
Also, the company’s net income came in at $10.28 million and $0.14 per share, against a net loss of $918.25 thousand and $0.01 per share in the previous year’s quarter, respectively.
Analysts expect SIGA’s revenue and EPS for the fiscal year (ending December 2024) to increase 26.9% and 24.2% year-over-year to $177.56 million and $1.18, respectively.
Shares of SIGA have gained 37% over the past six months and 33.6% over the past year to close the last trading session at $7.44.
SIGA’s sound fundamentals are reflected in its POWR Ratings. The stock has an overall rating of B, which translates to a Buy in our proprietary rating system.
The stock has an A grade for Value, Growth, and Quality. Within the Biotech industry, SIGA is ranked #8 of 356 stocks.
Click here to access additional ratings of SIGA for Momentum, Sentiment, and Stability.
Stock #1: Shionogi & Co., Ltd. (SGIOY)
Headquartered in Osaka, Japan, SGIOY is engaged in the research, development, manufacture, and distribution of pharmaceuticals, diagnostic reagents, and medical devices. The company offers Fetroja, Cabenuva and Apretude, Xocova, Finibax, Xofluza, and Tivicay.
In terms of forward EV/EBITDA, SGIOY is trading at 9.57x, 25.3% lower than the industry average of 12.80x. Also, the stock’s forward EV/EBIT multiple of 10.81 is 32.5% lower than the industry average of 16.01. Further, its forward Price/Cash Flow of 10.55x is 31.6% lower than the industry average of 15.42x.
On May 28, SGIOY’s subsidiary Taiwan Shionogi & Co., Ltd. launched the sale of Gram-negative bacterial infection treatment FETROJA® (Cefiderocol) 1g, which is a siderophore cephalosporin antibiotic in Taiwan as of May 27, 2024. This reflects SGIOY’s commitment to protecting people from the threat of infectious diseases.
On May 10, SGIOY and Maze Therapeutics, Inc. completed an exclusive worldwide license agreement for the rights to MZE001, an investigational oral glycogen synthase 1 inhibitor that aims to address Pompe disease by limiting disease-causing glycogen buildup.
Under the agreement, SGIOY acquired exclusive worldwide rights for MZE001 and related programs and intellectual property. The deal strongly fits SGIOY and adds new prospects to its growing pipeline in rare diseases.
Also, on May 9, SGIOY collaborated with Nagasaki University, the National Institute of Infectious Diseases, and the not-for-profit research and development organization Medicines for Malaria Venture to create new prevention drugs for malaria. This collaborative research will be funded by the Global Health Innovative Technology Fund and will be implemented with their support.
SGIOY’s revenue increased 2% year-over-year to ¥435.10 billion ($2.76 billion) for the fiscal year that ended March 31, 2024. Its operating profit grew 2.9% from the prior year to ¥153.30 billion ($973.94 million). Furthermore, the company’s EBITDA increased 7.5% year-over-year to ¥188.70 billion ($1.20 billion).
Street expects SGIOY’s revenue and EPS for the fiscal year (ending March 2025) to grow 23.7% and 0.6% year-over-year to $2.74 billion and $0.90, respectively. Moreover, the company has topped the consensus revenue estimates in three of the trailing four quarters.
Over the past year, SGIOY’s stock has surged 1.5% to close the last trading session at $11.04.
SGIOY’s POWR Ratings reflect its bright prospects. The stock has an overall rating of B, which translates to a Buy in our proprietary rating system.
SGIOY has a B grade for Value, Stability, and Quality. It is ranked #7 out of 356 stocks in the same industry.
In addition to the POWR Ratings we’ve stated above, we also have SGIOY’s other ratings for Momentum, Sentiment, and Growth. Get all SGIOY ratings here.
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SGIOY shares were unchanged in premarket trading Friday. Year-to-date, SGIOY has declined -7.78%, versus a 10.71% rise in the benchmark S&P 500 index during the same period.
About the Author: Rjkumari Saxena
Rajkumari started her career as a writer but gradually shifted her focus to financial journalism, leveraging her educational background in Commerce. Fascinated by the interplay of business and economic shifts in equities, she aspires to evolve as an analyst. With a knack for simplifying complex financial concepts, her mission is to empower investors with insights that lead to profitable decisions.
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