The biotech industry is experiencing significant growth as it continues to innovate in medicine and life sciences. With rising demand for therapeutics and new treatments targeting several complex diseases such as cancer, Alzheimer’s, and rare genetic disorders, the sector is buzzing with potential.
Amid this backdrop, investors looking to gain from this momentum could scoop up the shares of fundamentally sound biotech companies like Biogen Inc. (BIIB), BioMarin Pharmaceutical Inc. (BMRN), and Royalty Pharma plc (RPRX) with promising upside potential.
Analysts believe the Federal Reserve’s recent rate cuts could further boost the biotech sector. John Maraganore, former CEO of Alnylam Pharmaceuticals, emphasized that the cut “will be very positive for the biotech capital markets,” predicting a meaningful uptick in the sector as rates decline. Lower rates mean reduced borrowing costs, allowing biotech firms to raise more capital for their research and development (R&D) projects, potentially accelerating their breakthroughs.
Moreover, the global biotechnology market is anticipated to reach $4.61 trillion by 2034, growing at a CAGR of 11.5%. With a focus on next-generation therapies such as gene editing, immunotherapy, and biologics, biotech companies are at the forefront of medical innovation, creating a favorable environment for breakthroughs in life-saving treatments.
With that in mind, let’s evaluate the fundamentals of the featured Biotech industry stocks, starting with number three:
Stock #3: Royalty Pharma plc (RPRX)
RPRX operates as a buyer of biopharmaceutical royalties and a funder of innovations in the biopharmaceutical industry. The company’s portfolio consists of royalties on nearly 35 commercial products and 14 development-stage product candidates that address therapeutic areas like diabetes, cancer, neuroscience, immunology, respiratory, and hematology.
On September 3, RPRX and Ascendis Pharma Bone Diseases A/S, a wholly-owned subsidiary of Ascendis Pharma A/S (ASND), entered into a royalty funding agreement of $150 million based on U.S. net sales of Yorvipath. This transaction supports the continued development and commercialization of Endocrine Rare Disease products.
On May 28, RPRX announced its acquisition of Agios Pharmaceuticals’ royalty on Servier’s vorasidenib for $905 million cash. The vorasidenib would be the first targeted therapy for patients with IDH-mutant glioma if approved by the U.S. Food and Drug Administration (FDA).
RPRX for the second quarter (ended June 30, 2024) reported portfolio receipts of $608 million, indicating an 11.6% growth from the prior year quarter. Its operating income increased 8.4% year-over-year to $270 million. In addition, its adjusted EBITDA grew 12.4% from the prior year’s quarter to $560 million.
The company’s net income and EPS attributable stood at $102 million and $0.23, respectively. Also, the non-GAAP portfolio cash flow came in at $574 million, up 11.2% year-over-year.
The company has updated its fiscal year 2024 financial outlook, increasing its revenue projection to a range of $2.70 billion to $2.78 billion, up from the previous estimate of $2.60 billion to $2.70 billion.
Analysts expect RPRX’s revenue for the third quarter (ending September 2024) to grow 39.6% year-over-year to $748.66 million, while its EPS for the same period is expected to increase 16.7% from the prior year to $0.92.
Shares of RPRX have surged 5.2% over the past year to close the last trading session at $27.71. The 12-month median price target of $46.33 indicates a 67.3% upside potential from the last closing price. The price targets range from a low of $38 to a high of $51.
RPRX’s POWR Ratings reflect this robust outlook. The stock has an overall rating of B, which equates to Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
RPRX has a B grade for Growth and Sentiment. It is ranked #33 out of 335 stocks in the Biotech industry. Click here to see the additional ratings for RPRX (Value, Momentum, Stability, and Quality).
Stock #2: BioMarin Pharmaceutical Inc. (BMRN)
BMRN develops and commercializes therapies for people with serious and life-threatening rare diseases and medical conditions. The company is a biotechnology company addressing the root cause of genetic conditions.
On July 24, BMRN announced that the U.S. FDA approved BRINEURA (cerliponase alfa) for children under three years with neuronal ceroid lipofuscinosis type 2 (CLN2 disease). The approval expands the treatment to all ages, including presymptomatic children, to slow the loss of ambulation.
In the fiscal second quarter that ended on June 30, 2024, BMRN’s total revenue increased 19.6% year-over-year to $712.03 million. The company reported non-GAAP income from operations of $221.80 million, indicating 71.7% growth from the prior-year quarter. BMRN’s non-GAAP net income came in at $188.90 million, up 79.6% year-over-year, while its non-GAAP EPS grew 77.8% from the year-ago value to $0.96.
According to the updated financial guidance for fiscal year 2024, the company’s revenue is now projected to be between $2.75 billion and $2.83 billion, with non-GAAP operating margin anticipated to fall between 26% and 27%. Its non-GAAP EPS is expected to range from $3.10 to $3.25.
The consensus revenue estimate of $703.13 million for the fiscal third quarter (ending September 2024) represents a 20.9% increase year-over-year. The consensus EPS estimate of $0.80 for the same quarter indicates a 73.3% improvement year-over-year. The company has an impressive earnings surprise history; it surpassed the consensus EPS estimates in three of the trailing four quarters.
The stock has surged marginally intraday to close the last trading session at $69.48. Its 12-month price target of $105.52 reflects a 51.9% potential upside. The price targets range from a low of $72 to a high of $132.
It’s no surprise that BMRN has an overall rating of B, equating to a Buy in our POWR Ratings system. It has an A grade for Growth and a B for Value and Sentiment. Out of 335 stocks in the same industry, BMRN is ranked #14.
Beyond what is stated above, we’ve also rated BMRN for Momentum, Stability, and Quality. Get all BMRN ratings here.
Stock #1: Biogen Inc. (BIIB)
BIIB is a global biopharmaceutical company focused on discovering, developing, and delivering advanced therapies worldwide for people with serious and complex diseases. The company has a portfolio of medicines to treat multiple sclerosis (MS), spinal muscular atrophy (SMA), Alzheimer’s disease, and amyotrophic lateral sclerosis (ALS).
On August 22, BIIB and Eisai Co., Ltd. announced that the Medicines and Healthcare Products Regulatory Agency (MHRA) in Great Britain granted marketing authorization to its Leqembi®, the humanized amyloid-beta (Aβ) monoclonal antibody.
On July 30, BIIB, Beckman Coulter, Inc., and Fujirebio announced a collaboration to potentially identify and develop accessible, minimally invasive blood-based biomarkers specific for tau-pathology in the brain. These tools have the potential to be used to stratify patients or monitor treatment response for a new generation of future therapies impacting tau pathology in Alzheimer’s disease.
For the second quarter of 2024, which ended on June 30, BIIB’s total revenues increased marginally year-over-year to $2.46 billion. Its non-GAAP total net income attributable for the quarter amounted to $770.90 million or $5.28 per share, representing increases of 31.9% and 31.3%, respectively, from the same period last year.
Per the updated financial guidance for the fiscal year 2024, BIIB now forecasts non-GAAP EPS between $15.75 and $16.25, up from the previous estimate of $15 and $16.
Street expects BIIB’s revenue for the fiscal fourth quarter (ending December 2024) to increase 2.4% year-over-year to $2.44 billion. Its EPS for the same period is expected to register a 14.7% growth from the prior year, settling at $3.38. In addition, it surpassed the EPS estimates in three of the trailing four quarters, which is promising.
BIIB’s stock has declined 0.9% intraday to close the last trading session at $194.12. Its 12-month price target of $274.84 indicates a 41.6% potential upside. The price targets range from a low of $190 to a high of $342.
BIIB’s bright prospects are reflected in its POWR Ratings. The stock has an overall rating of A, which translates to a Strong Buy in our proprietary rating system.
It also has an A grade for Value and a B for Growth. Within the Biotech industry, it is ranked #8. Click here to see BIIB’s ratings for Momentum, Stability, Sentiment, and Quality.
What To Do Next?
43 year investment veteran, Steve Reitmeister, has just released his 2024 market outlook along with trading plan and top 11 picks for the year ahead.
BIIB shares were trading at $190.22 per share on Wednesday afternoon, down $3.90 (-2.01%). Year-to-date, BIIB has declined -26.49%, versus a 21.09% rise in the benchmark S&P 500 index during the same period.
About the Author: Shweta Kumari
Shweta's profound interest in financial research and quantitative analysis led her to pursue a career as an investment analyst. She uses her knowledge to help retail investors make educated investment decisions.
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