Innovative technology is propelling the biotech sector to new heights. Therefore, I present quality biotech stocks Theratechnologies Inc. (THTX), Shionogi & Co., Ltd. (SGIOY), and Gilead Sciences, Inc. (GILD), which show solid signs of breakout growth potential.
Recent innovations within the biotechnology industry are increasingly aligned with the adoption of cutting-edge technologies like artificial intelligence (AI), data analytics, and automation to optimize production processes.
The global Biotechnology market is projected to reach $2.77 trillion by 2030 at a CAGR of 14.2%.
Moreover, the biotechnology field is currently inundated with an unprecedented volume of data, owing to the rapid expansion of technologies and the seamless integration of sensors and Internet of Things (IoT) devices.
Hence, big data and analytics empower the industry to drive innovation, streamline clinical trial patient recruitment, and deploy bioinformatics solutions for crop and livestock improvements and microbial exploration.
As a result, the global big data in the healthcare market is expected to reach $255.80 billion by 2030 at a CAGR of 25.3%.
In addition, pharmaceutical companies are rapidly adopting 3D bioprinting technology to expedite drug discovery and development processes, allowing for more cost-effective and safer drug testing compared to traditional methods. The expanding use of 3D printing, particularly in the cosmetics industry, has increased public awareness of this technology.
Hence, the global 3D bioprinting market is projected to grow from $2.19 billion in 2023 to $5.17 billion by 2030, exhibiting a CAGR of 15.4%.
Given the industry tailwinds, it's time to examine the fundamentals of the top three stocks in the Biotech industry, starting with the third in line.
Stock #3: Theratechnologies Inc. (THTX)
Headquartered in Montreal, Canada, THTX is a biopharmaceutical company focused on developing and commercializing various therapies addressing unmet medical needs. The company commercializes two medicines in Human Immunodeficiency Viruses (HIV) and has research programs in Non-Alcoholic Steatohepatitis (NASH), Oncology, and HIV.
THTX’s revenue has grown at a CAGR of 6.8% over the past three years and 17.2% over the past five years.
On August 30, THTX announced that all five of the U.S.-based clinical sites participating in the conduct of the Phase 1 clinical trial of the company’s lead investigational peptide drug conjugate, sudocetaxel zendusortide, are now activated to screen, enroll and dose advanced ovarian cancer patients.
On July 31, THTX announced that it had completed the previously announced consolidation of the issued and outstanding common shares of the company’s share capital based on one post-consolidation share for each four pre-consolidation shares issued and outstanding.
In the second quarter that ended May 31, 2023, THTX’s revenue amounted to $17.55 million, while its total operating expenses declined 36.6% from the prior-year quarter to $25.49 million. Also, the company’s total current liabilities amounted to $71.32 million, down 37.6% compared to $114.28 million for the period that ended November 30, 2022.
Street expects THTX’s revenue for the fiscal third quarter (ending August 2023) to increase marginally year-over-year to $21.01 million. Its EPS for the same quarter is expected to rise 9.5% year-over-year.
The stock has gained 59% over the past five days to close the last trading session at $1.52.
THTX’s POWR Ratings reflect this promising outlook. The stock has an overall rating of B, which translates to Buy in our proprietary rating system. The POWR Ratings are calculated considering 118 distinct factors, with each factor weighted to an optimal degree.
It also has a B grade for Growth, Value, and Sentiment. Within the 373-stock Biotech industry, it is ranked #14.
To see THTX’s additional ratings for Momentum, Stability, and Quality, click here.
Stock #2: Shionogi & Co., Ltd. (SGIOY)
Headquartered in Osaka, Japan, SGIOY is involved in researching, developing, manufacturing, and distributing pharmaceuticals, medical devices, and diagnostic reagents.
Over the past three years, SGIOY’s revenue and EBITDA have grown at a CAGR of 12.6% and 15.4%. Moreover, its net income and EPS have increased at a CAGR of 17.4% and 18.8% over the past five years.
On September 4, SGIOY disclosed the acquisition of its own shares in accordance with Article 156 of the Companies Act, with terms replaced as per Article 165, paragraph 3 of the same Act.
The company acquired 1,922,400 shares of its common stock, amounting to a total value of YEN12,016,142,901 ($81.45 million). This acquisition occurred between August 1, 2023, and August 31, 2023, executed through discretionary trading on the Tokyo Stock Exchange.
With a four-year average dividend yield of 1.80%, SGIOY pays an annual dividend of $0.24, which translates to a dividend yield of 2.4% on the current price level.
During the first quarter that ended June 30, 2023, SGIOY’s revenues rose 52.2% year-over-year to ¥109.31 billion ($740.96 million). The company’s operating profit and profit before tax grew 274.9% and 38.2% year-over-year to ¥46.59 billion ($315.18 million) and ¥55.70 billion ($377.57 million).
Also, the company’s EPS rose 25.6% from the year-ago quarter to ¥144.57 billion.
Analysts expect SGIOY’s revenue for the fiscal year 2023 to grow 8.6% year-over-year to $2.99 billion. Its EPS is expected to be $0.94 in the current year. In addition, the company has topped the consensus revenue estimates in all the trailing four quarters, which is impressive.
Shares of SGIOY have gained 3.5% over the past month to close the last trading session at $10.91.
SGIOY’s POWR Ratings reflect its robust outlook. The stock has an overall grade of B, translating to a Buy in our proprietary rating system.
SGIOY has an A grade for Value and a B for Growth and Quality. It is ranked #12 in the same industry.
In addition to the POWR Ratings highlighted above, one can access SGIOY’s ratings for Stability, Momentum, and Sentiment here.
Stock #1: Gilead Sciences, Inc. (GILD)
GILD is a biopharmaceutical company that discovers, develops, and commercializes medicines in the areas of unmet medical need in the United States, Europe, and internationally.
Over the past three years, GILD’s revenue and EBITDA have grown at a CAGR of 7.3% and 7.4%, respectively. Moreover, its net income and EPS have increased at a CAGR of 20% and 21.1% over the past five years.
On August 15, GILD and Tentarix Biotherapeutics announced three multi-year collaborations utilizing Tentarix's Tentacles platform to develop conditional protein therapeutics in oncology and inflammatory diseases.
These therapies aim to selectively target disease-related immune cells while avoiding the activation of other immune cells to improve both efficacy and safety.
GILD pays $3 annually as dividends. This translates to a yield of 3.99% at the current market price, compared to the four-year average dividend yield of 4.01%.
During the fiscal second quarter ended June 30, 2023, GILD’s revenues rose 5.4% year-over-year to $6.60 billion. Non-GAAP operating income came in at $2.28 billion and non-GAAP net income attributable to GILD reached $1.69 billion. Additionally, its non-GAAP EPS stood at $1.34.
GILD’s EPS is expected to increase marginally year-over-year to $1.91 for the fiscal third quarter ending September 2023. Additionally, it has topped consensus revenue estimates in each of the trailing four quarters.
The stock has gained 16.3% over the past year to close the last trading session at $74.24.
GILD’s strong fundamentals 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 has an A grade in Value and a B in Growth, Stability, and Quality. The stock is ranked first in the same industry.
Click here to see GILD’s additional POWR Ratings (Momentum and Sentiment) here.
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GILD shares were trading at $73.99 per share on Thursday morning, down $0.25 (-0.34%). Year-to-date, GILD has declined -12.15%, versus a 16.66% 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.
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