The biotech industry is set for solid growth thanks to continuous innovations and the increasing need for advanced healthcare solutions, innovative vaccines, and therapies. Moreover, investments in research and development (R&D), an aging population, rising demand for personalized medicines, and government initiatives bolster the sector’s outlook.
Amid this favorable backdrop, investors could consider buying fundamentally strong biotech stocks: Innoviva, Inc. (INVA), Organogenesis Holdings Inc. (ORGO), and Compugen Ltd. (CGEN).
The biotech industry is booming worldwide thanks to significant advancements in drug development, such as targeted therapies and the application of genetic engineering. Increased investments in R&D and a rise in clinical trials will likely boost the industry’s prospects. The global biotechnology market is projected to reach $3.88 trillion by 2030, with a CAGR of 14%.
Meanwhile, the advances in AI and machine learning are helping bring innovation to the biotech industry. These technologies help with drug development and streamline manufacturing processes, contributing to the industry's growth. The global AI for Pharma and Biotech market is expected to reach $4.20 billion by 2027, growing at a 30.5% CAGR.
Considering these conducive trends, let’s analyze the fundamental aspects of the three Biotech picks, beginning with the third choice.
Stock #3: Innoviva, Inc. (INVA)
INVA engages in developing and commercializing pharmaceutical products in the United States and internationally. The company's products include RELVAR/BREO ELLIPTA, ANORO ELLIPTA, and TRELEGY ELLIPTA.
In terms of the trailing-12-month gross profit margin, INVA’s 84.09% is 48% higher than the 56.84% industry average. Likewise, its 45.43% trailing-12-month EBIT margin is significantly higher than the 0.80% industry average. Additionally, its 38.85% trailing-12-month levered FCF margin is substantially higher than the 0.65% industry average.
INVA’s total revenue for the fourth quarter that ended December 31, 2023, rose 30.4% to $85.84 million. The company’s net product sales rose 34.9% over the prior-year quarter to $19.68 million.
In addition, its net income attributable to INVA’s stockholders and net income per share came in at $61.53 million and $0.76, respectively, compared to a net loss and net loss per share of $68.31 million and $0.98, respectively, in the year-ago quarter.
Analysts expect INVA’s EPS for the quarter ending June 30, 2024, to increase considerably year-over-year to $0.22. Its revenue for the quarter ending September 30, 2024, is expected to grow 8.7% year-over-year to $73.14 million. Over the past year, INVA’s stock has gained 25% to close the last trading session at $14.63.
INVA’s POWR Ratings reflect solid prospects. It has an overall rating of B, which translates to a Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
It is ranked #29 out of 360 stocks in the Biotech industry. It has an A grade for Value and a B for Quality. Click here to see INVA’s Growth, Momentum, Stability, and Sentiment ratings.
Stock #2: Organogenesis Holdings Inc. (ORGO)
ORGO is a regenerative medicine company that develops, manufactures, and commercializes solutions for the advanced wound care, surgical, and sports medicine markets in the United States.
In terms of the trailing-12-month EBITDA margin, ORGO’s 7.32% is 41.2% higher than the 5.18% industry average. Likewise, its 75.42% trailing-12-month gross profit margin is 32.7% higher than the 56.84% industry average. Also, its 0.95x trailing-12-month asset turnover ratio is 140.3% higher than the 0.40x industry average.
For the fiscal year that ended December 31, 2023, ORGO's net revenue came in at $433.14 million. Its gross profit was $326.66 million. The company's adjusted net income stood at $12.68 million, while its net income per share came in at $0.04. Additionally, as of December 31, 2023, its total assets amounted to $460.03 million, compared to $449.36 million as of December 31, 2022.
Analysts expect ORGO’s revenue for the quarter ending September 30, 2024, to increase 6.8% year-over-year to $115.90 million. Over the past year, the stock has gained 39.8% to close the last trading session at $2.88.
ORGO’s POWR Ratings reflect solid prospects. It has an overall rating of B, which translates to a Buy in our proprietary rating system.
It is ranked #27 out of 360 stocks in the same industry. It has an A grade for Value. Click here to see ORGO’s Growth, Momentum, Stability, Sentiment, and Quality ratings.
Stock #1: Compugen Ltd. (CGEN)
CGEN is a clinical-stage therapeutic discovery and development company that researches, develops, and commercializes therapeutic and product candidates in Israel, the United States, and Europe.
On January 8, 2024, CGEN announced that it is entitled to receive a $10 million milestone payment from AstraZeneca after the first patient was dosed in AstraZeneca's ARTEMIDE-Bil01 trial with rilvegostomig, a PD-1/TIGIT bispecific antibody derived from CGEN’s anti-TIGIT antibody.
In terms of the trailing-12-month gross profit margin, CGEN’s 94.01% is 65.4% higher than the 56.84% industry average.
For the fiscal fourth quarter ended December 31, 2023, CGEN’s revenue increased 346.1% year-over-year to $33.46 million. Its gross profit came in at $31.46 million, up 382.1% over the prior-year quarter.
Additionally, the company's net income and net income per share stood at $9.71 million and $0.11, respectively, compared to the previous year's net loss and net loss per share of $3.09 million and $0.04.
Street expects CGEN’s revenue for the fiscal year ending December 31, 2024, to increase 13.3% year-over-year to $37.90 million. It surpassed the Street EPS estimates in three of the trailing four quarters. Over the past year, the stock has declined 261.3% to close the last trading session at $2.13.
It’s no surprise that CGEN has an overall rating of B, which translates to a Buy in our proprietary rating system.
It has a B grade for Value and Sentiment. Within the Biotech industry, it is ranked #26. Beyond what we stated above, we also have given CGEN grades for Growth, Momentum, Stability, and Quality. Get all the CGEN ratings here.
What To Do Next?
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INVA shares were trading at $14.54 per share on Monday morning, down $0.09 (-0.62%). Year-to-date, INVA has declined -9.35%, versus a 8.07% rise in the benchmark S&P 500 index during the same period.
About the Author: Abhishek Bhuyan
Abhishek embarked on his professional journey as a financial journalist due to his keen interest in discerning the fundamental factors that influence the future performance of financial instruments.
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