The biotech industry was at the forefront of vaccine development, which helped us tide over the pandemic. The growth of the biotech industry is driven by government initiatives, rapid technological developments, and the inelastic demand for healthcare.
With the macroeconomic environment expected to remain volatile, biotech companies could prove to be solid investments, given the non-cyclical nature of their businesses. Let’s explore why biotech stocks Amgen Inc. (AMGN), Biogen Inc. (BIIB), and Jazz Pharmaceuticals plc (JAZZ) could rake in big gains this year.
The biotech sector has experienced significant growth over the recent past. The industry has likely emerged as a winner out of the global pandemic. The U.S. biotech sector had a $2.90 trillion impact on the economy in 2021.
Moreover, the biotech industry’s recession-proof nature allowed it to fare well compared to other sectors. The industry is well poised for growth, given the rise in chronic diseases and a rapidly aging population. Moreover, the Biden administration’s National Biotechnology and Biomanufacturing Initiative is expected to drive the industry’s long-term growth.
The global biotechnology market is expected to grow at a CAGR of 8.7% to reach $1.68 trillion by 2030. Investors’ interest in biotech stocks is evident from the iShares Biotechnology ETF’s (IBB) 5.9% returns over the past six months.
Given the industry’s long-term potential, investors could add fundamentally strong biotech stocks AMGN, BIIB, and JAZZ to their watchlists.
Amgen Inc. (AMGN)
AMGN discovers, develops, manufactures, and delivers human therapeutics worldwide. It focuses on inflammation, oncology/hematology, bone health, cardiovascular disease, nephrology, and neuroscience areas.
In terms of the trailing-12-month gross profit margin, AMGN’s 75.66% is 35.4% higher than the 55.89% industry average. Likewise, its 0.42x trailing-12-month asset turnover ratio is 22.8% higher than the industry average of 0.34x.
On December 12, 2022, AMGN announced its acquisition of Horizon Therapeutics plc. AMGN’s Chairman and CEO, Robert A. Bradway, believes the acquisition is a compelling opportunity for AMGN. Also, it is consistent with its strategy of delivering long-term growth by providing innovative medicines that address the needs of patients who suffer from serious diseases.
Moreover, the acquisition should drive AMGN's revenue and non-GAAP EPS growth and is expected to be accretive from 2024.
For the fourth quarter of fiscal 2022, AMGN’s non-GAAP operating income increased marginally year-over-year to $3.01 billion. The company’s non-GAAP net income came in at $2.20 billion. Also, its non-GAAP EPS came in at $4.09.
AMGN’s revenue for the quarter ending June 30, 2023, is expected to increase 2.9% year-over-year to $6.78 billion. Its EPS for the quarter ending September 30, 2023, is expected to increase 0.5% year-over-year to $4.72.
It has a commendable earnings surprise history, surpassing the consensus EPS estimates in three of the trailing four quarters. Over the past year, the stock has gained 2.7% to close the last trading session at $234.74.
AMGN’s POWR Ratings reflect solid prospects. The stock has an overall rating of A, equating to a Strong Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
Within the Biotech industry, it is ranked #9 out of 398 stocks. The company has an A grade for Quality and a B for Value and Stability.
To see the additional ratings of AMGN for Growth, Momentum, and Sentiment, click here.
Biogen Inc. (BIIB)
BIIB discovers, develops, manufactures, and delivers therapies for treating neurological and neurodegenerative diseases internationally. The company offers various products for treating multiple sclerosis, spinal muscular atrophy, Alzheimer's disease, plaque psoriasis, and other diseases.
In terms of the trailing-12-month gross profit margin, BIIB’s 77.61% is 38.9% higher than the 55.89% industry average. Likewise, its 34.73% trailing-12-month EBITDA margin is 924.9% higher than the industry average of 3.39%.
For the fiscal fourth quarter that ended December 31, 2022, BIIB’s total non-GAAP net income attributable to BIIB increased 17.3% year-over-year to $587.20 million. The company’s total assets stood at $24.55 billion, up 2.8% from $23.88 billion for the fiscal year that ended December 31, 2021.
Additionally, its non-GAAP EPS came in at $4.05, representing a 19.5% increase from the prior-year quarter.
BIIB’s EPS for the fiscal year 2024 is expected to increase 4.1% year-over-year to $16.14. It has an impressive earnings surprise history, surpassing the consensus EPS estimates in three of the trailing four quarters. Over the past nine months, the stock has gained 35.4% to close the last trading session at $268.75.
BIIB’s positive outlook is reflected in its POWR Ratings. The company has an overall rating of A, which equates to a Strong Buy in our proprietary rating system. It is ranked #4 in the same industry. In addition, it has an A grade for Value and a B for Growth and Quality.
Click here to see the additional ratings of BIIB for Momentum, Stability, and Sentiment.
Jazz Pharmaceuticals plc (JAZZ)
Headquartered in Dublin, Ireland, JAZZ, a biopharmaceutical company, identifies, develops, and commercializes pharmaceutical products for various unmet medical needs internationally. The company has a portfolio of products and product candidates with a focus on the areas of neuroscience and oncology.
In terms of the trailing-12-month gross profit margin, JAZZ’s 92.70% is 65.9% higher than the 55.89% industry average. Likewise, its 45.24% trailing-12-month EBITDA margin is significantly higher than the industry average of 3.39%.
On December 21, 2022, JAZZ and Zymeworks Inc. (ZYME) announced that JAZZ is continuing its exclusive development and commercialization rights to ZYME’s zanidatamab in key markets. The collaboration should enable both companies to grow and rapidly advance the usage of zanidatamab to treat patients with cancer with significant unmet needs.
JAZZ’s total revenues for the fourth quarter that ended December 31, 2022, increased 8.4% year-over-year to $972.12 million. Its total oncology revenues rose 8.1% year-over-year to $223.86 million. The company’s non-GAAP gross margin came in at 90.3%.
JAZZ’s EPS and revenue for the quarter ending March 31, 2023, are expected to increase 12.8% and 9.7% year-over-year to $4.21 and $892.73 million, respectively. Over the past nine months, the stock has fallen 4.4% to close the last trading session at $144.34.
JAZZ’s POWR Ratings reflect its promising outlook. The stock has an overall rating of B, equating to Buy in our proprietary rating system. It is ranked #12 within the Biotech industry. The company has an A grade for Growth and Value.
Click here to see the additional POWR Ratings of JAZZ (Momentum, Stability, Sentiment, and Quality).
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AMGN shares were trading at $234.61 per share on Friday morning, down $0.13 (-0.06%). Year-to-date, AMGN has declined -9.88%, versus a 4.86% rise in the benchmark S&P 500 index during the same period.
About the Author: Malaika Alphonsus
Malaika's passion for writing and interest in financial markets led her to pursue a career in investment research. With a degree in Economics and Psychology, she intends to assist investors in making informed investment decisions.
3 Biotech Stocks With Potential to Be Big Winners in 2023 StockNews.com
