The biotech sector is poised for a significant boom in 2025, driven by innovative adaptive trial designs that cut time and costs while enhancing drug efficacy predictions. This favorable landscape presents an opportunity for investors to explore fundamentally strong biotech stocks with promising pipelines: Vertex Pharmaceuticals Incorporated (VRTX), Amgen Inc. (AMGN), and Gilead Sciences, Inc. (GILD).
The biotech sector is revolutionizing healthcare by targeting new and rare diseases with cutting-edge vaccines and therapies, driven by the rising demand for personalized medicine. Regulatory agencies like the FDA and EMA are streamlining processes to match technological advancements, propelling the global biotechnology market toward a projected $3.88 trillion by 2030, with an impressive CAGR of 14%.
Notably, AI and machine learning are transforming drug discovery by optimizing molecule screening and improving clinical outcome analysis. Beyond oncology and neurology, AI is driving advancements across diverse therapeutic areas. Deloitte estimates that biopharma companies investing in AI over the next five years could see up to an 11% increase in value relative to revenue across various functional areas.
Furthermore, investors’ interest in biotech stocks is evident from the SPDR S&P Biotech ETF’s (XBI) 20.6% returns over the past year. Considering these conducive trends, let’s analyze the fundamental aspects of the three Biotech picks, beginning with the third choice.
Stock #3: Vertex Pharmaceuticals Incorporated (VRTX)
VRTX is a biotechnology company that develops and commercializes therapies for treating cystic fibrosis (CF). It markets TRIKAFTA/KAFTRIO, SYMDEKO/SYMKEVI, ORKAMBI, and KALYDECO.
In terms of the trailing-12-month EBIT margin, VRTX’s 39.89% is considerably higher than the 2.49% industry average. Likewise, its 28.83% trailing-12-month levered FCF margin is significantly higher than the 2.32% industry average. Furthermore, its 0.48x trailing-12-month asset turnover ratio is 17.3% higher than the 0.41x industry average.
VRTX’s net revenues for the third quarter, which ended on September 30, 2024, increased 11.6% year-over-year to $2.77 billion. Its non-GAAP net income stood at $1.05 billion, or $4.01 per share, up 7.5% and 7.4%, respectively, compared to the prior-year quarter. Furthermore, its non-GAAP operating income rose 11.4% year-over-year to $1.31 billion.
Street expects VRTX’s revenue for the quarter ending December 31, 2024, to increase 10.5% year-over-year to $2.78 billion. Its EPS for fiscal 2025 is expected to grow considerably year-over-year to $18.79. It surpassed the Street EPS estimates in three of the trailing four quarters. Over the past year, VRTX’s stock has gained 30.4% to close the last trading session at $464.50.
VRTX’s positive outlook is reflected in its POWR Ratings. It has an overall rating of B, equating to a Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
It has a B grade for Value, Stability, and Sentiment. Within the Biotech industry, it is ranked #21 out of 335 stocks in the Biotech industry. Beyond what we stated above, we also have given VRTX grades for Growth, Momentum, and Quality. Get all the VRTX ratings here.
Stock #2: Amgen Inc. (AMGN)
AMGN discovers, develops, manufactures, and delivers human therapeutics worldwide. It focuses on inflammation, oncology/haematology, bone health, cardiovascular disease, nephrology, and neuroscience areas. Its product portfolio includes Enbrel, Neulasta, Prolia, and Xgeva.
On September 24, 2024, AMGN announced that TEPEZZA (Teprotumumab) has been approved in Japan for treating active Thyroid Eye Disease (TED), making it the first and only approved treatment in the country. The approval is based on positive Phase 3 trial results, with additional trials ongoing for chronic TED patients.
AMGN’s trailing-12-month gross profit margin of 60.59% is 4.1% higher than the industry average of 58.20%. Likewise, its trailing-12-month EBIT margin and levered FCF margin of 20.51% and 14.06% are 723.3% and 505.5% higher than the industry averages of 2.49% and 2.32%, respectively.
During the fiscal third quarter, which ended on September 30, 2024, AMGN’s total revenues and non-GAAP operating income increased by 23.2% and 18.8% year-over-year, reaching $8.50 billion and $4.04 billion, respectively. Moreover, its non-GAAP net income grew 13.4% compared to the previous year, reaching $3.02 billion. Also, its non-GAAP net income per share grew 12.5% from the year-ago value to $5.58.
Analysts expect AMGN’s revenue for the quarter ending December 31, 2024, to increase 8.1% year-over-year to $8.86 billion. Its EPS for the same quarter is expected to grow 7.1% year-over-year to $5.04. The company surpassed the Street EPS estimates in three of the trailing four quarters. Over the past year, the stock has gained marginally closing the last trading session at $274.78.
AMGN’s POWR Ratings reflect its positive prospects. It has an overall B rating, equating to Buy in our proprietary rating system.
AMGN has a B grade for Growth and Quality. Within the same industry, it is ranked #17. Click here for the additional POWR Ratings of AMGN (Value, Momentum, Stability, and Sentiment).
Stock #1: Gilead Sciences, Inc. (GILD)
GILD discovers, develops, and commercializes medicines in the areas of unmet medical need in the United States, Europe, and internationally.
On December 3, 2024, GILD and Tubulis announced an exclusive option and license agreement to develop an antibody-drug conjugate (ADC) for a solid tumor target. The collaboration leverages Tubulis’ advanced ADC platforms and GILD’s oncology expertise to address challenges like durability and off-target toxicity.
On September 10, 2024, GILD and Genesis Therapeutics announced a collaboration to use Genesis’ GEMS AI platform to discover and optimize small molecule therapies for selected targets. GILD gains exclusive rights to develop and commercialize the resulting compounds.
In terms of the trailing-12-month EBITDA margin, GILD’s 49.29% is 763.7% higher than the 5.71% industry average. Likewise, its 77.80% trailing-12-month gross profit margin is 33.7% higher than the 58.20% industry average. Its 0.48x trailing-12-month asset turnover ratio is 17.5% higher than the 0.41x industry average.
In the fiscal third quarter, which ended on September 30, 2024, GILD’s total revenues increased 7% year-over-year to $7.55 billion. The company’s non-GAAP operating income was $3.26 billion, up 1.1% from the previous year’s quarter. Additionally, its non-GAAP net income attributable to GILD stood at $2.53 billion, or $2.02 per share.
For the quarter ending December 31, 2024, GILD’s revenue is expected to increase marginally year-over-year to $7.15 billion. Its EPS for fiscal 2025 is expected to grow 71.4% year-over-year to $7.56. GILD surpassed the EPS estimates in three of the trailing four quarters. Over the past six months, the stock has gained 41.4% to close the last trading session at $91.77.
It’s no surprise that GILD has an overall rating of A, which translates to a Strong Buy in our proprietary rating system.
It is ranked first in the Biotech industry. It has an A grade for Value and a B for Growth, Sentiment, and Quality. Click here to see GILD’s Momentum and Stability ratings.
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AMGN shares were trading at $273.03 per share on Thursday afternoon, down $0.38 (-0.14%). Year-to-date, AMGN has declined -2.34%, versus a 28.52% 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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