Despite the macroeconomic uncertainties, the biotech industry has resiliently navigated its path forward through efficient capital allocation and streamlining its core operations, from research and development to supply chain and commercial operations.
In this piece, I have evaluated the fundamentals of brilliant biotech stocks, namely, BioMarin Pharmaceutical Inc. (BMRN), Equillium, Inc. (EQ), and Organogenesis Holdings Inc. (ORGO), that have the potential for high returns coupled with groundbreaking discoveries.
Before delving into the fundamentals of these stocks, let’s explore the factors propelling the biotechnology sector’s growth.
The biotech industry has weathered the macroeconomic storm and sought to maximize growth opportunities via strategic mergers, acquisitions, and alliances. Moreover, the sector remains robust, with a strong focus on innovation and valuable product offerings.
Notably, fundraising across healthcare in the first quarter was $6.8 billion, followed by $6.9 billion, culminating in a total of $13.7 billion. This figure, compared to the $21.8 billion raised throughout 2022, suggests a noteworthy rebound in progress.
The industry is now looking toward cell gene therapy, vaccines, and next-generation treatment to add to the existing revenue streams. R&D innovation in the industry is picking up pace. According to a Deloitte survey, 91% of life sciences organizations plan to invest in R&D this year, and about half of them are optimistic about the sector’s outlook.
Furthermore, with increasing R&D efforts, the demand for Artificial Intelligence (AI) empowered solutions in the medical field is rising. As a result, the global AI in drug discovery market is expected to expand at an impressive CAGR of 29.6% from 2023 to 2030.
With an uptick in innovation in treatment, drug discovery, and successful trial results, we anticipate this sector will continue to draw heavy interest as exciting new therapeutics make their way through the pipeline. The industry is poised to reach a whopping $3.2 trillion by 2030, growing at a 12.8% CAGR.
Hence, to capitalize on the industry’s tailwinds, let’s look at the fundamentals of the three brilliant Biotech stocks, beginning with number 3.
Stock #3: BioMarin Pharmaceutical Inc. (BMRN)
BMRN engages in developing and commercializing therapies for people with serious and life-threatening rare diseases and medical conditions. Its pipeline products include Vimizim, Naglazyme, Kuvan, Palynziq, Brineura, Roctavian and Voxzogo.
On June 29, the U.S. Food and Drug Administration (FDA) approved BMRN’s ROCTAVIAN™ (valoctocogene roxaparvovec-rvox) gene therapy for the treatment of adults with severe hemophilia A (congenital factor VIII (FVIII) deficiency with FVIII activity < 1 IU/dL) to control bleeds.
Based on durability, efficacy, and safety results from the global Phase 3 GENEr8-1 study, it is a one-time, single-dose infusion, the first approved gene therapy for severe hemophilia A in the United States. This approval should bode well for the company and accelerate the commercialization of ROCTAVIAN on a global scale.
BMRN’s revenue increased 11.5% year-over-year to $595.27 million in the fiscal second quarter (ended June 30). Its income from operations amounted to $58.87 million, representing a 50.4% increase from the prior-year quarter. Non-GAAP net income grew 37% from the year-ago value to $105.20 million, while its non-GAAP EPS increased 31.7% year-over-year to $0.54 over the period.
For the fiscal year 2023, the company expects its total revenues to come in between $2.38 billion and $2.50 billion, while its non-GAAP earnings per share is expected to be between $1.80 and $2.05.
The consensus EPS estimate of $0.48 for its fiscal third quarter (ending September 2023) represents a 7.9% improvement year-over-year. The consensus revenue estimate of $609.91 million for the current quarter indicates a 20.7% increase from the same period last year. The company has an impressive earnings surprise history, surpassing the consensus EPS estimates in three of the trailing four quarters.
Over the past three months, the stock has gained 4.8% to close its last trading session at $91.38.
BMRN’s POWR Ratings reflect this promising outlook. The stock has an overall B rating, translating to Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 distinct factors, each with its own weighting.
It has an A grade for Growth and a B for Value. Among the 375 stocks in the Biotech industry, it is ranked #19. Click here to see the additional POWR ratings for BMRN (Momentum, Stability, Sentiment, and Quality).
Stock #2: Equillium, Inc. (EQ)
EQ is a clinical-stage biotechnology company that develops and sells products to treat severe autoimmune, inflammatory, or immuno-inflammatory disorders with unmet medical needs. Its pipeline consists of itolizumab (EQ001), a monoclonal antibody to treat acute graft-versus-host disease; EQ101 for the treatment of cutaneous T cell lymphoma and alopecia areata; and EQ102 to treat various gastrointestinal diseases.
On August 2, EQ announced that its Board of Directors authorized the repurchase of up to $7.5 million shares of the company’s common stock. This underscores the company’s ability to boost shareholders’ returns.
EQ’s chief executive officer, Bruce Steel, said, “The program gives us the flexibility to opportunistically repurchase shares while maintaining capital expected to fund our clinical development efforts through multiple milestones between now and the end of 2024, including topline data from our study of EQ101 in alopecia areata and, importantly, Ono’s decision regarding exercising its option to acquire itolizumab.”
During the fiscal 2023 second quarter (ended June 30), EQ’s revenue amounted to $9.12 million, while its total operating expenses declined 6.2% year-over-year to $12.72 million. The company’s net loss improved 76.3% and 75.6% from the prior-year quarter to $3.34 million and $0.10 per share, respectively.
In addition, as of June 30, 2023, its current liabilities of $25.22 million decreased 21.3% compared to $32.04 million for the period ended December 31, 2022.
Analysts expect EQ’s revenues to improve 101.9% year-over-year to $31.83 million in the fiscal year 2023 (ending December 31). Further, its revenue is expected to reach $38.99 million in fiscal 2024, registering a 22.5% year-over-year growth. Also, it topped the revenue estimates in three of the trailing four quarters.
Shares of EQ have gained 26.1% over the past three months to close the last trading session at $0.81.
EQ’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall B rating, which equates to Buy in our proprietary rating system. EQ also has a B grade for Growth, Value, Sentiment, and Quality. Within the same industry, it is ranked #17.
In addition to the POWR Ratings I have just highlighted, click here to see the EQ ratings for Momentum and Stability.
Stock #1: 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. It offers a portfolio of bioactive and acellular biomaterials products in advanced wound care and surgical biologics, including orthopedics and spine.
For the six-month period that ended June 30, 2023, ORGO’s net revenue increased 2.9% year-over-year to $224.96 million. Its gross profit grew 3.1% from the year-ago value to $172.03 billion. In the same period, net income amounted to $2.35 million and $0.02 per share. Also, its adjusted EBITDA stood at $19.17 million.
Street expects ORGO’s revenue and EPS to amount to $111.40 million and $0.01, respectively, in the current quarter ending September 30, 2023. Its EPS is expected to increase by 2.4% per annum over the next five years.
The stock has gained 14.3% over the past six months to close the last trading session at $2.80.
It’s no surprise that ORGO has an overall rating of B, which equates to Buy in our proprietary rating system. It has an A grade for Value. Out of 375 stocks in the same industry, it is ranked #16.
In addition to the POWR Ratings we’ve stated above, we also have ORGO’s ratings for Growth, Momentum, Stability, Sentiment, and Quality. Get all ORGO ratings here.
What To Do Next?
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BMRN shares were trading at $93.49 per share on Friday afternoon, up $2.11 (+2.31%). Year-to-date, BMRN has declined -9.66%, versus a 18.68% 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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