The increasing demand for personalized medicine, numerous advancements in genetic engineering, and the rapid integration of AI in the biopharmaceutical market are some of the major factors propelling growth in the biotech industry.
Given the industry’s bright prospects, it could be wise to buy fundamentally strong biotech stocks, Exelixis, Inc. (EXEL), Vertex Pharmaceuticals Incorporated (VRTX), and Jazz Pharmaceuticals plc (JAZZ), which might offer solid returns.
The global biotechnology market is projected to hit around $5.68 trillion by 2033, growing at a CAGR of 14% by 2033. The expanding influence of personalized medicine and the rise in orphan drug formulations are creating new opportunities for biotechnology applications. This trend is attracting emerging and innovative companies, thereby enhancing market revenue.
Further, the rapid adoption of cutting-edge technologies such as Artificial Intelligence (AI) and machine learning is expediting the identification, development, and healthcare applications of drugs, revolutionizing the biotech segment. The global AI in the biopharmaceutical market is estimated to reach around $14.07 billion by 2032, growing a CAGR of 32.3%.
Given these encouraging trends, let’s look at the fundamentals of the top Biotech stocks, beginning with the third choice.
Stock #3: Exelixis, Inc. (EXEL)
EXEL is a biotech company specializing in oncology. The company focuses on developing inhibitors targeting cancer-related factors and collaborates with pharmaceutical companies for research and development.
On May 20, 2024, EXEL announced that it had entered into a Settlement and License Agreement with Cipla Ltd. and Cipla USA, Inc., under which EXEL will provide Cipla with a license to sell generic versions of CABOMETYX in the United States starting on January 1, 2031, contingent upon approval by the U.S. Food and Drug Administration (FDA) and subject to the usual terms and conditions of such agreements.
On January 25, 2024, EXEL reported promising results from the CONTACT-02 trial at ASCO GU 2024. The trial showed a significant improvement in progression-free survival with cabozantinib and atezolizumab combination therapy compared to second-line treatment, with 97% experiencing treatment-emergent adverse events in the combination group versus 87% in the second-line group.
EXEL’s trailing-12-month EBIT margin of 11.07% is significantly higher than the industry average of 1.52%. Likewise, the stock’s trailing-12-month gross profit margin of 95.70% is 67.3% higher than the industry average of 57.22%.
EXEL’s total revenues increased 13.1% year-over-year to $425.23 million in the first quarter that ended March 31, 2024. Its net product revenues from the cabozantinib franchise in the United States were $378.5 million during the quarter. It reported a non-GAAP net income of $51.98 million. Its non-GAAP net income per share increased 6.3% year-over-year to $0.17.
EXEL reaffirmed its fiscal year 2024 guidance with total revenues projected between $1.83 billion and $1.93 billion and net product revenues expected to range from $1.65 billion to $1.75 billion.
Analysts predict EXEL’s revenue for the fiscal year ending December 2024 to increase 2.6% year-over-year to $1.88 billion. Its EPS for the current year is expected to grow 73.5% from the prior year to $1.13.
Shares of EXEL have gained 13.9% over the past year to close the last trading session at $22.18.
EXEL’s solid fundamentals are reflected in its POWR Ratings. The stock has an overall rating of B, which translates to Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, each weighted to an optimal degree.
EXEL has an A grade for Value and Quality. EXEL is ranked #11 among 356 stocks in the Biotech industry.
Click here to access additional EXEL ratings (Momentum, Growth, Sentiment, and Stability).
Stock #2: Vertex Pharmaceuticals Incorporated (VRTX)
VRTX is a biotechnology company that engages in developing and commercializing therapies for treating Cystic Fibrosis (CF). The company markets TRIKAFTA/KAFTRIO, SYMDEKO/SYMKEVI, ORKAMBI, and KALYDECO. It sells its products to specialty pharmacies and retail pharmacies or pharmacy chains, hospitals, and clinics.
On April 26, 2024, VRTX announced that the European Commission had granted approval for the label expansion of KALYDECO (ivacaftor) for the treatment of infants up to one month of age with CF with certain mutations in the CFTR gene. The expansion should help the company.
On April 23, VRTX and TreeFrog Therapeutics announced that VRTX had obtained an exclusive license to TreeFrog's proprietary cell manufacturing technology, C-StemTM, to optimize the production of VRTX's cell therapies for type 1 diabetes (T1D).
VRTX’s trailing-12-month levered FCF margin of 32.49% is significantly higher than the industry average of 1.12%. Also, its trailing-12-month EBIT margin of 43.20% is significantly higher than the industry average of 1.52%. Likewise, its EBITDA margin of 45% is 689.4% higher than the industry average of 5.70%.
In the first quarter that ended March 31, 2024, VRTX’s net product revenues increased 13.5% year-over-year to $2.69 billion. Its non-GAAP operating income grew 48.1% from the prior year’s quarter to $1.34 billion. Its non-GAAP net income of $1.24 billion, or $4.76 per common share, indicates growth of 56.3% and 56.1% from the year-ago value, respectively.
As of March 31, 2024, the company’s total assets were $22.92 billion, versus $22.73 billion as of December 31, 2023.
Analysts predict VRTX’s revenue for the fiscal second quarter ending June 2024 to increase 6.8% year-over-year to $2.66 billion. Its EPS for the same quarter is expected to grow 7.3% year-over-year to $4.17. Moreover, the company has an excellent earnings surprise history, surpassing consensus EPS estimates in each of the trailing four quarters.
Over the past six months, VRTX’s stock has gained 37.4% to close the last trading session at $485.53.
VRTX’s bright prospects are reflected in its POWR Ratings. The stock has an overall rating of B, equating to a Buy in our proprietary rating system.
VRTX has a B grade for Quality, Value, and Sentiment. It is ranked #9 in the same industry.
In addition to the POWR Ratings we’ve stated above, we also have VRTX ratings for Momentum, Growth, and Stability. Get all VRTX ratings here.
Stock #1: Jazz Pharmaceuticals plc (JAZZ)
Headquartered in Dublin, Ireland, JAZZ identifies, develops, and commercializes pharmaceutical products for unmet medical needs in the United States, Europe, and internationally.
JAZZ’s trailing-12-month EBITDA margin of 35.73% is 526.6% higher than the industry average of 5.70%. Similarly, its trailing-12-month EBIT margin and levered FCF margin of 18.95% and 27.02% are considerably higher than the industry averages of 1.52% and 1.12%, respectively.
For the fiscal first quarter that ended March 31, 2024, JAZZ’s total revenues increased 1% year-over-year to $901.98 million. Its income from operations stood at $66.21 million. For the same quarter, its non-GAAP net income and EPS stood at $182.22 million and $2.68, respectively.
In addition, as of March 31, 2024, JAZZ’s total current assets amounted to $3.54 billion, compared to $3.44 billion as of December 31, 2023.
Street expects JAZZ’s EPS and revenue for the quarter ending June 30, 2024, to increase 6.5% and 5% year-over-year to $4.80 and $1.01 billion, respectively. Also, it surpassed the consensus revenue estimates in three of the trailing four quarters, which is impressive.
Over the past month, JAZZ’s stock has plunged 3.2% to close the last trading session at $106.32.
JAZZ’s POWR Ratings reflect its promising outlook. The stock has an overall rating of A, which translates to a Strong Buy in our proprietary rating system.
The stock has an A grade for Value and Quality. Within the same industry, JAZZ is ranked #6.
Click here to access additional ratings of JAZZ for Stability, Sentiment, and Growth.
What To Do Next?
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VRTX shares rose $2.71 (+0.56%) in premarket trading Friday. Year-to-date, VRTX has gained 19.33%, versus a 12.84% rise in the benchmark S&P 500 index during the same period.
About the Author: Nidhi Agarwal
Nidhi is passionate about the capital market and wealth management, which led her to pursue a career as an investment analyst. She holds a bachelor's degree in finance and marketing and is pursuing the CFA program. Her fundamental approach to analyzing stocks helps investors identify the best investment opportunities.
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