The focus on treating rare diseases, the development of innovative vaccines and therapies, changes in regulations, increased investments into R&D, and the use of advanced technology are driving the growth of the biotech sector. Ongoing innovations in the biotech space meet demands for advanced healthcare, especially for chronic and aging-related conditions.
Amid this backdrop, investors could consider buying fundamentally strong biotech stocks: United Therapeutics Corporation (UTHR), TRACON Pharmaceuticals, Inc. (TCON), and Corcept Therapeutics Incorporated (CORT).
The world’s ever-rising need for quality healthcare, growing demand for targeted therapies, robust drug pipelines, and innovations in genetic engineering boost the biotech industry’s prospects. In a recent survey by ICON of over 130 biotech executives, 60% of respondents expected to increase R&D spending, while only 2% planned to reduce funding.
The biotech sector’s growth is also being fueled by leveraging the power of AI and machine learning. AI is revolutionizing drug discovery, improving R&D processes, and aiding in efficient manufacturing.
Furthermore, the global biotechnology market is projected to reach $3.88 trillion by 2030, expanding at a CAGR of 14% from 2024 to 2030. Investors’ interest in biotech stocks is evident from the SPDR S&P Biotech ETF’s (XBI) 28% returns over the past six months.
Considering these conducive trends, let’s analyze the fundamental aspects of the three Biotech picks, beginning with the third choice.
Stock #3: United Therapeutics Corporation (UTHR)
UTHR is a biotechnology company that engages in the development and commercialization of products to address the unmet medical needs of patients with chronic and life-threatening diseases internationally.
In terms of forward non-GAAP P/E, UTHR’s 9.39x is 51.4% lower than the 19.33x industry average. Its 2.59x forward EV/Sales is 27.1% lower than the 3.55x industry average. Likewise, its 5x forward EV/EBITDA is 61.2% lower than the 12.89x industry average.
UTHR’s total revenues for the fourth quarter, which ended December 31, 2023, increased 25.1% year-over-year to $614.70 million. Its operating income rose 48.1% year-over-year to $260.10 million. The company’s net income came in at $217.10 million, or $4.36 per share, up 64.3% and 63.3% over the prior-year quarter, respectively.
For the quarter ended March 31, 2024, UTHR’s EPS is expected to increase 16% year-over-year to $5.64. Its revenue for the same quarter is expected to increase 22.9% year-over-year to $622.92 million. It surpassed the consensus EPS estimates in each of the trailing four quarters. UTHR’s stock has gained 7.9% year-to-date to close the last trading session at $237.24.
UTHR’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 #9 out of 361 stocks in the Biotech industry. It has an A grade for Value and a B for Quality. Click here to see UTHR’s Growth, Momentum, Stability, and Sentiment ratings.
Stock #2: TRACON Pharmaceuticals, Inc. (TCON)
TCON is a biopharmaceutical company that focuses on the development and commercialization of novel targeted therapeutics for cancer in the United States.
In terms of the trailing-12-month Price/Sales, TCON’s 0.35x is 91% lower than the 3.90x industry average.
For the fiscal fourth quarter that ended on December 31, 2023, TCON's revenue amounted to $3.05 million. Its income from operations came in at $407 thousand, compared to a loss from operations of $5.83 million in the year-ago quarter.
Additionally, the company's net income and earnings per share stood at $439 thousand and $0.01, respectively, compared to the previous year's net loss and loss per share of $7 million and $0.31.
Street expects TCON’s EPS for the quarter ended March 31, 2024, to remain negative. Over the past six months, the stock has declined 30.3% to close the last trading session at $16.42.
TCON’s positive outlook is reflected in its POWR Ratings. It has an overall rating of A, equating to a Strong Buy in our proprietary rating system.
It has an A grade for Growth and a B for Value, Sentiment, and Quality. It is ranked #8 in the same industry. To see TCON’s ratings for Momentum and Stability, click here.
Stock #1: Corcept Therapeutics Incorporated (CORT)
CORT engages in discovering and developing drugs for treating severe metabolic, oncologic, endocrine, and neurological disorders. It offers Korlym tablets for hyperglycemia in adults with endogenous Cushing's syndrome and is developing several other medications in clinical trials for various conditions.
In terms of forward EV/EBIT, CORT’s 14.52x is 10.2% lower than the 16.17x industry average. Also, its 3.35x forward EV/Sales is 5.6% lower than the 3.55x industry average.
For the fourth quarter, which ended December 31, 2023, CORT’s net product revenue grew 31.4% year-over-year to $135.41 million. The company’s net income attributable to common stockholders rose 88.1% from the year-ago value to $31.14 million. Its net income per common share was $0.28, up 100% year-over-year.
In addition, as of December 31, 2023, its total assets stood at $621.52 million, compared to $583.43 million as of December 31, 2022.
Analysts expect CORT’s EPS for the quarter ended March 31, 2024, to increase 61.4% year-over-year to $0.23. Its revenue for the same quarter is expected to increase 33.3% year-over-year to $140.80 million. It surpassed the consensus EPS estimates in three of the trailing four quarters. Over the past year, the stock has gained 8% to close the last trading session at $23.82.
It’s no surprise that CORT has an overall rating of A, which translates to a Strong Buy in our proprietary rating system.
It has an A grade for Value and Quality and a B for Growth. Within the Biotech industry, it is ranked #6. Beyond what we stated above, we also have given CORT grades for Momentum, Stability, and Sentiment. Get all CORT ratings here.
What To Do Next?
43 year investment veteran, Steve Reitmeister, has just released his 2024 market outlook along with trading plan and top 11 picks for the year ahead.
UTHR shares were trading at $235.08 per share on Friday morning, down $2.16 (-0.91%). Year-to-date, UTHR has gained 6.91%, versus a 8.32% 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.
3 Promising Biotech Stocks Driving Weekly Gains StockNews.com
