The biotech industry's soaring growth owes much to the flourishing realm of personalized medicine, the rise of orphan drugs, innovative biotech tools, and unwavering government support.
In light of this, fundamentally sound biotech stocks Equillium, Inc. (EQ), Protalix BioTherapeutics, Inc. (PLX), and Incyte Corporation (INCY) could hold great potential as ideal additions to your portfolio at this juncture. Before delving into the highlighted stocks, let's gain a detailed understanding of how these factors are driving the industry's growth.
Despite encountering funding obstacles, the biotech sector's life sciences service companies continue to captivate both investors and strategic purchasers. Increasing demands for clinical research, drug discovery, and manufacturing are driving investment opportunities, reinforcing the sector's resilience in the face of financial challenges.
The ascent of personalized medicine and the increasing availability of orphan drug formulations are catalyzing fresh vistas within the biotech sector. Year-to-date, the FDA's CDER has approved 42 pioneering molecular entities and therapeutic biological products, accentuating the industry's formidable research and development impetus.
Innovative biotech tools such as brain mapping, autonomous therapeutic systems, cellular anti-aging research, gene editing, living medicines, lab-grown organs, epigenetics, digital therapeutics, and advanced wearables, integrated with technological advancements, are further propelling the industry's growth.
Furthermore, substantial government backing is bolstering the industry's expansion. The 2023 Budget allocates $5 billion to the Advanced Research Projects Agency for Health (ARPA-H) for expediting biomedical innovations spanning molecular to societal dimensions, ultimately delivering pioneering solutions for patients.
Looking forward, the global biotechnology market is expected to be worth approximately $3.21 trillion by 2030 and poised to grow at a CAGR of 12.8% between 2023 and 2030, as projected by Precedence Research.
In light of these encouraging trends, let’s look at the fundamentals of the three best Biotech stocks, beginning with number 3.
Stock #3: Equillium, Inc. (EQ)
EQ is a clinical-stage biotechnology firm that develops pioneering immunomodulatory treatments for severe autoimmune and immuno-inflammatory disorders. It addresses significant unmet medical requirements through a pipeline of groundbreaking, first-in-class assets focused on immuno-inflammatory pathways.
In its fiscal second quarter report, EQ unveiled a series of upcoming milestones to propel the company's growth. These include the imminent release of EQ101 Phase 2 study data in alopecia areata by year-end. The company emphasized the enduring value of its multi-cytokine programs while actively advancing itolizumab.
The topline data from the fully enrolled EQUALISE study in lupus nephritis is scheduled for early 2024, aligned with the interim review of the Phase 3 EQUATOR study in 2024. These dual achievements will dictate Ono’s option exercise timeline for itolizumab, unlocking about $351 million in payment and significantly bolstering EQ's cash runway.
For the second quarter that ended June 30, 2023, EQ’s revenue came in at $9.12 million. Its total other income stood at $256 thousand, compared to a loss of $577 thousand In the previous year’s quarter. Moreover, as of June 30, 2023, the company’s cash and cash equivalents amounted to $25.62 million, while total assets were registered at $58.76 million.
The consensus revenue estimate of $31.83 million for the fiscal year ending December 2023 reflects a 102% year-over-year improvement. Likewise, the consensus revenue estimate of $38.99 million for the next fiscal year (ending December 2024) reflects a 22.5% rise from the prior year. Moreover, the company topped the consensus revenue estimates in three of the four trailing quarters.
Shares of EQ have gained 7.7% over the past five days to close the last trading session at $0.70.
EQ’s positive fundamentals are apparent in its POWR Ratings. The stock has an overall rating of B, equating to Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, each weighted to an optimal degree.
EQ has a B grade for Growth, Value, Sentiment, and Quality. It has ranked #21 out of 636 stocks within the Biotech industry.
In addition to the POWR Ratings I’ve just highlighted, you can see EQ’s ratings for Momentum and Stability here.
Stock #2: Protalix BioTherapeutics, Inc. (PLX)
PLX centers its efforts on advancing and marketing recombinant therapeutic proteins created through its exclusive ProCellEx plant cell-based expression system. This innovative platform produces the approved product Elelyso, effectively treating Gaucher disease.
On May 18, PLX announced that it had qualified for a $20 million milestone payment from its commercial partner, Chiesi Global Rare Diseases, part of the Chiesi Group, owing to the FDA's approval of ELFABRIO for treating Fabry disease in adult patients. This infusion is expected to enhance PLX's financial standing.
During the second quarter that ended June 30, 2023, PLX’s total revenue increased 300.7% year-over-year to $35.08 million. Its operating income stood at $20.42 million, compared to a loss of $5.52 million in the prior year’s period.
In addition, the company’s net income for the period and EPS of common stock came in at $19.34 million and $0.21, compared to a net loss and loss per share of $5.33 million and $0.11, respectively, in the previous year’s quarter.
The consensus revenue estimate of $74.06 million for the fiscal year ending December 2024 reflects a 22.1% year-over-year improvement. Similarly, the consensus EPS estimate of $0.23 reflects a 130% growth from the previous year. Also, the company surpassed the consensus revenue estimates in all four trailing quarters.
PLX has gained 52% over the past year, closing the last trading session at $1.55.
PLX’s solid outlook is apparent in its POWR Ratings. The stock has an overall rating of B, which translates to Buy in our proprietary rating system.
PLX has an A grade for Value and a B for Growth and Quality. It has ranked #16 out of 636 stocks within the Biotech industry.
Click here to access additional PLX ratings for Momentum, Stability, and Sentiment.
Stock #1: Incyte Corporation (INCY)
INCY discovers, develops, and commercializes therapeutics in two core areas. The Hematology/Oncology area covers Myeloproliferative Neoplasms, Graft-Versus-Host Disease, solid tumors, and hematologic malignancies. Its Inflammation and Autoimmunity area encompasses its Dermatology commercial franchise.
On July 31, INCY and Replimune Group, Inc. (REPL), a clinical-stage biotechnology company at the forefront of developing innovative tumor-targeted oncolytic immunotherapies, unveiled a clinical trial and supply agreement aimed at investigating RP1, REPL's primary product candidate, alongside INCB99280, INCY's small molecule oral PD-L1 inhibitor.
The partnership is expected to expand INCY's immunotherapy portfolio, promising innovative treatment approaches and potential new revenue streams, strengthening its position in the biotechnology sector.
On July 24, INCY and Syndax Pharmaceuticals, Inc. (SNDX) unveiled encouraging results from the AGAVE-201 trial of axatilimab, an anti-CSF-1R antibody, for chronic graft-versus-host disease. This significantly advances INCY's growth strategy, reaffirming its dedication to innovative therapies and reinforcing its healthcare sector standing.
For the second quarter that ended June 30, 2023, INCY’s total revenues increased 4.7% year-over-year to $954.61 million. Its net income and net income per share grew 26.1% and 25% from the prior year’s period to $203.55 million and $0.90, respectively. As of June 30, 2023, the company’s total assets stood at $6.21 billion, compared to $5.84 billion as of December 31, 2022.
Analysts expect INCY’s revenue to grow 10.5% year-over-year to $3.75 billion for the fiscal year ending December 2023. Similarly, the company’s EPS for the ongoing year is estimated to come in at $3.57, indicating a 28.4% year-over-year improvement. The stock has gained 1.5% over the past five days, closing the last trading session at $57.19.
INCY’s robust prospects are reflected in its POWR Ratings. The stock has an overall rating of B, which translates to Buy in our proprietary rating system.
INCY has an A grade for Value and Quality. It is ranked #8 within the same industry.
Click here to access the additional INCY ratings (Growth, Momentum, Stability, and Sentiment).
What To Do Next?
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INCY shares were trading at $57.41 per share on Wednesday afternoon, up $0.22 (+0.38%). Year-to-date, INCY has declined -28.52%, versus a 14.57% rise in the benchmark S&P 500 index during the same period.
About the Author: Aanchal Sugandh
Aanchal's passion for financial markets drives her work as an investment analyst and journalist. She earned her bachelor's degree in finance and is pursuing the CFA program. She is proficient at assessing the long-term prospects of stocks with her fundamental analysis skills. Her goal is to help investors build portfolios with sustainable returns.
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