Despite macroeconomic challenges, the biotech industry has demonstrated resilience and growth through innovation, demand, and technological advancements, thereby contributing to global healthcare and improving quality of life.
Given the industry’s growth prospects, investors could consider buying fundamentally sound biotech stocks Equillium, Inc. (EQ), Shionogi & Co., Ltd. (SGIOY), and Theratechnologies Inc. (THTX) for solid returns.
Before discussing the fundamentals of these stocks in detail, let’s see what’s driving the prospects biotech industry.
Drug development progress, vaccine development, technical advancements, personalized medicine demand, and global healthcare expansion all contribute to the biotech industry’s growth. Gene editing and precision medicine innovations are transforming illness therapy while rising research expenditure drives growth.
AI in biotechnology market is projected to grow at a 29.7% CAGR until 2032. The market is expected to grow due to the increased use of AI technologies in biotechnological applications, as well as advances in machine learning and big data analytics.
Furthermore, the global biotechnology market is expected to reach $5.01 trillion by 2032 at a CAGR of 13.8%. Investors’ interest in biotech stocks can be gauged from iShares Nasdaq Biotechnology Index Fund’s (IBB) 17.5% returns over the past three months.
Considering these conducive trends, let’s take a look at the fundamentals of the three above-mentioned Biotech stocks, starting with the third stock.
Stock #3: Equillium, Inc. (EQ)
EQ is a clinical-stage biotechnology company that develops and sells products to treat severe autoimmune and inflammatory or immuno-inflammatory disorders with unmet medical needs.
EQ’s forward Price/Sales of 0.79x is 80.1% lower than the industry average of 3.98x.
EQ’s trailing-12-month gross profit margin of 100% is 75.4 higher than the industry average of 57.02%. Its trailing-12-month asset turnover ratio of 0.82x is 108.4% higher than the industry average of 0.39x.
For the fiscal third quarter that ended September 30, 2023, EQ’s revenue stood at $8.87 million, while its total operating expenses declined 5.6% from the year-ago quarter to $12.49 million.
For the nine months that ended September 30, 2023, its cash and cash equivalents increased 33.6% year-over-year to $34.38 million. As of September 30, 2023, EQ’s total current liabilities stood at $28.20 million, compared to $32.04 million as of December 31, 2022.
The consensus revenue estimate of $43.14 million for the year ending December 2024, increased 31.5% year-over-year. Its EPS is expected to come in at $0.37 for the same period. It surpassed EPS estimates in three of four trailing quarters. EQ’s shares have gained 27.1% over the past three months to close the last trading session at $0.74.
EQ’s POWR Ratings reflect this promising outlook. The stock has an overall B rating, equating to Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
EQ also has a B grade for Growth, Value, Sentiment and Quality. It is ranked #17 out of 393 stocks in the Biotech industry. Click here for the additional POWR Ratings for Stability and Momentum for EQ.
Stock #2: Shionogi & Co., Ltd. (SGIOY)
Headquartered in Osaka, Japan, SGIOY researches, develops, manufactures, and distributes pharmaceuticals, diagnostic reagents, and medical devices in Japan. Its offerings include Fetroja, a multidrug-resistant bacterial infection treatment; Xofluza, an influenza virus drug; and Tivicay, an anti-HIV drug.
SGIOY’s forward EV/EBITDA of 9.53x is 29.6% lower than the industry average of 13.54x. Its forward EV/EBIT of 10.62x is 38.9% lower than the industry average of 17.39x.
SGIOY’s trailing-12-month EBITDA margin of 48.68% is 861.7% higher than the 5.06% industry average. Its trailing-12-month EBIT margin of 45.24% is significantly higher than the 0.04% industry average.
SGIOY’s revenue for the six months that ended September 30, 2023, increased 52.9% year-over-year to ¥230.54 billion ($1.59 billion). The company’s operating profit rose 247.6% year-over-year to ¥98.11 billion ($676.66 million).
In addition, profit attributable to owners of the parent rose 58.2% over the prior-year quarter to ¥90.59 million ($624.79 million). Also, its EPS came in at ¥308.54, up 62.3% year-over-year.
Street expects SGIOY’s revenue to increase 7.7% year-over-year to $2.96 billion for the fiscal year ending March 2024. Its EPS is expected to come in at $0.96 for the same period. Shares of SGIOY have gained 19.4% over past six months to close the last trading session at $12.41.
SGIOY’s positive outlook is reflected in its POWR Ratings. The stock has an overall rating of B, translating to a Buy in our proprietary rating system.
SGIOY has a B grade for Value and Quality. It ranks #15 in the same industry. Click here to access additional SGIOY ratings (Growth, Stability, Sentiment and Momentum).
Stock #1: Theratechnologies Inc. (THTX)
Headquartered in Montreal, Canada, THTX is a biopharmaceutical company focused on developing and commercializing various therapies addressing unmet medical needs. The company commercializes two medicines in Human Immunodeficiency Viruses (HIV) and has research programs in Non-Alcoholic Steatohepatitis (NASH), Oncology, and HIV.
On December 13, 2023, THTX received FDA approval for its Labelling Prior Approval Supplement, which includes a 2000-mg intravenous (IV) push loading dose of Trogarzo (ibalizumab-uiyk). Trogarzo can be administered more easily and conveniently via the whole IV push approach for people with HIV who have received extensive treatment.
THTX’s forward EV/Sales of 1.44x is 61.3% lower than the industry average of 3.74x. Its forward Price/Sales of 1.02x is 74.4% lower than the industry average of 3.98x.
THTX’s trailing-12-month asset turnover ratio of 1.05x is 165.4% higher than the industry average of 0.39x. Its trailing-12-month gross profit margin of 74.32% is 30.3% higher than the industry average of 57.02%.
In the fiscal third quarter that ended August 31, 2023, THTX’s revenue increased marginally year-over-year to $20.86 million. For the same quarter, adjusted EBITDA stood at $2.16 million, compared to an adjusted EBITDA of negative $3.85 million in the prior-year quarter.
As of August 31, 2023, THTX’s total current liabilities came at $97.66 million, compared to $114.28 million as of November 30, 2022.
Analysts expect THTX’s revenue to come in at $92.80 million for the year ending November 2024, increased 11.1% year-over-year. Its EPS is expected to grow at 61.1% for the same period. The stock has gained 25.6% over the past three months to close the last trading session at $1.72.
THTX has an overall B rating, equating to a Buy in our POWR Ratings system. It has a B grade for Value, Sentiment and Quality. It is ranked #13 in the same industry.
Beyond what is stated above, we’ve also rated THTX for Growth, Momentum and Stability. Get all THTX 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.
SGIOY shares were unchanged in premarket trading Wednesday. Year-to-date, SGIOY has gained 3.66%, versus a 2.57% rise in the benchmark S&P 500 index during the same period.
About the Author: Rashmi Kumari
Rashmi is passionate about capital markets, wealth management, and financial regulatory issues, which led her to pursue a career as an investment analyst. With a master's degree in commerce, she aspires to make complex financial matters understandable for individual investors and help them make appropriate investment decisions.
3 Smart Biotech Picks for Your 2024 Portfolio StockNews.com
