After garnering investors’ attention during the pandemic, the biotech industry fell out of favor as investors focused on other sectors like tech, energy, etc. However, the biotech industry shows signs of renewed investor interest, as evident from the SPDR S&P Biotech ETF’s (XBI) 11.5% returns over the past three months.
Given this backdrop, it could be wise to buy fundamentally strong biotech stocks Shionogi & Co., Ltd. (SGIOY), Amicus Therapeutics, Inc. (FOLD), and Entrada Therapeutics, Inc. (TRDA).
Before diving deeper into their fundamentals, let’s discuss why the biotech industry is well-positioned for growth.
Biotechnology involves the development of diagnostics, vaccines, gene therapies, tissue engineering, and personalized medicine. The biotech industry is well positioned for growth thanks to a rapidly aging population, rising healthcare costs, the need for effective treatments for complex diseases, and the prevalence of chronic diseases.
Additionally, significant investments in research and development (R&D) will enable the industry to develop advanced drugs, therapies, and treatments. Last year, President Biden signed an executive order to launch the National Biotechnology and Biomanufacturing Initiative to encourage biotech production and research in the United States.
The global biotechnology market is expected to grow at a CAGR of 12.8% to reach $3.21 trillion by 2030.
Let's take a closer look at the fundamentals of the featured stocks.
Shionogi & Co., Ltd. (SGIOY)
Headquartered in Osaka, Japan, SGIOY engages in the research, development, manufacture, and distribution of pharmaceuticals, diagnostic reagents, and medical devices. It offers Fetroja, a multidrug-resistant for gram-negative bacterial infection treatment; Xofluza, an influenza virus drug; and Tivicay, an anti-HIV drug.
On June 26, 2023, SGIOY announced that its New Jersey-based subsidiary Shionogi entered into a definitive agreement pursuant to which SGIOY will acquire Qpex Biopharma, Inc.
SGIOY’s CEO Ph.D., Isao Teshirogi, said, “We are pleased to welcome Qpex into the Shionogi family. Bacterial resistance to antibiotics remains one of the biggest threats to global health, and Qpex’s pipeline, including xeruborbactam, and its capabilities will accelerate our efforts to develop new antibiotic treatments to address antimicrobial resistance.”
In terms of the trailing-12-month gross profit margin, SGIOY’s 85.41% is 53.5% higher than the 55.64% industry average. Likewise, its 41.35% trailing-12-month EBITDA margin is significantly higher than the industry average of 3.74%. Furthermore, the stock’s 43.35% trailing-12-month net income margin compares to the industry average of negative 6.87%.
SGIOY’s revenue for the fiscal year ended March 31, 2023, increased 27.3% year-over-year to ¥426.68 billion ($3.08 billion). Its operating profit rose 35.1% over the prior-year quarter to ¥149 billion ($1.08 billion). The company’s profit attributable to owners of the parent increased 62% year-over-year to ¥184.97 billion ($1.34 billion). Also, its EPS came in at ¥621.10, representing an increase of 64% year-over-year.
Analysts expect SGIOY’s revenue for the quarter ended June 30, 2023, to increase 31% year-over-year to $714.55 million. Over the past month, the stock has declined 5.8% to close the last trading session at $10.50.
SGIOY’s POWR Ratings reflect solid prospects. It has an overall rating of B, equating 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 #28 out of 392 stocks in the Biotech industry. It has a B grade for Value and Quality. Click here to see the other ratings of SGIOY for Growth, Momentum, Stability, and Sentiment.
Amicus Therapeutics, Inc. (FOLD)
FOLD, a biotechnology company, focuses on discovering, developing, and delivering medicines for rare diseases. Its commercial product and product candidates include Galafold. The company also develops AT-GAA, a novel treatment paradigm for Pompe disease; and enzyme replacement therapies for Pompe diseases.
On June 27, 2023, FOLD announced that the European Commission (EC) approved Opfolda (miglustat) 65 mg capsules, an enzyme stabilizer of cipaglucosidase alfa, a long-term enzyme replacement therapy for adults with late-onset Pompe disease. The approval for Opfolda follows Pombiliti's (cipaglucosidase alfa) approval in March 2023.
In terms of the trailing-12-month gross profit margin, FOLD’s 88.73% is 59.5% higher than the 55.64% industry average. Likewise, its 0.44x trailing-12-month asset turnover ratio is 24.7% higher than the industry average of 0.35x.
For the fiscal first quarter ended March 31, 2023, FOLD’s net product sales increased 9.6% year-over-year to $86.27 million. Its gross profit rose 11.5% over the prior-year quarter to $79.33 million. The company’s net loss attributable to common stockholders narrowed 37.9% year-over-year to $52.93 million. Also, its loss per share narrowed 40% year-over-year to $0.18.
For the quarter ended June 30, 2023, FOLD’s revenue is expected to increase 11.7% year-over-year to $90.19 million. Over the past nine months, the stock has gained 15.5% to close the last trading session at $13.07.
FOLD’s POWR Ratings reflect this positive outlook. It has an overall rating of B, which translates to Buy in our proprietary rating system.
Within the same industry, it is ranked #24. It has a B grade for Growth and Quality. To see the additional ratings of FOLD for Value, Momentum, Stability, and Sentiment, click here.
Entrada Therapeutics, Inc. (TRDA)
TRDA, a biotechnology company, develops endosomal escape vehicle (EEV) therapeutics for treating multiple neuromuscular diseases. Its endosomal escape vehicle platform develops a portfolio of oligonucleotide, antibody, and enzyme-based programs.
On February 9, 2023, TRDA announced the expiration of the waiting period under the Hart-Scott-Rodino (HSR) Antitrust Improvements Act of 1976 and the closing of its strategic collaboration and license agreement with Vertex announced on December 8, 2022. TRDA will receive $224 million upfront and a $26 million equity investment.
It is also eligible to receive up to $485 million based on certain research, development, regulatory, and commercial milestones and royalties from future sales of any products resulting from the collaboration.
In terms of the trailing-12-month gross profit margin, TRDA’s 70.77% is 27.2% higher than the 55.64% industry average. Likewise, its 15.68% trailing-12-month Capex/Sales is 237.6% higher than the 4.64% industry average.
TRDA’s collaboration revenues for the first quarter ended March 31, 2023, came in at $25.26 million. Its net loss narrowed 69.2% year-over-year to $6.67 million. Also, its loss per share narrowed 69.6% year-over-year to $0.21.
Its total assets came in at $475.57 million, compared to $252.06 million for the fiscal year ended December 31, 2022. In addition, its cash and cash equivalents came in at $227.65 million, compared to $45.16 million for the fiscal year ended December 31, 2022.
Over the past year, the stock has gained 43.5% to close the last trading session at $16.16.
TRDA’s POWR Ratings reflect this positive outlook. It has an overall rating of B, which translates to a Buy in our proprietary rating system.
It has a B for Value and Sentiment. It is ranked #26 in the Biotech industry. Click here to see TRDA’s ratings for Growth, Momentum, Stability, and Quality.
What To Do Next?
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SGIOY shares were trading at $10.48 per share on Friday afternoon, down $0.02 (-0.19%). Year-to-date, SGIOY has declined -15.35%, versus a 18.59% rise in the benchmark S&P 500 index during the same period.
About the Author: Dipanjan Banchur
Since he was in grade school, Dipanjan was interested in the stock market. This led to him obtaining a master’s degree in Finance and Accounting. Currently, as an investment analyst and financial journalist, Dipanjan has a strong interest in reading and analyzing emerging trends in financial markets.
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