Within the evolving sphere of biotechnology, continuous technological advancements and breakthroughs are driving substantial expansion. The industry's robust standing is further reinforced by a steady demand, ensuring its stability well into the future.
Against this backdrop, investors might want to direct their attention to quality biotech stocks Shionogi & Co., Ltd. (SGIOY), Vertex Pharmaceuticals Incorporated (VRTX), Regeneron Pharmaceuticals, Inc. (REGN), and United Therapeutics Corporation (UTHR) for 2024 to elevate and invigorate their portfolios. These stocks are rated A (Strong Buy) in our proprietary POWR Ratings system.
Biotechnology, a highly dynamic sector, has already exhibited its profound influence in numerous areas of everyday life, ranging from public health and pharmaceuticals to food and agriculture, bioenergetics, industry, and information technology.
Without a doubt, the biotech industry is one of the most innovative and critically important sectors of the global economy – a fact made clear during the entirety of the global health crisis. Lucrative applications further cement the industry's resilient standing for potential growth and advancement.
Government initiatives play a crucial role in bolstering industry sustainability, most notably by boosting research and development efforts. The proposed 2023 Budget sets aside $5 billion for the Advanced Research Projects Agency for Health (ARPA-H) to catalyze biomedical advancements on multitudinous scales – from the molecular to the societal – ensuring the creation of revolutionary patient treatments.
The financial injections simplify the regulatory journey for medical products and establish cohesive clinical research methodologies, expediting the approval of new vaccines and treatments. The integration of Generative AI into the biotech industry bolsters industry competencies, paving the way for swift drug discovery, proficient disease diagnosis, personalized medication schemes, and advanced gene editing alterations.
The global biotechnology market is expected to grow at a CAGR of 20.4% to reach $4.15 trillion by 2030. Furthermore, investors’ interest in biotech stocks is evident by the First Trust NYSE Arca Biotechnology Index Fund ETF’s (FBT) impressive 10.9% gains over the past month.
Considering these conducive trends, let's take a look at the fundamentals of the four Biotech stocks, starting with number 4.
Stock #4: 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.
On December 20, SGIOY launched Fetroja (cefiderocol) intravenous infusion 1g vial in Japan. Furthermore, the sale of testing reagents for measuring sensitivity to Cephiderocol commenced on December 22, 2023.
Fetroja received manufacturing and marketing approval from the Ministry of Health, Labour and Welfare for various infections caused by strains resistant to carbapenem antibiotics. The company anticipates that this medication could become a new treatment option for appropriate patients suffering from infectious diseases caused by drug-resistant bacteria.
On December 7, 2023, SGIOY announced the acquisition of 1,230,100 common shares, totaling ¥8.65 billion ($60.71 million) from November 1, 2023, to November 30, 2023, through discretionary trading on the Tokyo Stock Exchange. The total number of shares acquired under the resolution of July 31, 2023, is 5.84 million, with a total of ¥38.65 billion ($271.24 million).
Its annualized dividend rate of $0.26 per share translates to a dividend yield of 2.17% on the current share price. Its four-year average yield is 1.84%. SGIOY’s dividend payments have grown at a 1.1% CAGR over the past three years.
SGIOY’s trailing-12-month EBIT and levered FCF margins of 45.24% and 19.26% are significantly higher than the industry averages of 0.81% and 0.29%, respectively. Its 48.68% trailing-12-month EBITDA margin is 801.7% higher than the 5.40% industry average.
In the six months that ended September 30, 2023, SGIOY’s revenue and gross profit increased 52.9% and 64.2% year-over-year to ¥230.54 billion ($1.62 billion) and ¥202.66 billion ($1.42 billion), respectively.
For the same period, profit attributable to owners of parent and earnings per share stood at ¥90.59 billion ($635.74 million) and ¥308.54, up 58.2% and 62.3% from the year-ago period, respectively. As of September 30, 2023, SGIOY's total current assets came at ¥806.06 billion ($5.66 billion), compared to ¥784.19 billion ($5.50 billion) as of March 31, 2023.
Street expects SGIOY’s revenue in the fiscal year ending March 2024 to increase 10% year-over-year to $3.03 billion. Its EPS is expected to be $0.94. The company surpassed consensus revenue estimates in each of the trailing four quarters, which is impressive.
The stock has gained 10.1% over the past six months to close the last trading session at $11.92. Over the past three months, it has gained 7.1%.
SGIOY’s POWR Ratings reflect its positive prospects. The stock has an overall A rating, equating to a Strong Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 distinct factors, with each factor weighted to an optimal degree.
The stock has an A grade for Value and a B for Quality. Within the Biotech industry, it is ranked #12 out of 341 stocks.
To see additional POWR Ratings for Growth, Momentum, Stability, and Sentiment for SGIOY, click here.
Stock #3: Vertex Pharmaceuticals Incorporated (VRTX)
VRTX is a biotech company focused on developing and commercializing therapies for Cystic Fibrosis (CF). The company portfolio includes products like TRIKAFTA/KAFTRIO, SYMDEKO/SYMKEVI, ORKAMBI, and KALYDECO. Its pipeline covers treatments for CF, pain, sickle cell disease, beta thalassemia, AAT deficiency, Type 1 Diabetes, and cancer.
On December 11, VRTX presented positive and durable results for CASGEVY™, a CRISPR/Cas9 gene-edited therapy, in global trials for sickle cell disease and transfusion-dependent beta-thalassemia, with FDA approval for severe SCD and ongoing investigation for TDT.
The European Medicines Agency’s (EMA) Committee for Medicinal Products for Human Use (CHMP) adopted a positive opinion for the conditional approval of CASGEVY. This should bode well for the company.
VRTX’s trailing-12-month cash per share of $43.09 is significantly higher than the industry average of $1.21. Its trailing-12-month EBIT and levered FCF margins of 45.67% and 40.60% are significantly higher than the industry averages of 0.81% and 0.29%, respectively.
In the fiscal third quarter that ended September 30, 2023, VRTX’s net product revenues stood at $2.48 billion, up 6.4% year-over-year, while non-GAAP operating income stood at $1.17 billion.
For the same quarter, non-GAAP net income and non-GAAP net income per common share increased 2.3% and 1.7% from the prior-year quarter to $1.06 billion and $4.08, respectively. As of September 30, 2023, VRTX’s total current assets came at $14.70 billion, compared to $13.23 billion as of December 31, 2022.
Street expects VRTX’s revenue and EPS in the fiscal fourth quarter ending December 2023 to increase 9.4% and 8.5% year-over-year to $2.52 billion and $4.08, respectively. The company surpassed consensus EPS estimates in each of the trailing four quarters.
The stock has gained 40.3% year-to-date to close the last trading session at $405.25. Over the past nine months, it has gained 36.1%.
VRTX’s POWR Ratings reflect this promising outlook. It has an overall rating of A, which indicates a Strong Buy in our proprietary rating system.
VRTX has an A grade for Quality and a B for Value. Within the same industry, it is ranked #11.
For VRTX's additional ratings (Growth, Momentum, Stability, and Sentiment), click here.
Stock #2: Regeneron Pharmaceuticals, Inc. (REGN)
REGN discovers, invents, develops, manufactures, and commercializes medicines for treating various diseases worldwide.
On December 10, REGN announced positive data for odronextamab in patients with relapsed/refractory follicular lymphoma from a pivotal Phase 2 trial. This data includes updated efficacy, safety, and patient-reported outcomes.
Odronextamab is an investigational CD20xCD3 bispecific antibody designed to bridge CD20 on cancer cells with CD3-expressing T cells to facilitate local T-cell activation and cancer-cell killing.
REGN’s trailing-12-month cash per share of $20.26 is significantly higher than the industry average of $1.21. Its trailing-12-month EBIT and levered FCF margins of 33.65% and 26.98% are significantly higher than the industry averages of 0.81% and 0.29%, respectively.
In the fiscal third quarter that ended September 30, 2023, REGN’s revenues increased 14.5% year-over-year to $3.36 billion, while income from operations stood at $1.11 billion.
For the same quarter, non-GAAP net income and non-GAAP net income per share stood at $1.33 billion and $11.59, up 4.6% and 4% from the year-ago quarter, respectively. For the nine months that ended September 30, 2023, free cash flow increased 6.3% from the year-ago period to $3.04 billion.
Street expects REGN’s revenue in the fiscal year ending December 2023 to increase 6.3% year-over-year to $12.94 billion. Its EPS is expected to be $42.80. The company surpassed consensus revenue and EPS estimates in each of the trailing four quarters.
The stock has gained 17.4% year-to-date to close the last trading session at $846.72. Over the past nine months, it has gained 12.7%.
REGN’s solid fundamentals are reflected in its POWR Ratings. The stock has an overall rating of A, translating to a Strong Buy in our proprietary rating system.
REGN has an A grade for Sentiment and a B for Value and Quality. Within the same industry, it is ranked #10.
Beyond what we’ve stated above, we have also rated the stock for Growth, Momentum, and Stability. Get all ratings of REGN here.
Stock #1: United Therapeutics Corporation (UTHR)
UTHR is a biotechnology company specializing in developing and commercializing therapies for chronic and life-threatening diseases globally. Its portfolio includes products for pulmonary arterial hypertension, high-risk neuroblastoma, and idiopathic pulmonary fibrosis.
On December 13, UTHR’s wholly-owned subsidiary Morpheus Subsidiary Inc. (Merger Sub) successfully acquired all outstanding shares of Miromatrix Medical Inc. for a purchase price of $3.25 per share in cash at closing and an additional $1.75 per share in cash upon the achievement of a clinical development milestone related to Miromatrix’s development-stage, fully-implantable manufactured kidney product known as mirokidney by December 31, 2025.
Following the closing of the tender offer, Merger Sub merged with and into Miromatrix, Miromatrix became a wholly owned subsidiary of UTHR, and all shares of Miromatrix common stock that had not been validly tendered were converted into the right to receive the consideration paid in the tender offer.
UTHR’s trailing-12-month cash per share of $23.58 is significantly higher than the industry average of $1.21. Likewise, its trailing-12-month EBIT and levered FCF margins of 50.34% and 26.89% are significantly higher than the industry averages of 0.81% and 0.29%, respectively.
In the fiscal third quarter that ended September 30, 2023, UTHR’s total revenues and operating income stood at $609.40 million and $327 million, up 18.1% and 4% year-over-year, respectively.
For the same quarter, net income and net income per common share increased 11.8% and 9.6% from the prior-year quarter to $267.60 million and $5.38, respectively. As of September 30, 2023, UTHR’s total current assets came at $3.46 billion, compared to $3.38 billion as of December 31, 2022.
Street expects UTHR’s revenue and EPS in the fiscal fourth quarter ending December 2023 to increase 17.5% and 58.9% year-over-year to $577.50 million and $4.24, respectively. The company surpassed consensus EPS estimates in three of the trailing four quarters.
The stock has gained marginally intraday to close the last trading session at $218.93. Over the past nine months, it has gained 2.8%.
UTHR’s robust prospects are reflected in its POWR Ratings. The stock has an overall A rating, equating to a Strong Buy in our proprietary rating system.
UTHR has an A grade for Value and a B for Sentiment and Quality. It is ranked #8 within the same industry.
Click here for the additional POWR Ratings for UTHR (Growth, Momentum, and Stability).
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VRTX shares were unchanged in premarket trading Tuesday. Year-to-date, VRTX has gained 40.33%, versus a 25.73% rise in the benchmark S&P 500 index during the same period.
About the Author: Sristi Suman Jayaswal
The stock market dynamics sparked Sristi's interest during her school days, which led her to become a financial journalist. Investing in undervalued stocks with solid long-term growth prospects is her preferred strategy. Having earned a master's degree in Accounting and Finance, Sristi hopes to deepen her investment research experience and better guide investors.
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