The biotech industry is expected to grow steadily due to advancements in medical technologies, personalized medicine, gene therapies, and government initiatives. While Harmony Biosciences Holdings, Inc. (HRMY) and Exelixis, Inc. (EXEL) could be ideal investments, Surrozen, Inc. (SRZN) might be best kept on hold.
The global biotechnology market is projected to grow at a CAGR of 14% until 2030. The market is driven by strong government support through initiatives aimed at the modernization of the regulatory framework, improvements in approval processes & reimbursement policies, as well as standardization of clinical studies.
Furthermore, the growth of personalized medicine and the emergence of orphan drug formulations are offering new avenues for biotech firms. Additionally, cutting-edge medical technologies such as 3D bioprinting are being harnessed, contributing to the expansion and advancement of the biotech industry.
Additionally, the rising consumption of plant-based meat substitutes and cultured meat, among other protein-rich products has led to the high demand for food biotechnology for meeting the rising requirements of consumers seeking sustainable and ethical protein. Surging advances in biotechnology and genetics for the customization of diets and nutrition plans will also prove favorable for the market growth.
Therefore, food biotechnology market is expected to grow at a CAGR of 10% until 2032.
With these favorable trends in mind, let's delve into the fundamentals of the three best Biotech stock picks mentioned above.
Stocks to Buy:
Harmony Biosciences Holdings, Inc. (HRMY)
HRMY is a commercial-stage pharmaceutical company, focuses on developing and commercializing therapies for patients with rare and other neurological diseases in the United States. It offers WAKIX (pitolisant), a molecule with a novel mechanism of action for the treatment of excessive daytime sleepiness in adult patients with narcolepsy.
On December 7, 2023, HRMY announced positive topline results from its Phase 2 signal detection study evaluating the safety and efficacy of pitolisant in adult patients with myotonic dystrophy type 1 (DM1).
Its trailing-12-month EBITDA margin of 41.39% is 673.3% higher than the 5.34% industry average. Its trailing-12-month gross profit margin of 80.63% is 41.4% lower than the 57.02% industry average.
HRMY’s net product revenue increased 36.4% year-over-year to $160.27 million in the third quarter, which ended September 30, 2023. The company’s gross profit increased 35.8% year-over-year to $127.97 million, while its earnings per share came in at $0.64.
Analysts expect HRMY’s revenue for the fiscal fourth quarter ended December 2023 to increase 31.3% year-over-year to $168.43 million. Its EPS is expected to be $0.48 for the same quarter. Also, it has surpassed revenue estimates in three of the trailing four quarters, which is impressive.
The stock has gained 61.6% over the past three months to close the last trading session at $32.53.
HRMY’s POWR Ratings reflect its promising outlook. The stock has an overall rating of B, which translates to a Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
HRMY also has an A grade for Value and Quality. It is ranked #33 of 347 stocks in the Biotech industry.
To access additional ratings for HRMY’s Growth, Sentiment, Stability, and Momentum, click here.
Exelixis, Inc. (EXEL)
EXEL is a biotech firm specializing in oncology. The company develops and commercializes cancer treatments, including CABOMETYX and COMETRIQ. Its pipeline includes promising drugs like zanzalintinib and XL102.
On January 18, 2024, EXEL announced it had successfully defended European Patent number EP2593090 (c-MET Modulator Pharmaceutical Compositions) against three opponents, STADA Arzneimittel AG, Teva Pharmaceutical Industries Ltd., and Generics (U.K.) Ltd. in a hearing before the Opposition Division of the European Patent Office (EPO).
The three-member panel of the Opposition Division rejected all grounds of opposition, thus upholding the patent as granted. The patent at issue, which expires on July 18, 2031, covers tablet formulations of cabozantinib, including the tablet formulation approved as CABOMETYX (cabozantinib) tablets by the European Medicines Agency.
Its trailing-12-month EBIT margin of 2.31% is significantly higher than the 0.20% industry average. Its trailing-12-month gross profit margin of 96.24% is 68.8% lower than the 57.02% industry average.
For the fiscal third quarter (ended September 30, 2023), EXEL’s total revenues increased 14.6% year-over-year to $471.92 million. Its non-GAAP net income and non-GAAP net income per share stood at $32.10 million and $0.10, respectively. For the nine months ended September 30, EXEL generated total revenues of $1.35 billion, up 13.8% year-over-year.
EXEL’s revenue and EPS are expected to grow 13.6% and 97.2% from the same period the prior year to $481.52 million and $0.24 for the fiscal first quarter ending March 2024, respectively.
Shares of EXEL have gained 35.3% over the past year to close the last trading session at $22.64.
It’s no surprise that EXEL has an overall rating of A, which equates to Strong Buy in our proprietary rating system.
EXEL has an A grade for Value and a B in Growth and Quality. It is ranked #3 in the same industry.
In addition to the POWR Ratings highlighted above, one can access EXEL’s ratings for Momentum, Stability, and Sentiment here.
Stock to Hold:
Surrozen, Inc. (SRZN)
SRZN is a clinical-stage biotechnology company that pioneers drug candidates for precise modulation of the pivotal Wnt pathway. The company’s forefront products entail multispecific, antibody-based therapeutics emulating the functions of natural Wnt and R-spondin proteins, vital for Wnt pathway activation and enhancement.
Its trailing-12-month CAPEX/Sales of 4.37% is 3.4% higher than the 4.22% industry average. Whereas its trailing-12-month asset turnover ratio of 0.17x is 56% lower than the 0.39x industry average.
For the fiscal third quarter that ended September 30, SRZN’s interest income increased 233.8% year-over-year to $661 thousand. However, loss from operations came in at $11.19 million and net loss stood at $10.45 million. Also, net loss per share came in at $0.34.
Analysts expect EPS for the first quarter of 2024, ending March 2024, to increase 39.6% year-over-year. For the fiscal year ending December 2024, the EPS is estimated to increase 18.3% year-over-year.
The stock has gained 19.5% over the past three months but declined 36.4% over the past six months to close the last trading session at $8.21.
SRZN’s neutral prospects are reflected in its POWR Ratings. The stock has an overall C rating, equating to a Neutral in our proprietary rating system.
SRZN has a C grade for Growth, Momentum, and Quality. It is ranked #34 in the same industry.
Click here to see the additional POWR Ratings for SRZN (Sentiment, Stability, and Value).
What To Do Next?
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HRMY shares were trading at $31.66 per share on Tuesday afternoon, down $0.87 (-2.67%). Year-to-date, HRMY has declined -1.98%, versus a 1.70% rise in the benchmark S&P 500 index during the same period.
About the Author: Nidhi Agarwal
Nidhi is passionate about the capital market and wealth management, which led her to pursue a career as an investment analyst. She holds a bachelor's degree in finance and marketing and is pursuing the CFA program. Her fundamental approach to analyzing stocks helps investors identify the best investment opportunities.
Are These 3 Biotech Stocks Worth Buying? StockNews.com
