The biotech industry’s long-term outlook looks robust, driven by the growing need for personalized treatment options, rapid adoption of agricultural biotechnology to increase the productivity of crops, ongoing technological breakthroughs and innovation, and favorable government policies.
Given the industry tailwinds, it could be wise to invest in fundamentally sound biotech stocks Corcept Therapeutics Incorporated (CORT), Jazz Pharmaceuticals plc (JAZZ), Incyte Corporation (INCY), and Exelixis, Inc. (EXEL) for significant returns.
Biotechnology has a wide range of applications in several sectors, ranging from healthcare to food & agriculture and industrial processing. Growing reimbursement policies and supportive government initiatives promoting regulatory modernization will propel the biotech industry’s growth.
The increasing need for personalized medicine and a growing number of orphan drug formulations to combat the rising prevalence of chronic and rare diseases are opening new avenues for biotechnology applications and are boosting the influx of emerging and innovative biotech companies.
In 2023, the FDA’s Center for Drug Evaluation and Research (CDER) approved 55 new molecular entities and therapeutic biological products. Some of these drugs include Filsuvez, to treat wounds associated with dystrophic and junctional epidermolysis bullosa, and Augtyro, to treat ROS1-positive non-small cell lung cancer.
According to the Precedence Research report, the U.S. biotechnology market is projected to reach about $763.82 billion by 2033, growing at a noteworthy CAGR of 11.9% during the forecast period. Meanwhile, the global biotechnology market is poised to expand at a CAGR of 11.8% from 2044 to 2033.
Exciting technological developments, including gene editing, stem cell technology, artificial intelligence (AI), machine learning, big data, regenerative medicine, synthetic biology, and biomanufacturing, are shaping the biotech industry. The global AI in the biopharmaceutical market is expected to hit nearly $14.07 billion by 2032, registering a CAGR of 32.3%.
Investors’ interest in biotech stocks is evident from SPDR S&P Biotech ETF’s (XBI) 16.3% returns over the past six months.
With these encouraging trends in mind, let’s delve into the fundamentals of the four best Biotech stock picks, beginning with the fourth choice.
Stock #4: Corcept Therapeutics Incorporated (CORT)
CORT engages in the discovery and development of drugs for the treatment of severe metabolic, oncologic, endocrine, and neurological disorders. It offers Korlym (mifepristone) tablets for treating hyperglycemia secondary to hypercortisolism in patients with endogenous Cushing’s syndrome. It is also developing relacorilant to treat patients.
According to the preliminary results, CORT’s fourth-quarter revenue of $135.40 million indicates a 31% year-over-year increase. Its full-year 2023 revenue of $482.40 million represents a 20% from the previous year.
As per the fiscal year 2024 revenue guidance, CORT’s revenue is expected to be in the range of $600 million to $630 million.
On October 26, 2023, CORT initiated MONARCH, a Phase 2b trial of its proprietary selective cortisol modulator miricorilant in patients with non-alcoholic steatohepatitis (NASH). MONARCH is a 150-patient, randomized, double-blind, placebo-controlled study evaluating the efficacy and safety of miricorilant in adult patients with biopsy-confirmed NASH.
“We are excited to initiate the MONARCH study and to build on the promising results of our Phase 1b study, which demonstrated that miricorilant effectively reduces liver fat, improves liver health and key metabolic and lipid measures and is well-tolerated. Miricorilant has the potential to greatly benefit the millions of patients with NASH,” said Bill Guyer, CORT’s Chief Development Officer.
For the third quarter that ended September 30, 2023, CORT’s net product revenue increased 21.5% year-over-year to $123.60 million. Its net income came in at $31.17 million, or$0.28 per share, respectively. As of September 30, 2023, the company’s cash and cash equivalents were $111.80 million, compared to $66.33 million as of December 31, 2022.
Analysts expect CORT’s revenue for the fourth quarter (ended December 2023) to increase 25.5% year-over-year to $129.30 million. The company’s EPS for the same period is expected to grow 84.3% year-over-year to $0.26. Furthermore, the company has surpassed the consensus revenue estimates in three of the four trailing quarters.
Shares of CORT have surged 3.9% over the past year to close the last trading session at $23.95.
CORT’s POWR Ratings reflect its robust outlook. The stock has an overall rating of A, which translates to a Strong Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
CORT has an A grade for Quality and Value and a B for Growth. It is ranked #5 out of 353 stocks in the Biotech industry.
In addition to the POWR Ratings we’ve stated above, we also have CORT’s ratings for Sentiment, Momentum, and Stability. Get all CORT ratings here.
Stock #3: Jazz Pharmaceuticals plc (JAZZ)
Based in Dublin, Ireland, JAZZ is a biopharmaceutical company that identifies, develops, and commercializes pharmaceutical products for unmet medical needs. It has a portfolio of products and product candidates emphasizing the areas of neuroscience, including sleep medicine and movement disorders, and in oncology, such as hematologic and solid tumors.
On February 7, 2024, JAZZ and Redx Pharma plc (REDX) signed a definitive agreement under which JAZZ will acquire Redx’s KRAS inhibitor program. The companies will collaborate to advance candidates through IND-enabling studies, where Jazz will be responsible for all clinical development, regulatory, manufacturing and commercialization activities.
This preclinical program expands JAZZ’s pipeline of targeted oncology therapies.
On November 7, JAZZ and MD Anderson Cancer Center announced a partnership for five years to evaluate zanidatamab, an investigational HER2-targeted bispecific antibody, in various HER2-expressing cancers, addressing unmet needs in solid tumors.
The collaboration will explore zanidatamab’s potential in early-stage breast cancer and other areas where current HER2-directed therapies face limitations.
During the third quarter that ended September 30, 2023, JAZZ’s total revenue increased 3.3% year-over-year to $972.14 million. The company’s income from operations grew 596.2% from the prior year’s quarter to $172.39 million. Its net income came in at $146.82 million, against a net loss of $19.65 million during the previous year’s quarter.
In addition, the company’s earnings per share for the quarter was $2.14. Its total assets stood at $11.20 billion as of September 30, 2023, compared to total assets as of December 31, 2022, of $10.83 billion.
As per its full-year 2023 financial guidance, JAZZ expects its revenue to range between $3.75 billion and $3.87 billion. Also, the company expects its non-GAAP net income to be $1.29 - $1.34 billion for the year.
Street expects JAZZ’s revenue and EPS for the fiscal year 2023 to increase 4.7% and 39.8% year-over-year to $3.83 billion and $18.44, respectively. Further, for the first quarter (ending March 2024), the company’s revenue and EPS are expected to grow 6.6% and 10.2% year-over-year to $951.94 million and $4.35, respectively.
JAZZ’s stock has gained 2.7% over the past month to close the last trading session at $124.24.
JAZZ’s sound fundamentals are reflected in its POWR Ratings. The stock has an overall rating of A, which translates to a Strong Buy in our proprietary rating system.
JAZZ has an A grade for Value. The stock also has a B grade for Quality and Growth. Within the Biotech industry, JAZZ is ranked #4 out of 353 stocks.
In addition to the POWR Ratings stated above, one can access JAZZ’s ratings for Stability, Sentiment, and Momentum here.
Stock #2: Incyte Corporation (INCY)
INCY is a biopharmaceutical company engaged in the discovery, development, and commercialization of therapeutics for hematology/oncology, inflammation, and autoimmunity areas worldwide. It provides JAKAFI (ruxolitinib), MONJUVI (tafasitamab-cxix)/MINJUVI (tafasitamab), PEMAZYRE (pemigatinib), and ICLUSIG.
On February 5, INCY entered an asset purchase agreement with MorphoSys AG (MOR), giving INCY exclusive global rights for tafasitamab, a humanized Fc-modified CD19-targeting immunotherapy marketed in the U.S. as Monjuvi® (tafasitamab-cxix) and outside of the U.S. as Minjuvi® (tafasitamab).
This new agreement with MorphoSys provides INCY with exclusive global rights to tafasitamab and complete control over its development and commercialization, enabling the company to realize significant operating efficiencies and cost synergies.
In the third quarter that ended September 30, 2023, INCY’s total revenues increased 11.6% year-over-year to $919.02 million. Its non-GAAP operating income grew 63.4% from the year-ago value to $273.29 million. Its non-GAAP net income came in at $248.72 million, or $1.10 per share, up 85.9% and 83.3% from the previous year’s quarter, respectively.
Furthermore, the company’s total assets were at $6.39 billion as of September 30, 2023, compared to $5.84 billion as of December 31, 2022.
Analysts expect INCY’s revenue for the fourth quarter (ended December 2023) to increase 8.3% year-over-year to $1 billion, and its EPS is expected to grow 85.3% year-over-year to $1.15 over the same period. Additionally, the company topped the consensus EPS estimates in three of the trailing four quarters.
Over the past three months, INCY’s stock has climbed 10.3% to close the last trading session at $57.84.
INCY’s bright prospects are reflected in its POWR Ratings. The stock has an overall rating of A, equating to a Strong Buy in our proprietary rating system.
The stock has an A grade for Value, Growth, and Quality. It has a B grade for Sentiment. INCY is ranked #3 of 353 stocks in the Biotech industry.
Click here to access additional ratings of INCY for Momentum and Stability.
Stock #1: Exelixis, Inc. (EXEL)
EXEL is an oncology company that emphasizes the discovery, development, and commercialization of new medicines for difficult-to-treat cancers. The company offers CABOMETYX tablets and COMETRIQ capsules. It also provides COTELLIC, an inhibitor of MEK to treat specific forms of advanced melanoma, and MINNEBRO, an oral non-steroidal selective blocker.
On January 22, 2024, EXEL and Bristol Myers Squibb (BMY) announced four-year follow-up results from the CheckMate -9ER trial evaluating Opdivo® (nivolumab) in combination with CABOMETYX® (cabozantinib) vs. sunitinib in patients having previously untreated advanced or metastatic renal cell carcinoma (RCC).
The follow-up results show superior progression-free survival (PFS) and objective response rates (ORR) in patients treated with Opdivo plus CABOMETYX over sunitinib. Opdivo plus CABOMETYX also reduced the risk of death by 23% in the first-line treatment of advanced renal cell carcinoma vs. sunitinib.
On December 4, 2023, EXEL and Arcus Biosciences (RCUS) entered into a clinical trial collaboration for STELLAR-009, a phase 1b/2 trial evaluating zanzalintinib, EXEL’s next-generation tyrosine kinase inhibitor (TKI), in combination with AB521, an inhibitor of the transcription factor HIF-2⍺.
It is for patients with advanced solid tumors, including clear cell renal cell carcinoma (ccRCC). Patient enrollment for STELLAR-009 phase 1b/2 clinical trial began during year-end 2023.
EXEL’s total revenues increased 13.1% year-over-year to $479.65 million for the fourth quarter that ended December 31, 2023. Its income from operations came in at $81.79 million. The company’s non-GAAP net income was $104.19 million, compared to a non-GAAP net loss of $10.21 million in the fourth quarter of 2022.
According to its guidance for fiscal year 2024, EXEL expects total revenue to be in the range of $1.82 billion and $1.92 billion. Also, the company’s net product revenues are expected to be between $1.65 billion and $1.75 billion.
Analysts expect EXEL’s revenue for the first quarter (ending March 2024) to increase 10.8% year-over-year to $453.01 million. The consensus EPS estimate for the ongoing quarter of $0.23 indicates a 92.4% year-over-year growth.
For the fiscal year ending December 2024, the company’s revenue and EPS are expected to grow 4.1% and 86% year-over-year to $1.91 billion and $1.21, respectively.
Shares of EXEL have surged 15.3% over the past year to close the last trading session at $20.39.
EXEL’s POWR Ratings reflect a promising outlook. The stock has an overall rating of A, which translates to a Strong Buy in our proprietary rating system.
EXEL has an A grade for Value and Quality. The stock also has a B grade for Growth and Sentiment. It is ranked first among 353 stocks in the Biotech industry.
To access EXEL’s ratings for Stability and Momentum, click here.
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INCY shares rose $0.86 (+1.49%) in premarket trading Tuesday. Year-to-date, INCY has declined -6.21%, versus a 5.04% rise in the benchmark S&P 500 index during the same period.
About the Author: Mangeet Kaur Bouns
Mangeet’s keen interest in the stock market led her to become an investment researcher and financial journalist. Using her fundamental approach to analyzing stocks, Mangeet’s looks to help retail investors understand the underlying factors before making investment decisions.
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