Despite the economic headwinds, the SPDR S&P Biotech ETF (XBI) has gained 5.1% over the past month, indicating investors’ confidence in the industry. Moreover, increasing technological advancement and regulatory permissiveness in key areas of innovation are expected to boost the biotech industry.
Given the backdrop, I think quality biotech stocks Alkermes plc (ALKS) and Nippon Shinyaku Co., Ltd. (NPPNY), which have maintained stable profit margins, could be worth buying now. These stocks are Buy-rated in our proprietary rating system.
Biotechnology is thriving, thanks to technological advancements, with key market players continuously launching new products to strengthen their position in the industry. Data Bridge Market Research predicts that the biotechnology market to reach $10.13 trillion by 2030, growing at a CAGR of 29%.
Moreover, the pandemic has accelerated the shift towards digitalization, telemedicine, and personalized medicine, all of which are expected to drive growth in the industry.
The market for personalized medicine and companion diagnostics is expected to grow due to the increasing prevalence of rare diseases and advancements in understanding the human genome.
The global personalized medicine market is projected to grow at a CAGR of 10.9% to reach $540.12 billion by 2028.
Amidst the trending debate about whether the US will enter a recession this year, Raj Lala, the president and CEO of Evolve Funds, recently commented that even if it does, biotech companies will “continue to perform well.”
Take a look at the stocks mentioned above:
Alkermes plc (ALKS)
Headquartered in Dublin, Ireland, ALKS is a biopharmaceutical company that researches, develops, and commercializes pharmaceutical products to address the unmet medical needs of patients in various therapeutic areas in the United States, Ireland, and internationally.
Its trailing-12-month asset turnover ratio of 0.57x is 64.5% higher than the 0.35x industry average. Its trailing-12-month gross profit margin of 80.48% is 44.6% higher than the 55.65% industry average.
ALKS’ total revenues for the quarter ended March 31, 2023, came in at $287.60 million, compared to $278.55 million for the same period in the prior year. Non-GAAP net income was $2.42 million for the quarter, while its non-GAAP earnings per share was $0.01.
ALKS’s revenue is expected to rise 15.3% year-over-year to $318.39 million for the fiscal second quarter ending June 2023. The company’s EPS for the same quarter is expected to come in at $0.01. Additionally, the stock has topped consensus EPS and revenue estimates in three of the trailing four quarters, which is impressive.
The stock has gained 22.4% over the past six months to close the last trading session at $28.55.
ALKS’s POWR Ratings reflect its promising 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.
ALKS also has a B grade for Growth, Sentiment, Value, and Quality. It is ranked first out of 383 stocks in the Biotech industry.
To access additional ratings for ALKS’s Stability and Momentum, click here.
Nippon Shinyaku Co., Ltd. (NPPNY)
Headquartered in Kyoto, Japan, NPPNY manufactures and sells pharmaceuticals and foodstuffs in Japan and internationally. The company operates through Pharmaceuticals and Functional Food segments.
Its trailing-12-month gross profit margin of 61.12% is 9.8% higher than the 55.65% industry average. Its trailing-12-month asset turnover ratio of 0.65x is 85.1% higher than the 0.35x industry average.
NPPNY’s revenue increased by 3.4% year-on-year to ¥109.92 billion ($821.42 million) in the fiscal third quarter, which ended March 31, 2023. The company’s operating income came in at ¥27.99 billion ($209.15 million), while profit attributable to owners came in at ¥22.67 billion ($169.44 million).
Analysts expect NPPNY’s revenue to rise 12.6% year-over-year to $271.50 million for the fiscal third quarter ended March 2023. Additionally, the stock has topped consensus revenue estimates in three of the trailing four quarters.
The stock has gained marginally over the past month to close the last trading session at $11.30.
NPPNY’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall rating of B, equating to a Buy in our proprietary rating system.
NPPNY also has a B grade for Value, Stability, and Quality. It is ranked #11 in the same industry.
To access additional ratings for NPPNY’s Growth, Sentiment, and Momentum, click here.
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ALKS shares were unchanged in premarket trading Monday. Year-to-date, ALKS has gained 9.26%, versus a 9.17% 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.
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