The biotech industry is expected to grow steadily due to drug advancements, chronic disease treatment demand, personalized medicine, gene therapies, an aging population, and rising healthcare expenditures.
Given the industry’s growth prospects, investors could consider buying fundamentally sound biotech stocks Theratechnologies Inc. (THTX), Gilead Sciences, Inc. (GILD), and Exelixis, Inc. (EXEL) for solid returns.
Before discussing the fundamentals of these stocks in detail, let’s see what’s driving the prospects of the biotech industry.
Generative AI is revolutionizing biotech by accelerating drug development, reducing costs, and improving personalized medicine therapy through deep learning algorithms and computational capacity.
Biotechnology instruments are crucial in biotechnology and medical engineering, used in drug discovery, genetic engineering, and diagnostics. Global demand, disease prevalence, the geriatric population, and research advancements drive market growth. The global biotechnology instruments market is projected to grow at a CAGR of 8.1% until 2032.
Furthermore, the global biotechnology market is projected to grow at a CAGR of 13.8% until 2032. Investors’ interest in biotech stocks can be gauged from SPDR S&P Biotech ETF’s (XBI) 18% returns over the past month.
Considering these conducive trends, let’s take a look at the fundamentals of the three above-mentioned Biotech stocks, starting with the third stock.
Stock #3: Theratechnologies Inc. (THTX)
Headquartered in Montreal, Canada, THTX is a biopharmaceutical company focused on developing and commercializing various therapies addressing unmet medical needs. The company commercializes two medicines in Human Immunodeficiency Viruses (HIV) and has research programs in Non-Alcoholic Steatohepatitis (NASH), Oncology, and HIV.
On December 13, 2023, THTX received FDA approval for its Labelling Prior Approval Supplement, which includes a 2000-mg intravenous (IV) push loading dose of Trogarzo (ibalizumab-uiyk). Trogarzo can be administered more easily and conveniently via the whole IV push approach for people with HIV who have received extensive treatment.
THTX’s forward EV/Sales of 1.77x is 51.7% lower than the industry average of 3.67x. Its forward Price/Sales of 1.35x is 67.4% lower than the industry average of 4.13x.
THTX’s trailing-12-month levered FCF margin of 10.97% is significantly higher than the industry average of 0.29%. Its trailing-12-month gross profit margin of 74.92% is 30.7% higher than the industry average of 56.84%.
In the fiscal third quarter that ended August 31, 2023, THTX’s revenue increased marginally year-over-year to $20.86 million. For the same quarter, adjusted EBITDA stood at $2.16 million, compared to an adjusted EBITDA of negative $3.85 million in the prior-year quarter.
As of August 31, 2023, THTX’s total current liabilities came at $97.66 million, compared to $114.28 million as of November 30, 2022.
The consensus revenue estimate of $92.79 million for the year ending November 2024 represents a 11.1% increase year-over-year. Its EPS is expected to grow at 61.2% for the same period. THTX’s shares have gained 36.2% over the past month to close the last trading session at $2.18.
THTX’s POWR Ratings reflect this promising outlook. The stock has an overall A rating, equating to Strong Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
THTX also has a B grade for Value, Sentiment and Quality. It is ranked #9 out of 347 stocks in the Biotech industry. Click here for the additional POWR Ratings for Growth, Stability and Momentum for THTX.
Stock #2: Gilead Sciences, Inc. (GILD)
GILD is a global biopharmaceutical firm that specializes in discovering, developing, and commercializing medicines across diverse areas, including HIV/AIDS, viral hepatitis, oncology, and pulmonary arterial hypertension. The company actively engages in collaborative agreements and partnerships within the biotech sector.
GILD’s forward non-GAAP P/E of 12.67x is 34.1% lower than the industry average of 19.22x. Its forward non-GAAP PEG of 1.08x is 50.4% lower than the industry average of 2.18x.
GILD’s trailing-12-month levered FCF margin of 33.65% is significantly higher than the industry average of 0.29%. Its trailing-12-month EBIT margin of 33.61% is significantly higher than the industry average of 0.90%.
In the third quarter ended September 30, 2023, GILD reported total revenues of $7.05 billion, up marginally from the previous-year quarter. The company generated non-GAAP net income attributable to GILD and EPS of $2.88 billion and $2.29, up 20.4% and 20.5% year-over-year, respectively. Moreover, its free cash flow amounted to $1.63 billion.
Analysts expect GILD’s revenue to increase 2.1% year-over-year to $27.64 billion for the year ending December 2024. Its EPS is expected to grow 6.9% year-over-year to $7.26 for the same period. The stock has gained 15.6% over the past six months to close the last trading session at $86.06.
GILD has an overall A rating, equating to a Strong Buy in our POWR Ratings system. It has an A grade for Value and Quality. It is ranked #3 in the same industry.
Beyond what is stated above, we’ve also rated GILD for Growth, Sentiment, Momentum and Stability. Get all GILD ratings here.
Stock #1: Exelixis, Inc. (EXEL)
EXEL is a biotech company specializing in oncology and dedicated to discovering, developing, and commercializing cancer treatments. They focus on developing inhibitors targeting cancer-related factors and collaborate with pharmaceutical companies for research and development.
EXEL’s forward EV/Sales of 3.45x is 6% lower than the industry average of 3.67x. Its forward Price/Book of 2.18x is 21.4% lower than the industry average of 2.77x.
EXEL’s trailing-12-month gross profit margin of 96.24% is 69.3% higher than the 56.84% industry average. Its trailing-12-month EBIT margin of 2.31% is 155.6% higher than the 0.90% industry average.
For the third quarter ended September 30, 2023, EXEL’s total revenues increased 14.6% year-over-year to $471.92 million. The company generated non-GAAP net income and net income per share of $32.10 million and $0.10, respectively. For the nine months ended September 30, EXEL reported total revenues of $1.35 billion, up 13.8% year-over-year.
Street expects EXEL’s revenue to increase 8.2% year-over-year to $1.98 billion for the fiscal year ending December 2024. Its EPS is expected to grow 66.8% year-over-year to $1.01 for the same period. Shares of EXEL have gained 38.1% over the past year to close the last trading session at $23.27.
EXEL’s positive outlook is reflected in its POWR Ratings. The stock has an overall rating of A, translating to a Strong Buy in our proprietary rating system.
EXEL has an A grade for Value and Quality and a B for Growth. It ranks #2 in the same industry. Click here to access additional EXEL ratings (Stability, Sentiment and Momentum).
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GILD shares were trading at $84.04 per share on Wednesday morning, down $2.02 (-2.35%). Year-to-date, GILD has gained 3.74%, versus a -0.08% rise in the benchmark S&P 500 index during the same period.
About the Author: Rashmi Kumari
Rashmi is passionate about capital markets, wealth management, and financial regulatory issues, which led her to pursue a career as an investment analyst. With a master's degree in commerce, she aspires to make complex financial matters understandable for individual investors and help them make appropriate investment decisions.
Top 3 Biotech Stocks for Weekly 2024 Profits StockNews.com
