This year, the biotechnology industry is well-placed to advance in AI applications for drug discovery and treatment repurposing, alongside progress in RNA technology and CRISPR, driving innovation in healthcare. With the growing aging population and rising prevalence of chronic diseases, biotech plays a crucial role in developing new therapies to address health challenges.
Therefore, investors could consider monitoring fundamentally sound biotech stocks Corcept Therapeutics Incorporated (CORT), Entrada Therapeutics, Inc. (TRDA), and Exelixis, Inc. (EXEL) to strengthen their portfolio.
Last year, global biopharma R&D saw funding rise to $72 billion, productivity increased with a Clinical Development Productivity Index of 17.4, and 69 novel active substances were launched worldwide. However, clinical trial starts declined by 15%, reflecting a shift towards areas like cell and gene therapies.
Besides that, in 2023, biopharma M&A activity surged to approximately $152 billion in aggregate deal value, with bolt-on deals dominating and oncology representing 48% of deal value. In 2024, IQVIA forecasts an aggregate M&A deal value to reach $180 billion to $200 billion, driven by solid deal capacity and the urgency to replenish pipelines.
In addition, global medicine spending is projected to total $2.30 trillion by 2028. Medicine use has grown by 14% over the past five years, and a further 12% increase is anticipated, reaching 3.80 trillion defined daily doses annually.
The biotechnology market is further expanding, driven by growing demand for agriculture products and increasing chronic illnesses due to large patient pools and supportive regulatory environments. The global biotechnology market is estimated to grow at an impressive CAGR of 15.5% to achieve $1.35 trillion by 2030.
Considering these encouraging market trends, let’s examine the fundamentals of top three Biotech stock picks, beginning with the third choice.
Stock #3: Corcept Therapeutics Incorporated (CORT)
CORT develops drugs primarily for severe endocrinologic disorders, notably offering Korlym tablets for endogenous Cushing’s syndrome. Its pipeline includes potential treatments for conditions such as adrenal cancer, prostate cancer, ovarian tumors, amyotrophic lateral sclerosis, and nonalcoholic steatohepatitis.
On February 15, 2024, CORT revealed that 24% of the initial 700 patients in the CATALYST study exhibited hypercortisolism, emphasizing its significant prevalence in difficult-to-control type 2 diabetes. These results highlight the need for heightened awareness among healthcare providers and potentially better treatment strategies for this patient population.
CORT’s trailing-12-month EBIT margin and levered FCF margin of 22.24% and 26.62% are significantly higher than the industry average of 0.45% and 0.49%, respectively.
During the fourth quarter, which ended December 31, 2023, CORT’s net product revenue grew 31.4% year-over-year to $135.41 million. The company's net income rose 88.9% from a year-ago quarter to $31.36 million. Its net income per common share was $0.28, compared to $0.14 in the fourth quarter of 2022.
As of December 31, 2023, the company’s total assets amounted to $621.52 million, compared to its total assets of $583.43 million as of December 31, 2022.
For the fiscal year ending December 2024, Street expects CORT’s revenue and EPS to grow 26.6% and 16% year-over-year to $610.65 million and $1.09, respectively. Moreover, the company has surpassed the consensus EPS estimates in three of the trailing four quarters, which is notable.
CORT’s shares have gained 12.5% over the past year to close the last trading session at $23.64. Also, the stock has surged 1.1% intraday.
CORT’s POWR Ratings reflect its promising prospects. 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 Value and Quality and a B for Growth. Within the Biotech industry, it is ranked #3 among 366 stocks.
To see CORT’s additional POWR Ratings for Momentum, Stability, and Sentiment, click here.
Stock #2: Entrada Therapeutics, Inc. (TRDA)
TRDA develops innovative therapies for neuromuscular disorders, utilizing their endosomal escape vehicle platform. Its lead candidates, including ENTR-601-44 and ENTR-601-45, show promise in preclinical trials for Duchenne muscular dystrophy and myotonic dystrophy type 1.
On November 22, 2023, TRDA completed dosing for the first and second cohorts of its Phase 1 clinical trial for ENTR-601-44, targeting Duchenne Muscular Dystrophy with exon 44 skipping amenability. Despite a clinical hold on the IND by the FDA, the trial progresses, with data expected in the second half of 2024, prompting plans for discussions with the FDA on the next steps.
TRDA’s trailing-12-month levered FCF margin of 141.80% is significantly higher than the industry average of 0.49%. Likewise, the stock’s trailing-12-month CAPEX/Sales of 6.13% is 50.4% higher than the industry average of 4.08%.
In the third quarter, which ended September 30, 2023, TRDA generated collaboration revenue of $43.74 million. The company’s income from operations and net income came in at $14.01 million and $35.46 million, compared to a loss from operations and net loss of $25.94 million and $25.14 million in the prior year’s quarter, respectively.
Furthermore, the company’s net income per share came in at $1.02 for the quarter, compared to a year-ago net loss per share of $0.80.
Analysts expect TRDA’s revenue to be $57.76 million for the fiscal year ending December 2024. The stock has gained 11% over the past year to close the last trading session at $12.68. Also, it has climbed marginally intraday.
TRDA’s POWR Ratings reflect this optimistic outlook. The stock has an overall A rating, translating to a Strong Buy in our proprietary rating system.
The stock has an A grade for Value and a B for Growth and Quality. In the same industry, it is ranked #2.
To access additional ratings for TRDA’s Momentum, Stability, and Sentiment, click 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.
On January 25, 2024, EXEL reported promising results from the CONTACT-02 trial at ASCO GU 2024, showing a significant improvement in progression-free survival with cabozantinib and atezolizumab combination therapy compared to second-line treatment, with 97% experiencing treatment-emergent adverse events in the combination group versus 87% in the second-line group.
EXEL’s trailing-12-month EBIT and levered FCF margin of 9.34% and 6.85% are significantly higher than the industry average of 0.45% and 0.49%, respectively.
EXEL’s total revenues increased 13.1% year-over-year to $479.65 million in the fourth quarter that ended December 31, 2023. Its total operating expenses decreased 15.7% year-over-year to $397.86 million. it reported non-GAAP net income of $104.20 million and $0.33 per share, compared to its year-ago quarter’s non-GAAP net loss of $10.21 million and $0.03 per share, respectively.
EXEL reaffirmed its fiscal year 2024 financial guidance with total revenues projected between $1.83 billion and $1.93 billion and net product revenues expected to range from $1.65 billion to $1.75 billion.
Street expects EXEL’s revenue and EPS to grow 11.5% and 95.7% year-over-year to $455.64 million and $0.23 for the first quarter ending March 2024, respectively. The stock has surged 35.8% over the past year to close the last trading session at $22.21. It also gained marginally intraday.
EXEL’s robust fundamentals are reflected in its POWR Ratings. The stock has an overall rating of A, equating to a Strong Buy in our proprietary rating system.
EXEL has an A grade for Value and a B for Growth and Quality. Within the same industry, it is ranked first.
Click here to see EXEL’s additional POWR Ratings for Momentum, Stability, and Sentiment.
What To Do Next?
43 year investment veteran, Steve Reitmeister, has just released his 2024 market outlook along with trading plan and top 11 picks for the year ahead.
EXEL shares were trading at $22.29 per share on Monday morning, up $0.08 (+0.36%). Year-to-date, EXEL has declined -7.09%, versus a 7.26% rise in the benchmark S&P 500 index during the same period.
About the Author: Kritika Sarmah
Her interest in risky instruments and passion for writing made Kritika an analyst and financial journalist. She earned her bachelor's degree in commerce and is currently pursuing the CFA program. With her fundamental approach, she aims to help investors identify untapped investment opportunities.
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