With the growing prevalence of chronic diseases and an aging population worldwide, a significant surge in critical medical needs should drive the biotech industry’s growth and expansion. Further, supportive government initiatives and funding combined with the growing adoption of advanced digital technologies should boost the industry’s prospects.
Given the solid footing of the industry, it could be wise to invest in fundamentally strong biotech stocks Shionogi & Co., Ltd. (SGIOY), United Therapeutics Corporation (UTHR), and Corcept Therapeutics Incorporated (CORT) for potential gains.
Before diving deeper into the fundamentals of these stocks, let’s discuss why the biotech sector is well-positioned to grow.
The biotechnology industry has a remarkable influence in meeting patients’ needs, including drug and diagnostic inventions. Moreover, the COVID-19 pandemic has positively impacted the biotech sector by propelling a surge in opportunities and advancements for drug development and manufacturing of vaccines for the disease.
As per a report by Grand View Research, the biotechnology market size is expected to grow at a CAGR of 14% from 2023 to 2030. Favorable government initiatives aimed at streamlining the regulatory framework, expediting approval processes, enhancing reimbursement policies, and standardizing clinical studies would provide the market with solid growth potential.
In addition, a stronghold of personalized medicine and a rising number of orphan drug formulations are creating numerous avenues for biotech applications, boosting the influx of innovative biotech companies. The global personalized medicine market size is expected to increase at a CAGR of 7.2% from 2023 to 2030.
Further, increased deployment of emerging digital technologies among biotech companies, such as artificial intelligence (AI), the Internet of Things (IoT), augmented reality (AR), virtual reality (VR), and machine learning (ML), among others, would create more revenue-generating opportunities for the biotech industry.
The global AI for Pharma and Biotech market size is estimated to expand at a CAGR of 30.2% during the forecast period, reaching $5.44 billion by 2028.
With these favorable trends in mind, let's delve into the fundamentals of the three best Biotech stock picks, beginning with the third choice.
Stock #3: United Therapeutics Corporation (UTHR)
UTHR develops and sells products and therapies for chronic and life-threatening illnesses worldwide. The company’s commercial therapies include Remodulin to treat patients with pulmonary arterial hypertension (PAH), Tyvaso, an inhaled solution, and specific treatments for neuroblastoma and idiopathic pulmonary fibrosis.
In its latest financial release, after reporting double-digit revenue growth and its highest quarterly revenue in the second quarter, UTHR remains optimistic about its continued business momentum. “We expect this growth trajectory to continue with our current business as we expect to reach a $4 billion annual revenue run rate by mid-decade,” said CEO Martine Rothblatt.
“Beyond that we expect continued waves of growth with an additional doubling of our revenue from the potential launch of Tyvaso in pulmonary fibrosis and ralinepag in pulmonary arterial hypertension, and then yet another doubling of our revenue with the potential for an unlimited supply of tolerable, transplantable organs in the next decade,” Rothblatt added.
UTHR’s revenues for the second quarter that ended June 30, 2023, increased 27.8% year-over-year to $596.50 million. The company reported operating income of $313.40 million, up 55.3% year-over-year. Also, its net income and net income per common share came in at $259.20 million and $5.24, registering a growth of 123.5% and 117.4% year-over-year, respectively.
Analysts expect UTHR’s revenue for the fiscal year (ending December 2023) to increase 16.4% year-over-year to $2.25 billion. The company’s EPS for the ongoing year is expected to grow 19.8% year-over-year to $20.02. Moreover, UTHR has an impressive earnings surprise history as it surpassed the consensus EPS estimates in three of the trailing four quarters.
The stock has gained 11.5% over the past three months and 5.5% over the past year to close the last trading session at $229.53.
UTHR’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall rating of B, which equates to a Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
UTHR is ranked #12 among 376 stocks in the Biotech industry. The stock has a B grade for Value, Sentiment, and Quality.
To see the other ratings of UTHR for Growth, Momentum, and Stability, click here.
Stock #2: Shionogi & Co., Ltd. (SGIOY)
SGIOY, headquartered in Osaka, Japan, is involved in researching, developing, manufacturing, and distributing pharmaceuticals, medical devices, and diagnostic reagents. The company offers various drugs and therapies for treating bacterial infections, opioid-induced constipation, neuropathic pain, obesity, bladder cancer, and many others.
On July 4, SGIOY applied for a supplemental new drug application in Taiwan to extend the use of Xofluza (baloxavir marboxil) for treating and preventing influenza in children aged 5 to under 12 years. This expansion aims to provide a new oral treatment option for younger children in Taiwan. The extension of the use of Xofluza should benefit the company considerably.
On June 30, SGIOY’s Eddingpharm received approval for Mulpleta, a daily oral thrombopoietin receptor agonist for treating thrombocytopenia in adult chronic liver disease patients undergoing procedures.
SGIOY had entered a license agreement with Edding to grant exclusive marketing rights for Mulpleta in Mainland China, Hong Kong, and Macau. Shionogi will supply the product to Edding and receive upfront and milestone payments based on post-launch sales performance.
For the first quarter that ended June 30, 2023, SGIOY’s revenues were ¥109.31 billion ($747 million), up 52.2% year-over-year. The company’s operating profit and profit before tax came in at ¥46.59 billion ($318.38 million) and ¥55.70 billion ($380.64 million), up 274.9% and 38.2% year-over-year, respectively.
Furthermore, profit attributable to owners of the parent amounted to ¥42.56 billion ($290.84 million), an increase of 22.6% over the prior year’s quarter. The company’s earnings per share rose 25.6% from the year-ago value to ¥144.57 billion.
Street expects SGIOY’s revenue for the second quarter (ending September 2023) to grow 10% year-over-year to $583.71 million. Similarly, the consensus revenue estimate of $18.22 billion for the fiscal year (ending December 2023) represents a 19.4% increase year-over-year. Also, the company has topped the consensus revenue estimates in all the trailing four quarters.
Shares of SGIOY have gained 3.6% over the past month and 1.9% over the past three months to close the last trading session at $11.13.
SGIOY’s POWR Ratings reflect this promising outlook. The stock has an overall grade of B, translating to a Buy in our proprietary rating system.
SGIOY has an A grade for Value and a B for Growth and Quality. It is ranked #10 out of 376 stocks in the same industry.
In addition to the POWR Ratings I’ve just highlighted, you can see SGIOY’s ratings for Stability, Momentum, and Sentiment here.
Stock #1: Corcept Therapeutics Incorporated (CORT)
CORT is a commercial-stage company that engages in the discovery and development of drugs and therapies to treat severe metabolic, endocrine, oncologic, and neurological disorders across the US by modulating the effects of the hormone cortisol.
On August 2, in the latest quarterly release, the company announced raising its revenue guidance for full-year fiscal 2023, driven by enhanced confidence in the growth potential of its Cushing’s syndrome business. CORT increased its 2023 revenue guidance to $455-$470 million from $435-$455 million.
On July 17, CORT announced Phase 1b study results for its miricorilant, a selective cortisol modulator, in presumed non-alcoholic steatohepatitis (NASH) patients. Those receiving 100 mg of miricorilant twice weekly for 12 weeks exhibited about 30% liver fat reduction, improved liver markers, and metabolic measures.
Miricorilant can potentially be a potent solution for the large patient population with NASH, expanding the company’s portfolio lines and driving growth.
On June 27, CORT announced the publication of its Phase 2 trial results of its proprietary cortisol modulator, Relacorilant, in women with platinum-resistant ovarian cancer in the Journal of Clinical Oncology. Patients on intermittent relacorilant dosing showed improved progression-free survival, response duration, and overall survival capabilities.
For the second quarter that ended June 30, 2023, CORT reported revenue and income before income taxes of $117.72 million and $32.93 million, up 13.9% and 2.7% year-over-year, respectively. Furthermore, the company’s net income per common share was $0.25, compared to $0.24 for the corresponding period of the previous year.
The consensus revenue estimate of $121.88 million for the fourth quarter (ending December 2023) represents an 18.3% increase year-over-year. The consensus EPS estimate of $ 0.21 for the same period indicates a 46.4% improvement year-over-year.
Over the past six months, the stock has gained 57.6% and 62.8% year-to-date to close the last trading session at $32.83.
CORT’s POWR Ratings reflect this robust outlook. CORT has an overall rating of B, which translates to a Buy in our proprietary rating system.
CORT has an A grade for Quality and a B for Value. It is ranked #9 out of 375 stocks in the Biotech industry.
Beyond what we stated above, we also have CORT’s ratings for Stability, Momentum, Sentiment, and Growth. Get all CORT ratings here.
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SGIOY shares were unchanged in premarket trading Wednesday. Year-to-date, SGIOY has declined -10.10%, versus a 18.45% 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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