The biotech industry enjoyed new opportunities during the COVID-19 pandemic, which encouraged advancements in drug and vaccine developments. Evidently, the bioscience industry’s economic impact on the U.S. economy amounted to $2.9 trillion in 2021.
In the post-pandemic world, the need for medical breakthroughs and favorable government spending is expected to keep the sector buoyed. In September, the White House announced its plans to invest more than $2 billion in the U.S. biotechnology sector.
Furthermore, the global biotechnology market is expected to grow at a CAGR of 13.9% from 2022 to 2030. Given this backdrop, quality biotech stocks Amgen Inc. (AMGN) and Gilead Sciences, Inc. (GILD) could be solid buys this November.
However, given the macroeconomic headwinds, the fundamentally weak stock, Ginkgo Bioworks Holdings, Inc. (DNA), might be best avoided now.
Stocks to Buy:
Amgen Inc. (AMGN)
AMGN discovers, develops, manufactures, and delivers human therapeutics globally. The company primarily focuses on inflammation, oncology/hematology, bone health, cardiovascular disease, nephrology, and neuroscience.
On October 28, AMGN declared a $1.94 per share dividend for the fourth quarter of 2022, payable to shareholders on December 8, 2022. This reflects the shareholder return ability of the company.
On October 20, AMGN announced that it had completed its acquisition of ChemoCentryx, Inc. (CCXI), a biopharmaceutical company, for $52 per share in cash, representing aggregate merger consideration of approximately $3.7 billion. The acquisition should enhance AMGN’s inflammation and nephrology portfolio.
For the third quarter of 2022, AMGN’s non-GAAP operating income rose 7.4% year-over-year to $3.28 billion. Its non-GAAP net income increased 8.9% year-over-year to $2.53 billion, while its non-GAAP EPS grew 15.2% year-over-year to $4.70.
AMGN’s revenue is expected to increase 4% year-over-year to $6.49 billion in the fiscal first quarter ending March 2023. Its EPS is expected to increase 6.7% year-over-year to $4.53 in the same quarter. Additionally, it surpassed EPS estimates in all four trailing quarters, which is impressive.
The stock has gained 27.7% year-to-date to close the last trading session at $287.29. Over the past month, the stock has gained 16.1%.
AMGN’s POWR Ratings reflect this promising outlook. The company has an overall rating of B, which translates to Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
AMGN has an A grade for Quality and a B for Stability. Within the Biotech industry, it is ranked #12 out of 381 stocks.
Beyond what is stated above, we’ve also rated AMGN for Momentum, Growth, Value, and Sentiment. Get all AMGN ratings here.
Gilead Sciences, Inc. (GILD)
Biopharmaceutical company GILD discovers, develops, and commercializes medicines in the areas of unmet medical need in the United States, Europe, and internationally.
On November 2, GILD announced that the U.S. Food and Drug Administration (FDA) approved its supplemental new drug application for Vemlidy® (tenofovir alafenamide) for treating chronic hepatitis B virus (HBV) infection. This approval indicates a significant step forward in GILD’s research and portfolio diversification.
On October 27, GILD announced that the company’s Board of Directors declared a quarterly dividend of $0.73 per share of common stock for the fourth quarter. The dividend is payable on December 29, 2022. This reflects its cash generation ability.
On October 17, GILD and MacroGenics, Inc. (MGNX) announced an exclusive option and collaboration agreement to develop MGD024, an investigational, bispecific antibody, and two additional bispecific research programs. This is expected to bolster the company’s portfolio.
GILD’s total product sales, excluding Veklury, came in at $6.05 billion for the third quarter that ended September 30, up 11.4% year-over-year. Non-GAAP net income attributable to GILD and non-GAAP EPS came in at $2.39 billion and $1.90, respectively. The company’s cash and cash equivalents at the end of the period rose 7.7% from the prior-year period to $4.70 billion.
For the fourth quarter ending December 2022, Street expects GILD’s EPS to increase 115.3% year-over-year to $1.49. Its revenue is expected to come in at $6.65 billion for the same period. It surpassed consensus EPS estimates in three of the four trailing quarters.
Over the past six months, the stock has gained 31% to close the last trading session at $83.62. It has gained 26.4% over the past month.
This promising outlook is reflected in GILD’s POWR Ratings. The stock’s overall A rating equates to a Strong Buy in our proprietary rating system.
GILD has an A grade for Value and Sentiment and a B for Quality. In the Biotech industry, it is ranked #3.
Click here for the additional POWR Ratings for Growth, Stability, and Momentum for GILD.
Stock to Avoid:
Ginkgo Bioworks Holdings, Inc. (DNA)
DNA engages in the development of a platform for cell programming. Its platform is used to program cells to enable the biological production of products, such as novel therapeutics, food ingredients, and chemicals derived from petroleum.
On November 16, DNA announced a public offering of its Class A common stock for gross proceeds of approximately $100 million. The company intends to use the net proceeds to offset the cash used to finance the acquisition of certain assets and liabilities of Bayer CropScience LP and for other general corporate purposes.
DNA’s loss from operations came in at $653.02 million for the third quarter that ended September 30, up significantly year-over-year. Its net loss attributable to DNA stockholders came in at $669.06 million, up considerably year-over-year. Its net loss per share attributable to DNA common stockholders came in at $0.41.
Analysts expect DNA’s revenue to decrease 40.8% year-over-year to $87.93 million for the fiscal fourth quarter ending December 2022. EPS is expected to come in at a negative $0.24 for the same period. It has missed EPS estimates in all four trailing quarters.
Over the past year, the stock has lost 83.7% to close the last trading session at $2.19. It has lost 23.2% over the past three months.
DNA’s bleak prospects are reflected in its POWR Ratings. The stock has an overall rating of F, which equates to a Strong Sell in our proprietary rating system.
DNA has an F grade for Stability and Sentiment and a D for Value, Momentum, and Quality. In the same industry, it is ranked 380.
Click here to see the additional POWR Rating for DNA (Growth).
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AMGN shares were trading at $290.09 per share on Monday afternoon, up $2.80 (+0.97%). Year-to-date, AMGN has gained 33.02%, versus a -15.95% rise in the benchmark S&P 500 index during the same period.
About the Author: Anushka Dutta
Anushka is an analyst whose interest in understanding the impact of broader economic changes on financial markets motivated her to pursue a career in investment research. More...
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