The COVID-19 pandemic has boosted the worldwide biotech market by increasing focus on drug discovery and development. The growing prevalence of chronic disease and an aging population worldwide are increasing the importance of the biotech industry.
Personalized medicine’s expanding influence and the rise in orphan drug formulations are creating new opportunities for biotechnology applications and attracting new, innovative biotechnology firms. The White House intends to invest more than $2 billion in the biotechnology sector in the United States, with President Biden unveiling a National Biotechnology and Biomanufacturing Initiative (NBBI).
The global biotechnology market is expected to grow at a 15.5% CAGR to $1.35 trillion by 2030. Government initiatives to modernize the regulatory environment, improvements in approval procedures and reimbursement policies, and standardization of clinical research are driving the industry’s growth.
Given the industry’s growth prospects, fundamentally sound biotech stocks Gilead Sciences (GILD), Vertex Pharmaceuticals (VRTX), and United Therapeutics (UTHR) could be solid buys this year. However, given Ginkgo Bioworks’ (DNA) fundamental weakness and bleak growth prospects, the stock might be best avoided now.
Stocks to Buy:
Gilead Sciences, Inc. (GILD)
Biopharmaceutical company GILD is focused on discovering, developing, and marketing drugs to treat and prevent diseases like cancer, viral hepatitis, and the human immunodeficiency virus (HIV). The company is also working to rebalance the immune system by developing agonists that target immune suppressive receptors.
On November 29, GILD announced that the European Commission (EC) had approved a new low-dose tablet dosage form of Biktarvy® as well as an extension of the indication for Biktarvy to treat HIV infection in virologically suppressed children who are at least two years old and weigh at least 14 kg.
The approval is a significant step forward in addressing the unmet needs of children with HIV who require new treatment alternatives. This would further the coordinated efforts of GILD to fight the HIV epidemic by expanding the therapeutic alternatives that are available to assist children’s access to care and their HIV treatment options.
On November 2, GILD announced the U.S. Food and Drug Administration’s (FDA) acceptance of the supplemental new drug application (sNDA) for Vemlidy® (tenofovir alafenamide) for the treatment of chronic hepatitis B virus infection in pediatric patients.
The approval will treat this condition quickly to prevent complications and probable liver damage. It is expected to aid GILD in overcoming the most challenging aspects of liver disease and altering the course of the illness.
For the fiscal 2022 third quarter ended September 30, 2022, GILD’s HIV product sales increased 7% year-over-year to $4.49 billion, while its total product sales, excluding Veklury, increased 11% from the year-ago value to $6.05 billion. Also, the company’s oncology sales grew 79% year-over-year to $578 million.
GILD has raised its dividends for six consecutive years. It pays a $2.92 per share dividend annually, which translates to a 3.40% yield on the current price. Its four-year average dividend yield is 4%. GILD’s dividend payments have grown at a CAGR of 7.4% over the past five years.
Analysts expect GILD’s EPS for the fiscal 2022 fourth quarter ending December 31, 2022, to increase 115.3% year-over-year to $1.49. Also, the company is expected to report an EPS of $1.71 for the fiscal 2023 second quarter (ending June 30, 2023), indicating an increase of 8% year-over-year. GILD has surpassed its consensus EPS estimates in three of the trailing four quarters.
The stock has gained 10% over the past month and 21.4% over the past year to close the last trading session at $85.76.
GILD’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall rating of A, which equates to a Strong Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, each weighted to an optimal degree.
The stock has an A grade for Value and Sentiment and a B for Quality. Within the Biotech industry, it is ranked #3 of 380 stocks.
Beyond what we stated above, we also have GILD’s Growth, Stability, and Momentum ratings. Get all GILD ratings here.
Vertex Pharmaceuticals Incorporated (VRTX)
VRTX, a worldwide biotechnology firm, is focused on creating medicines that treat the fundamental cause of cystic fibrosis; and has multiple current clinical and research activities to expand and extend its treatment. The company uses its understanding of causal human biology to develop exploratory medicines for other severe diseases.
On October 11, VRTX announced the FDA approval of the IND application for VX-634, allowing the business to begin a first-in-human clinical trial in healthy volunteers for this small molecule AAT corrector.
This might help VRTX develop transformational small-molecule medications for AATD patients to target both the liver and lung symptoms of the disease. VRTX is advancing new next-wave AAT correctors in line with its portfolio approach for all initiatives, with the first compounds anticipated to hit the clinic in 2023.
For the fiscal 2022 third quarter ended September 30, 2022, VRTX’s net product revenue increased 17.7% year-over-year to $2.33 billion. Its non-GAAP operating income was $1.29 billion, up 11% year-over-year, while its non-GAAP net income grew 14% from the prior year to $1.04 billion. Non-GAAP net income per share came in at $4.01, a 14.3% increase from the year-ago value.
For the fiscal year 2022, ending December 31, 2022, analysts expect VRTX’s revenue to increase 18% from the previous year to $8.93 billion. The company’s EPS for the ongoing year is expected to increase 12.7% year-over-year to $14.68. VRTX has an impressive earnings surprise history since it surpassed the consensus EPS in each of the trailing four quarters.
The stock has gained 17.8% over the past six months and 66.4% over the past year to close the last trading session at $316.33.
VRTX’s POWR Ratings reflect its strong outlook. The stock has an overall rating of A, which equates to a Strong Buy in our proprietary rating system.
The stock has an A grade for Quality and a B for Value and Sentiment. Within the Biotech industry, it is ranked first among 380 stocks.
To see additional POWR Ratings for Growth, Stability, and Momentum for VRTX, click here.
United Therapeutics Corporation (UTHR)
UTHR develops and commercializes medicines to meet the unmet medical needs of people with chronic and life-threatening diseases worldwide. It also markets and sells technologies to supply transplantable organs and tissues and improve transplant outcomes for recipients.
The company is now focusing on its objective to double the number of patients utilizing its medicines within the next few years after achieving another sales record in the third quarter.
Furthermore, the business is advancing two IPF clinical trials that, if successful, could lead to treating around 100,000 patients in the United States. By the end of this decade, UTHR’s IPF revenues will outpace those for pulmonary arterial hypertension (PAH), thanks to the strong revenue growth.
For the fiscal 2022 third quarter ended September 30, 2022, UTHR’s revenue increased 16% year-over-year to $516 million, while its operating income grew 37.4% year-over-year to $314.30 million. Net income came in at $239.30 million, up 47.1%year-over-year. In addition, the company’s net income per share grew 43.6% from the year-ago value to $4.91.
Analysts expect UTHR’s revenue for the fiscal year ending December 31, 2022, to increase 16.5% year-over-year to $1.96 billion. The company’s EPS for the current year is expected to increase by 27.1% from the prior year to $19.39. The stock has gained 18.1% over the past month and 39.7% over the past year to close the last trading session at $271.03
UTHR’s POWR Ratings reflect its promising outlook. The stock has an overall rating of A, which equates to a Strong Buy in our proprietary rating system.
The stock has a B grade for Growth, Value, Quality, and Sentiment. Within the same industry, it is ranked #2 of 380 stocks.
Click here to see additional UTHR ratings for Stability and Momentum.
Stock to Sell:
Ginkgo Bioworks Holdings, Inc. (DNA)
DNA creates a platform for cell programming, which is utilized to program cells to enable the biological creation of goods such as innovative treatments, food ingredients, and chemicals made from petroleum. The company operates through two segments, Foundry and Biosecurity.
For the third quarter of fiscal 2022 ended September 30, DNA’s total revenue has decreased 14.4% year-over-year to $66.40 million. The company’s loss from operations widened 2,348.3% year-over-year to $653.02 million. DNA reported a net loss of $669.06 million, worsening 553.3% year-over-year.
Furthermore, the net loss per share attributable to DNA stockholders widened by 412.5% from the prior-year period to $0.41.
DNA’s trailing-12-month ROCE, ROTC, and ROTA of negative 236.35%, 145.89%, and 188.65% compare to the industry averages of 13.05%, 7.43%, and 5.70%, respectively. Likewise, the stock’s trailing-12-month Asset Turnover Ratio of 0.26% is 64.39% lower than the 0.74% industry average.
Analysts expect DNA’s revenue for the fiscal 2022 fourth quarter ending December 31, 2022, to decrease 40.8% year-over-year to $87.93 million. The company is expected to report a loss per share of 0.24 during the current quarter. Moreover, the company failed to surpass its consensus EPS estimates in each of the trailing four quarters.
Shares of DNA have slumped 84.6% over the past year to close the last trading session at $1.85.
DNA’s poor prospects are also apparent in its POWR Ratings. The stock has an overall F rating, equating to a Strong Sell in our proprietary rating system.
The stock has an F grade for Stability and Sentiment. Within the Biotech industry, it is ranked last among 380 stocks.
Beyond what we stated above, we also have DNA’s ratings for Value, Momentum, Quality, and Growth. Get all DNA ratings here.
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GILD shares fell $0.15 (-0.17%) in premarket trading Wednesday. Year-to-date, GILD has gained 22.27%, versus a -15.74% 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. More...
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