The biotech industry came into the limelight last year, with the onset of the COVID-19, as companies rushed to develop a vaccine or a treatment to fight against the virus. The increased attention to the industry fueled record financings and IPOs. Moreover, the ongoing focus on developing gene therapies and synthetic biology to meet the rising demand from an aging population could shape the industry’s growth.
The global biotechnology market is expected to expand at a CAGR of 15.8% from 2021 to 2028. Spurred by COVID-19, the VanEck Vectors Biotech ETF (BBH) has gained 63.4% over the past two years, surpassing the broader SPDR S&P 500 ETF Trust’s (SPY) 48.1% gain.
Therefore, fundamentally sound biotech stocks Harmony Biosciences Holdings, Inc. (HRMY) and Dynavax Technologies Corporation (DVAX), which are currently trading above their 50-day and 200-day moving averages, could be solid bets.
Harmony Biosciences Holdings, Inc. (HRMY)
HRMY functions as a commercial-stage pharmaceutical company that develops therapies for treating patients with rare neurological disorders. The company received FDA approval for its first commercial product WAKIX® (pitolisant) tablets for treating narcolepsy, in August of 2019.
On August 10, HRMY collaborated with asset management company Blackstone Inc. (BX), whereby the latter will provide up to $330 million of capital to the former. The financing is expected to facilitate the company to expand its product portfolio catering to neurological disorders and reduce interest expense.
On August 9, the company announced the acquisition of a molecule from biotechnology company ConSynance Therapeutics, Inc., that provides a novel approach to treating narcolepsy. With the acquisition, HRMY gained the entire development and commercialization rights over the molecule, which might enable HRMY to firmly establish its foothold in the field of neurological disease treatment.
In the fiscal second quarter that ended June 30, HRMY’s net product revenues increased 94.2% year-over-year to $73.82 million. Gross profit rose 93.8% from the prior-year quarter to $61.13 million. Non-GAAP adjusted net income improved 221.3% from the same period last year to $31.87 million, while non-GAAP adjusted net income per share came in at $0.54, up substantially from its negative year-ago value.
The consensus EPS estimate for the current quarter (ending December 2021) of $0.43 indicates a 72% year-over-year increase. Likewise, the consensus revenue estimate of $92.42 million reflects a rise of 64.2% from the prior-year quarter. Moreover, HRMY has an impressive earnings surprise history as it has topped the consensus EPS estimates in three out of the trailing four quarters.
The stock has gained 19.6% over the past year and 32.8% over the past three months to close yesterday’s trading session at $38.02. It is currently trading above its 50-day and 200-day Moving Averages of $36.38 and $31.24, respectively, indicating an uptrend.
HRMY’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall grade of A which equates to a Strong Buy rating in our proprietary ratings system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
HRMY has a Growth and Sentiment grade of A, and a Value and Quality grade of B. In the 502-stock Biotech industry, it is ranked #7. Click here to see additional grades for HRMY (Momentum and Stability).
Dynavax Technologies Corporation (DVAX)
A fully integrated biopharmaceutical company, DVAX develops and sells novel vaccines. The company’s vaccines leverage the body’s immune system through Toll-like Receptor (TLR) stimulation.
On October 4, DVAX signed an agreement worth $22 million with the U.S. Department of Defense (DOD) for the company to develop a recombinant plague vaccine expected to commence in 2022. This demonstrates the company’s dominant position in the industry.
In August, DVAX, in collaboration with Taiwanese biopharmaceutical company Medigen Vaccine Biologics Corporation, launched its COVID-19 vaccine in Taiwan. This agreement demonstrates the expansion of DVAX’s global operations.
For the fiscal second quarter that ended June 30, DVAX’s total revenues increased 1,877.8% year-over-year to $52.77 million. This can be attributed to a 2,090.3% year-over-year improvement in net product revenues to $52.68 million. Net income and net income per share stood at $4.47 million and $0.02, registering a substantial increase from their negative year-ago values.
Analysts expect EPS to rise 457.1% year-over-year to $0.50 in the ongoing quarter (ending December 2021). Street revenue estimate of $147.41 million for the current quarter indicates an improvement of 654% from the same period last year. In addition, DVAX has beaten the consensus EPS estimates in each of the four trailing quarters, which is impressive.
DVAX’s stock has gained 293.5% over the past year to close yesterday’s trading session at $18.14. It also gained 307.6% year-to-date. The stock is currently trading above its 50-day and 200-day Moving Averages of $16.89 and $11.36, respectively.
It’s no surprise that DVAX has an overall grade of B rating, which translates to a Buy rating in our POWR Ratings system. The stock has an A grade for Growth, and a B grade for Value and Quality. It is ranked #31 in the same industry.
In addition to the grades we’ve stated above, one can see DVAX’s grades for Momentum, Stability, and Sentiment here.
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HRMY shares were unchanged in after-hours trading Friday. Year-to-date, HRMY has declined 0.00%, versus a 18.26% 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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