The biotechnology industry’s growth prospects appear promising due to increasing demand for innovative healthcare solutions, growing global healthcare needs, government initiatives, adoption of advanced technologies, and scientific breakthroughs. Biotech companies are constantly pushing boundaries to develop new treatments and therapies.

Given the industry’s bright prospects, investors could consider buying fundamentally strong biotech stocks Harmony Biosciences Holdings, Inc. (HRMY), Illumina, Inc. (ILMN), and Halozyme Therapeutics, Inc. (HALO).

The biotech industry is well-positioned to continue growing as medical technology advances and demand for innovative healthcare solutions increases. The United States has the largest biotech industry in the world, accounting for more than 47% of global revenues. The industry’s expansion is driven by innovation and research, particularly in developing cutting-edge technologies and treatments.

GlobalData’s recent survey, The State of the Biopharmaceutical Industry 2024, showed that 44% of healthcare industry professionals globally are optimistic or extremely optimistic about the recovery of biotech funding in the next twelve months. The growing demand for personalized medicine, tailored treatments, and orphan drugs is driving the growth of the biotech industry.

Furthermore, the industry leverages cutting-edge technologies like AI to drive innovation and bolster drug development. The use of global generative AI in the biotech market is expected to be worth around $472 million by 2032, growing at a CAGR of 24.9%.

The global biotechnology market is expected to reach $5.68 trillion by 2033, growing at a CAGR of 14%. Investors’ interest in biotech stocks is evident from the VanEck Biotech ETF’s (BBH) 5.5% returns over the past nine months.

With these favorable trends in mind, let’s examine the fundamentals of the three best Biotech stock picks, beginning with the third choice.

Stock #3: Harmony Biosciences Holdings, Inc. (HRMY)

HRMY is a commercial-stage pharmaceutical company that focuses on developing and commercializing therapies for patients in the United States with rare and other neurological diseases. It offers WAKIX (pitolisant), a molecule with a novel mechanism of action for treating excessive daytime sleepiness in adult patients with narcolepsy.

HRMY’s trailing-12-month gross profit margin of 79.17% is 38.6% higher than the industry average of 57.14%. Likewise, the stock’s trailing-12-month levered FCF margin of 36.91% is significantly higher than the industry average of 0.84%. Additionally, its 0.78x trailing-12-month asset turnover ratio is 99.7% higher than the industry average of 0.39x.

HRMY’s net product revenue for the fourth quarter, which ended December 31, 2023, grew 31.3% year-over-year to $168.41 million. Its gross profit increased 23.5% from the year-ago value to $125.26 million. Also, the company’s non-GAAP net income and EPS were $42.83 million and $0.73, respectively.

Street expects HRMY’s EPS and revenue for the quarter ended March 31, 2024, to increase 28.3% and 29.8% year-over-year to $0.62 and $154.68 million, respectively. HRMY shares have declined 2.2% over the past year to close the last trading session at $29.84.

HRMY’s POWR Ratings reflect this promising outlook. It has an overall rating of B, equating to a Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.

HRMY has an A grade for Value and Quality. Within the Biotech industry, it is ranked #22 out of 362 stocks. To see HRMY’s additional ratings for Growth, Momentum, Stability, and Sentiment, click here.

Stock #2: Illumina, Inc. (ILMN)

ILMN develops, manufactures, and markets life science tools and integrated systems for large-scale analysis of genetic variation and function. It operates through the Core Illumina and GRAIL segments. It provides sequencing and array-based instruments and consumables, whole-genome sequencing, genotyping, NIPT, and product support services.

ILMN’s trailing-12-month gross profit margin of 65.30% is 14.3% higher than the industry average of 57.14%. Its trailing-12-month EBITDA margin of 7.50% is 41.2% higher than the industry average of 5.31%. Additionally, its 11.39% trailing-12-month levered FCF margin is significantly higher than the 0.84% industry average.

For the fiscal fourth quarter that ended December 31, 2023, ILMN’s total revenue grew 3.6% year-over-year to $1.12 billion, and its service and other revenue came in at $199 million, an increase of 17.1% year-over-year. The company’s non-GAAP net income and EPS were $22 million and $0.14, respectively.

For the quarter ending September 30, 2024, ILMN’s revenue and EPS are expected to increase 2.1% and 10% year-over-year to $1.14 billion and $0.36, respectively. It surpassed the consensus EPS estimates in three of the trailing four quarters. Over the past three months, the stock has fallen 2.7% to close the last trading session at $130.12.

ILMN’s strong fundamentals are reflected in its POWR Ratings. It has an overall rating of B, which equates to a Buy in our proprietary rating system.

It is ranked #20 in the same industry. It has an A grade for Growth and a B for Quality. Click here to see the additional ratings of ILMN for Value, Momentum, Stability, and Sentiment.

Stock #1: Halozyme Therapeutics, Inc. (HALO)

HALO is a biopharma technology platform company that researches, develops, and commercializes proprietary enzymes and devices internationally. The company offers Hylenex recombinant, rilpivirine, cabotegravir, N6LS BNAB, ocrelizumab, XYOSTED, and ATRS-1902.

HALO’s trailing-12-month EBIT margin of 41.01% is significantly higher than the industry average of 0.89%. Its trailing-12-month asset turnover ratio of 0.46x is 18.2% higher than the industry average of 0.39x. Its 50.28% trailing-12-month EBITDA margin is 846.2% higher than the 5.31% industry average.

HALO’s total revenues for the fourth quarter that ended December 31, 2023, increased 26.7% year-over-year to $230.04 million, and its operating income grew 35.6% from the year-ago value to $101.03 million. The company’s adjusted EBITDA was $121.73 million for the quarter, up 46.6% year-over-year.

Furthermore, HALO’s non-GAAP EPS of $0.82 indicates growth of 70.8% from the prior year’s quarter.

Analysts expect HALO’s EPS and revenue for the quarter ended March 31, 2024, to increase 53.3% and 24.7% year-over-year to $0.72 and $202.17 million, respectively. Shares of HALO have gained 12.4% over the past three months to close the last trading session at $39.91.

It’s no surprise that HALO has an overall B rating, equating to a Buy in our POWR Ratings system.

It has a B grade for Growth, Value, and Quality. It is ranked #19 in the Biotech industry. Beyond what is stated above, we’ve also rated HALO for Momentum, Stability, and Sentiment. Get all HALO ratings here.

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ILMN shares were trading at $133.59 per share on Tuesday morning, up $3.47 (+2.67%). Year-to-date, ILMN has declined -4.06%, versus a 9.39% rise in the benchmark S&P 500 index during the same period.

About the Author: Rashmi Kumari

Rashmi is passionate about capital markets, wealth management, and financial regulatory issues, which led her to pursue a career as an investment analyst. With a master's degree in commerce, she aspires to make complex financial matters understandable for individual investors and help them make appropriate investment decisions. More...

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