Cathie Wood is a long-time advocate of the technology industry, with a focus on industry disrupting innovations. While her big gamble on Tesla, Inc. (TSLA) raised her profile as one of this century’s most successful investors, her bets on the forthcoming genome mapping revolution are gradually bearing fruit.
Wood’s Ark Genomic Revolution ETF (ARKG) is an actively managed ETF that invests in companies that have the potential to restructure the global healthcare and pharmaceutical industry through DNA sequencing and targeted therapeutics. With net assets of approximately $7.67 billion as of March 31, ARKG has a weighted average market capitalization of $55 billion. With 2020 being one of the biggest years for the biopharma industry, genome mapping technology has taken off.
Wood’s investments in the healthcare industry have been profitable. ARKG has gained more than 180% over the past year, and 47.6% over the past three months.
Among ARKG’s top holdings are Novartis AG (NVS), Regeneron Pharmaceuticals Inc. (REGN) and Vertex Pharmaceuticals Incorporated (VRTX). They have a combined 12.49% weighting in the ETF. So, we think it wise to bet on these stocks now.
Novartis AG (NVS)
As one of the largest pharmaceutical companies in the world, NVS is a prime holding in Wood’s Ark Genomic Revolution ETF (ARKG). As of March 31, ARKG held 4.33 million shares of NVS, representing a 4.2% weighting in the portfolio. Wood has a 3.92% stake in the NVS stock.
Based in Switzerland, NVS has operations around the world, and is estimated to be the second largest company in the world based on projected sales in 2021. The company has more than 170 prescription drugs in its portfolio, with its top selling arthritis treatment drug Cosentyx generating nearly $4 billion in annual sales in 2020. While NVS didn’t launch an individual COVID-19 treatment drug, it partnered with German biopharma CureVac NV to produce the latter’s vaccine candidate CVnCoV. However, the stock reported only modest price gains, rising 3.7% over the past year.
NVS’ cancer drug pipeline has been making substantial progress, with a positive phase three clinical trial of its radioligand therapy drug. Its cardiac drug Novartis Entresto is the first and only FDA-approved therapy drug available in the United States. The company has been expanding its oncology pipeline through in-licensing Beigene products, allowing NVS to commercially develop Beigene’s immune-oncology drugs across North America, Europe and Japan.
NVS’ net sales increased 3% year-over-year to $12.77 billion in the fourth quarter ended December 31. Its net income rose 86% year-over year to $2.10 billion over the fourth quarter ended December 31, while its EPS increased 84% from the year-ago value to $0.92. The company’s annual operating income and core EPS each increased by 13% year-over-year to $14.11 billion and $5.28, respectively.
A consensus EPS estimate of $6.37 for fiscal 2021 represents a 10.2% improvement year-over-year. Furthermore, NVS beat the Street’s EPS estimates in three of the trailing four quarters. Analysts expect the company’s revenues to rise 7.4% from its year-ago value to reach $52.28 billion this year.
NVS’s POWR Ratings reflect this promising outlook. The stock has an overall B rating, which equates to Buy in our proprietary POWR Ratings system. The POWR Ratings are calculated considering 118 different factors, with each factor weighted to an optimal degree.
NVS has an A grade for Stability, and B for Value and Quality. It is ranked #8 of 236 stocks in the Medical – Pharmaceuticals industry. In addition to the grades we’ve highlighted, one can check out NVS Ratings for Momentum, Sentiment and Growth here.
Check out the top-rated stocks in the Medical – Pharmaceuticals industry here.
Vertex Pharmaceuticals Incorporated (VRTX)
VRTX is known for its cystic fibrosis drug pipeline. The company’s commercialized drugs cater primarily to cystic fibrosis patients with gene mutations. It is distributed through specialty pharmacy and specialty distributors.
With advanced gene mapping technology, VRTX fits Wood’s investment criteria perfectly, making it a top stock in her Genome ETF. ARKG holds 1.71 million shares of VRTX, representing a 3.89% weighting in the portfolio. ARK has a 0.66% stake in the company. VRTX’s accelerated price decline over the past year has delivered Wood a perfect entry point; she expects the share’s price to rise significantly soon. Analysts expect VRTX to hit $284.73 soon, indicating a 34.3% potential upside.
On March 26, VRTX’s cystic fibrosis treatment drug KAFTRIO received a positive review from the European Medicines Agency’s Committee for Medicinal Products for Human use. Its alternative CF drug TRIKAFTA was approved by the Australian Therapeutic Goods Administration the day before. The company’s drug pipeline for the treatment of type 1 diabetes attained the fast-track designation from the U.S. FDA in March. VRTX’s non-GAAP product revenues have increased 55% year-over-year to $6.20 billion in its fiscal year 2020 ended December 31, 2020. Its annual non-GAAP operating income rose 95% from its year-ago value to $3.49 billion, while its net income increased 96% from the same period last year to $2.72 billion. The company reported non-GAAP EPS of $5.33, up 94% year-over-year.
Analysts expect VRTX’s EPS to rise 9.6% in the current year, and 15.6% next year. The company has an impressive earnings surprise history also; it surpassed consensus EPS estimates in each of the trailing four quarters.
It’s no surprise that VRTX has an overall B rating, which equates to Buy in our proprietary rating system. It has an A grade for Quality, and B for Value and Sentiment. Of the 484 stocks in the Biotech industry, VRTX is ranked #14.
In total, we rate VRTX on eight different levels. Beyond what we’ve stated above, one can check out additional grades for Momentum, Stability, and Growth here.
There are 29 more stocks in the Biotech industry with an overall rating of A or B. Click here to view them.
Regeneron Pharmaceuticals Inc. (REGN)
REGN’s diversified drug portfolio caught the attention of the Ark Genomic Revolution ETF. Wood holds 934,601 shares of the company, representing a 4,68% weighting in the fund. REGN’s commercialized drug portfolio includes diabetic treatment, cancer and oncology related drugs and medication for other serious ailments. REGN’s shares have gained 5% over the past month and 2.2% over the past five days.
REGEN-COV, the company’s COVID-19 treatment, achieved positive outcomes in its phase three trials, as announced on March 23. The antibody cocktail reduced hospitalization or death in non-hospitalized patients by 70%. The company’s diabetic drug candidate EYLEA demonstrated a 68% success rate in reducing the risk of developing vision-threatening complications. And its Libtayo monotherapy drug for cervical cancer treatment also showed positive results in its phase three results announced last month.
REGN’s revenues have increased 30% year-over-year to $8.50 billion in the fourth quarter ended December 31, 2020. Its annual net income of $3.51 billion represents a 66% rise from the same period last year. Its EPS increased 65% from its year-ago value to $30.52.
The Street expects REGN’s EPS to rise 43.9% year-over-year to $45.28 in its fiscal year 2021. Furthermore, REGN exceeded consensus EPS estimates in each of the trailing four quarters. The company’s annual revenue is expected to hit $12.04 billion in the current year, up 41.7% from the same period last year.
REGN has an overall A rating, which translates to a Strong Buy in our proprietary rating system. It has an A grade for Value, and B for Growth and Quality. It is currently ranked #4 in the Biotech industry. Get all REGN Ratings for Sentiment, Stability, and Momentum here.
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NVS shares were trading at $86.09 per share on Thursday afternoon, up $0.61 (+0.71%). Year-to-date, NVS has declined -6.61%, versus a 7.25% rise in the benchmark S&P 500 index during the same period.
About the Author: Aditi Ganguly
Aditi is an experienced content developer and financial writer who is passionate about helping investors understand the do’s and don'ts of investing. She has a keen interest in the stock market and has a fundamental approach when analyzing equities. More...
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