The biotech industry is well-positioned to thrive, owing to inelastic demand, rapid advancements, and government initiatives. So, quality biotech stocks Regeneron Pharmaceuticals, Inc. (REGN), Biogen Inc. (BIIB), and United Therapeutics Corporation (UTHR) could be worth buying.
According to Data Horizzon Research, the AI in biotechnology market share would grow at a 29.7% CAGR until 2032. The rising adoption of AI technologies in numerous biotechnology applications, such as drug discovery, genomics, and personalized medicine, can be attributed to this tremendous growth.
The incorporation of AI in these areas is predicted to change biotech companies by increasing research and development efficiency, accuracy, and speed.
Moreover, the global Biotechnology market is expected to reach $2.77 trillion by 2030 at a CAGR of 14.2%. The biotechnology market is expanding rapidly due to rising personalized medicine demand, genomics breakthroughs, food and agriculture product demand, and government investment.
Investors’ interest in biotech stocks is evident from the VanEck Vectors Biotech ETF’s (BBH) 1.3% returns over the past three months and 2.7% over the past six months.
In light of these encouraging trends, let’s look at the fundamentals of the three best Biotech stocks, beginning with number 3.
Stock #3: Regeneron Pharmaceuticals, Inc. (REGN)
REGN discovers, invents, develops, manufactures, and commercializes medicines for treating various diseases worldwide.
On August 22, 2023, REGN announced that the Biomedical Advanced Research and Development Authority (BARDA) has agreed to support the clinical development, clinical manufacturing, and regulatory licensure of a next-generation COVID-19 monoclonal antibody therapy for the prevention of SARS-CoV-2 infection.
The deal is part of ‘Project NextGen,’ a U.S. Department of Health and Human Services (HHS) initiative to create a pipeline of novel, innovative COVID-19 vaccines and therapies.
On August 9, 2023, REGN and Decibel Therapeutics, Inc. (DBTX), a clinical-stage biotechnology company dedicated to discovering and developing transformative treatments to restore and improve hearing and balance, announced a definitive agreement for Regeneron to acquire Decibel for $4.00 per share of Decibel common stock payable in cash at closing, with an additional non-tradeable contingent value right (CVR) to receive up to $3.50 per share in cash upon achievement of certain milestones.
The proposed acquisition values Decibel at about $109 million in total equity based on the amount payable at closure, and up to roughly $213 million if the CVR milestones are met.
REGN’s forward EV/EBIT of 15.07x is 10.1% lower than the industry average of 16.75x.
REGN’s trailing-12-month levered FCF margin of 17.82% is significantly higher than the 0.23% industry average. Its trailing-12-month EBITDA margin of 38% is 637.2% higher than the 5.15% industry average.
For the fiscal second quarter ended June 30, 2023, REGN’s revenues were $3.16 billion, up 10.5%year-over-year. Its non-GAAP net income increased 4.9% from the year-ago value to $1.18 billion. The company’s non-GAAP EPS grew 4.8% from the prior-year quarter to $10.24.
The consensus revenue estimate of 13.38 billion for the year ending December 2024 represents a 4.9% increase year-over-year. Its EPS is expected to grow 4.7% year-over-year to $43.82 for the same period. It surpassed EPS estimates in all four trailing quarters. REGN’s shares have gained 17.2% over the past year to close the last trading session at $830.69.
REGN’s POWR Ratings reflect this promising outlook. The stock has an overall B rating, which translates to a Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
REGN has a B grade for Sentiment and Value. Within the Biotech industry, it is ranked #21 out of 374 stocks. Click here for the additional POWR Ratings for Momentum, Growth, Stability, and Quality for REGN.
Stock #2: Biogen Inc. (BIIB)
BIIB discovers, develops, manufactures, and delivers therapies for treating neurological and neurodegenerative diseases. It offers TECFIDERA, AVONEX, PLEGRIDY, FAMPYRA, etc., for treating MS; SPINRAZA for SMA treatment; ADUHELM for treating Alzheimer’s; and FUMADERM for the treatment of severe plaque psoriasis.
On July 28, 2023, BIIB and Reata Pharmaceuticals, Inc. (RETA) announced the signing of a definitive agreement under which BIIB would pay $172.50 per share in cash, for a total enterprise value of approximately $7.3 billion.
RETA has achieved important advances in creating therapies that regulate cellular metabolism and inflammation in critical neurologic illnesses, including SKYCLARY (Somaveloxolone), the first and only FDA-approved treatment for Friedreich’s ataxia (FA) in the United States.
As a result, the proposed purchase would add a highly complementary novel product to BIIB’s portfolio in an area of high unmet medical need, contributing significantly to its adjusted bottom line beginning in 2025.
BIIB’s forward non-GAAP P/E of 16.78x is 13.2% lower than the industry average of 19.33x. Its forward EV/EBIT multiple of 13.92 is 16.9% lower than the industry average of 16.75.
BIIB’s trailing-12-month levered FCF margin of 17.12% is significantly higher than the 0.23% industry average. Its trailing-12-month EBITDA margin of 30.95% is 500.5% higher than the 5.15% industry average.
During the fiscal 2023 second quarter that ended June 30, 2023, BIIB’s total revenue came in at $2.46 billion, while the total non-GAAP net income attributable to it came in at $584.6 million, or $4.02 per share. BIIB’s total assets stood at $25.16 billion as of June 30, 2023, compared to $24.55 billion as of June 30, 2022.
Analysts expect BIIB’s EPS to grow 10.1% year-over-year to $16.99 for the year ending December 2024. It is EPS is expected to surpass EPS estimates in all four trailing quarters. The stock has gained 24.5% over the past year to close the last trading session at $258.99.
It’s no surprise that BIIB has an overall B rating, equating to a Buy in our POWR Ratings system. It has an A grade for Value and a B for Sentiment and Quality. It is ranked #17 in the same industry.
Beyond what is stated above, we’ve also rated BIIB for Growth, Stability, and Momentum. Get all BIIB ratings here.
Stock #1: United Therapeutics Corporation (UTHR)
UTHR is a biotechnology company that develops and commercializes products to address the unmet medical needs of patients with chronic and life-threatening diseases internationally.
UTHR’s forward EV/EBITDA of 5.26x is 59.5% lower than the industry average of 12.98x. Its forward EV/EBIT multiple of 5.63 is 66.4% lower than the industry average of 16.75.
UTHR’s trailing-12-month levered FCF margin of 24.14% is significantly higher than the 0.23% industry average. Its trailing-12-month EBITDA margin of 54.45% is 956.2% higher than the 5.15% industry average.
For the fiscal second quarter that ended June 30, 2023, UTHR’s total revenues stood at $596.50 million, up 27.8% year-over-year, while its operating income rose 55.3% year-over-year to $313.40 million. Its net income increased 123.4% from the year-ago value to $259.20 million. The company’s EPS grew 117.4% from the prior-year quarter to $5.24.
Street expects UTHR’s revenue to increase 16.4% year-over-year to $2.25 billion for the year ending December 2023. Its EPS is expected to grow 19.8% year-over-year to $20.02 for the same period. It surpassed EPS estimates in three of the four trailing quarters. Over the past six months the stock has gained marginally to close the last trading session at $225.13.
UTHR’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall rating of B, which equates to a Buy in our proprietary rating system.
It is ranked #14 in the same industry. It has a B grade for Value, Sentiment and Quality. To see additional UTHR’s ratings for Growth, Stability and Momentum, click here.
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REGN shares were trading at $833.46 per share on Monday afternoon, up $2.77 (+0.33%). Year-to-date, REGN has gained 15.52%, versus a 17.91% 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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