The biotech industry is poised for substantial expansion due to growing new drug formulations, the rising prevalence of personalized medicine, and several government initiatives and funding in the space. Hence, it seems wise to scoop up shares of robust biotech companies Biogen Inc. (BIIB), Alkermes plc (ALKS), and Theratechnologies Inc. (THTX) this month.
Let’s understand this in detail.
The COVID-19 pandemic spurred an immense demand for scientific breakthroughs and public health interventions, catapulting the biotech industry to unprecedented growth. Ground-breaking solutions, such as mRNA vaccines, diagnostics, and therapies, revolutionized global healthcare, driving the biotech sector to new heights.
The growing developments and improvements in drug research, the prevalence of personalized medicine driven by advancement in genetics, and new technological breakthroughs and advances are creating new opportunities for biotechnological applications, bolstering the industry’s expansion. The global personalized medicine market is expected to grow at a 7.2% CAGR from 2023 to 2030.
Furthermore, growing government initiatives and investments are accelerating the industry’s progress. The federal activities aim to streamline the medication regulatory pathway, standardize clinical studies, and expedite the drug and treatment approval process.
For example, the National Biotechnology and Biomanufacturing Initiative, launched by the Biden Administration last year, is expected to advance biotechnology innovation and encourage expanding America’s bio-economy across numerous sectors.
According to a report by Vantage Market Research, the global biotechnology market is expected to grow at a CAGR of 14.2% and reach $2.77 trillion by 2030. Moreover, the XBI SPDR® S&P Biotech ETF’s (XBI) 9% returns over the past three months illustrate investors’ interest in biotech stocks.
Given the industry’s bright growth prospects, investing in fundamentally sound biotech stocks BIIB, ALKS, and THTX could be wise.
Let’s discuss the fundamentals of these stocks in detail.
Biogen Inc. (BIIB)
BIIB is a global biotechnology company that discovers, develops, and delivers therapies for severe and complex diseases. Its portfolio treats multiple sclerosis, spinal muscular atrophy, and Alzheimer’s. The company aims to advance its pipeline in neurology, neuropsychiatry, specialized immunology, and rare diseases.
On July 6, BIIB and Eisai Co., Ltd. announced that the U.S. Food and Drug Administration (FDA) had approved the supplemental Biologics License Application (sBLA) supporting the traditional approval of LEQEMBI® (lecanemab-irmb) 100 mg/mL injection for intravenous use.
LEQEMBI is now the sole approved treatment for reducing Alzheimer’s Disease (AD) progression and slowing cognitive and functional decline in adults.
Also, on April 25, BIIB announced that the FDA had approved QALSODYTM (tofersen) 100 mg/15mL injection for the treatment of amyotrophic lateral sclerosis (ALS) in adults with a mutation in the superoxide dismutase 1 (SOD1) gene. Such drug approvals by the FDA are expected to boost the company’s growth and profitability.
For the fiscal first quarter that ended March 31, 2023, net income and EPS attributable to BIIB increased 27.7% and 29.6% year-over-year to $387.90 million and $2.67, respectively. The company’s free cash flow grew 274.1% from the year-ago value to $388.70 million. In addition, its total assets were $24.60 billion as of March 31, 2023.
The consensus EPS estimate of $16.52 for the fiscal year (ending December 2024) reflects a 7% year-over-year improvement. Moreover, the company topped the consensus EPS estimates in all four trailing quarters, which is impressive. Over the past year, the stock has gained 30% to close the last trading session at $279.84.
BIIB’s solid fundamentals are apparent in its POWR Ratings. The stock has an overall rating of A, equating 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.
BIIB has an A grade for Value and a B for Growth, Sentiment, and Quality. It has topped the 389-stock Biotech industry.
In addition to the POWR Ratings I’ve just highlighted, you can see BIIB’s ratings for Stability and Momentum here.
Alkermes plc (ALKS)
ALKS, headquartered in Dublin, Ireland, researches, develops, and commercializes pharmaceutical products for neuroscience and oncology. It offers treatments for alcohol and opioid dependence, schizophrenia, and bipolar I disorder. The company also has a pipeline for neurodegenerative disorders and cancer.
The company reported notable advancements across its portfolio in its latest quarterly fiscal first-quarter release. Strong commercial execution led to growth for proprietary products LYBALVI®, VIVITROL®, and ARISTADA®.
ALKS 2680, an orexin 2 receptor agonist, is also set to enter a phase 1b study for narcolepsy and idiopathic hypersomnia, with data anticipated later this year. Such developments are poised to greatly benefit the company by bolstering its market position, driving revenue growth, and expanding its potential for future success.
During the first quarter that ended March 31, 2023, ALKS’ net product sales increased 25.4% from the year-ago value to $214.73 million. Its total revenues grew 3.2% year-over-year to $287.59 million. As of March 31, 2023, the company’s cash, cash equivalents, and total investments stood at $692.54 million, while its total assets were $1.92 billion.
Analysts expect ALKS’ revenue to grow 26% year-over-year to $1.40 billion for the fiscal year ending December 2023. The consensus EPS estimate for the ongoing year is expected to increase 120.6% year-over-year to $0.75. Moreover, the company surpassed its consensus revenue estimates in three of the trailing four quarters.
ALKS’ stock has gained 12.7% over the past six months to close the last trading session at $30.24.
ALKS’ positive outlook is reflected in its POWR Ratings. The stock has an overall rating of A, translating to a Strong Buy in our proprietary rating system.
ALKS has a B grade for Growth, Value, Sentiment, and Quality. It is ranked #2 out of 389 stocks in the Biotech industry.
Click here to access additional ALKS ratings (Stability and Momentum).
Theratechnologies Inc. (THTX)
Based in Montreal, Canada, THTX develops and commercializes therapies to address unmet medical needs. Its pipeline products encompass F8 Formulation for the treatment of lipodystrophy in people living with HIV; and TH1902, which is in Phase 1 clinical trials for the treatment of various solid tumors.
On June 2, THTX announced the FDA's approval of its amended protocol for the Phase 1 clinical trial of sudocetaxel zendusortide. This innovative Peptide-Drug Conjugate (PDC) targets the sortilin receptor (SORT1) to facilitate the internalization and direct delivery of cytotoxic drugs into cancer cells.
The approval would accelerate the development of this novel therapy, offering targeted treatment to individuals with advanced cancers and reducing toxicity. This should bode well for the company.
On May 4, THTX presented data showing favorable virologic outcomes of ibalizumab (Trogarzo®) in heavily treatment-experienced HIV patients. The study demonstrates ibalizumab's effectiveness and highlights THTX's commitment to improving HIV care and patient outcomes.
For the six months that ended May 31, 2023, THTX’s EGRIFTA®, EGRIFTA SV® net sales increased 1.9% year-over-year to $23.56 million. Its cost of sales decreased 36.3% year-over-year to $9.60 million. Furthermore, the company ended the second quarter with $25.37 million in cash, bonds, and money market funds.
Analysts expect THTX’s revenue to increase 15.9% year-over-year to $92.32 million for the fiscal year ending November 2023. The company’s revenue for the fiscal year 2024 is expected to grow 12.6% from the prior year to $103.96 million.
Shares of THTX gained 8.1% intraday to close the last trading session at $0.97.
THTX’s robust outlook is apparent in its POWR Ratings. The stock has an overall rating of B, which translates to Buy in our proprietary rating system.
THTX has a B grade for Growth, Value, and Sentiment. It is ranked #14 within the same industry.
Click here to access additional THTX ratings for Momentum, Stability, and Quality.
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BIIB shares were trading at $279.18 per share on Wednesday afternoon, down $0.66 (-0.24%). Year-to-date, BIIB has gained 0.82%, versus a 17.63% rise in the benchmark S&P 500 index during the same period.
About the Author: Aanchal Sugandh
Aanchal's passion for financial markets drives her work as an investment analyst and journalist. She earned her bachelor's degree in finance and is pursuing the CFA program. She is proficient at assessing the long-term prospects of stocks with her fundamental analysis skills. Her goal is to help investors build portfolios with sustainable returns.
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