With an aging population and rising prevalence of chronic diseases, the demand for quality drugs and therapies continues to grow. The biotech industry is well-positioned to capitalize on these opportunities thanks to its robust pipeline of drugs, the use of advanced technologies in drug discovery, and rising healthcare spending.
Although BioMarin Pharmaceutical Inc. (BMRN) possesses solid growth prospects, fundamentally strong biotech majors Amgen Inc. (AMGN), Jazz Pharmaceuticals plc (JAZZ), and Vertex Pharmaceuticals Incorporated (VRTX) look even better positioned than BMRN to capitalize on the industry’s tailwinds. Therefore, it could be wise to buy these stocks.
Before diving deeper into the fundamentals of these stocks, let’s discuss the biotech industry’s prospects and why the stocks mentioned above are a better buy than BMRN.
Biotech is one of the most exciting sectors today as it uses advanced technology to develop precise and targeted treatments for various diseases. The industry played a pivotal role in vaccine development during the pandemic. The industry receives significant investments in its research and development (R&D) initiatives.
The commercialization of biotech products has improved patient outcomes and provided hope for a future where previously uncurable diseases may become curable or manageable. The global biotechnology market is expected to grow at a CAGR of 14.2% to reach $2.77 trillion by 2030.
BMRN specializes in developing and commercializing therapies for severe and life-threatening rare diseases and medical conditions. The company reported a solid third-quarter (ended September 30) results, with its total revenues increasing 15% year-over-year to $581.30 million. Its non-GAAP net income rose 72.1% over the prior-year quarter to $89.50 million.
Also, its non-GAAP EPS came in at $0.46, representing an increase of 70.4% year-over-year. The double-digit growth in revenue positions it well to achieve its full-year 2023 revenue and profitability objectives. On October 20, 2023, BMRN announced that the U.S. FDA approved the supplemental New Drug Application (sNDA) for VOXZOGO to increase linear growth in pediatric patients with achondroplasia with open epiphyses.
For the quarter ending December 31, 2023, BMRN’s EPS and revenue are expected to increase 25.4% and 18.8% year-over-year to $0.45 and $638.30 million, respectively.
However, BMRN is trading at an expensive valuation. In terms of forward EV/EBITDA, BMRN’s 52.72x is 308.3% higher than the 12.91x industry average. Likewise, its 6.78x forward EV/Sales is 110.4% higher than the 3.22x industry average. Its 42.85x forward non-GAAP P/E is 137.3% higher than the 18.06x industry average.
BMRN’s stock has declined 19.5% over the past nine months but gained 1% to close the last trading session at $87.06.
While BMRN is rated buy in our proprietary rating system, investing in AMGN, JAZZ, and VRTX could help generate even better returns. Now, let’s analyze the fundamentals of these three Biotech stock picks, beginning with the third choice.
Stock #3: Amgen Inc. (AMGN)
AMGN discovers, develops, manufactures, and delivers human therapeutics worldwide. It focuses on inflammation, oncology/hematology, bone health, cardiovascular disease, nephrology, and neuroscience.
On September 1, 2023, AMGN and Horizon Therapeutics Public Limited Company (HZNP) announced the entry into a consent order agreement with the Federal Trade Commission (FTC), helping resolve the pending FTC administrative lawsuit. This effectively clears AMGN’s path to close the acquisition of HZNP.
With the consent order agreement, AMGN and HZNP expect that the parties will jointly file stipulated proposed orders to dismiss the preliminary injunction motion and dissolve the temporary restraining order in the U.S. District Court for the North District of Illinois. Both companies will seek the final approvals required under Irish law to close the acquisition.
In terms of the trailing-12-month gross profit margin, AMGN’s 73.73% is 31.7% higher than the 55.99% industry average. Likewise, its 33.19% trailing-12-month levered FCF margin is significantly higher than the industry average of 0.26%. Furthermore, its 49.57% trailing-12-month EBITDA margin is 875.5% higher than the 5.08% industry average.
For the fiscal third quarter ended September 30, 2023, AMGN’s total revenues increased 3.8% year-over-year to $6.90 billion. Its non-GAAP operating income rose 3.8% over the prior-year quarter to $3.40 billion. The company’s non-GAAP net income increased 5.4% year-over-year to $2.67 billion. Also, its non-GAAP EPS came in at $4.96, representing an increase of 5.5% year-over-year.
Street expects AMGN’s EPS and revenue for the quarter ending December 31, 2023, to increase 12.5% and 18.8% year-over-year to $4.60 and $8.12 billion, respectively. It surpassed the Street EPS estimates in three of the trailing four quarters. Over the past six months, the stock has gained 16.9% to close the last trading session at $273.03.
AMGN’s POWR Ratings reflect its solid prospects. It has an overall rating of A, equating to a Strong Buy in our proprietary rating system. The POWR ratings assess stocks by 118 different factors, each with its own weighting.
It is ranked #9 out of 343 stocks in the Biotech industry. It has an A grade for Quality and a B for Stability and Sentiment. Click here to see the other ratings of AMGN for Growth, Value, and Momentum.
Stock #2: Jazz Pharmaceuticals plc (JAZZ)
Headquartered in Dublin, Ireland, JAZZ identifies, develops, and commercializes pharmaceutical products for unmet medical needs. The company has a portfolio of products and product candidates focusing on neuroscience, including sleep medicine, movement disorders, and oncology.
On August 2, 2023, JAZZ announced that it entered into a Letter of Intent (LOI) with the Pan-Canadian Pharmaceutical Alliance (pCPA) regarding Rylaze in Canada. This allows for individual jurisdictions in Canada to begin formalizing access for eligible patients.
In terms of the trailing-12-month EBITDA margin, JAZZ’s 43.59% is 757.8% higher than the 5.08% industry average. Likewise, its 91.92% trailing-12-month gross profit margin is 64.2% higher than the 55.99% industry average. Likewise, its 27.14% trailing-12-month EBIT margin compared to the negative 0.11% industry average.
JAZZ’s total revenues for the fiscal third quarter that ended September 30, 2023, increased 3.3% year-over-year to $972.14 million. Its non-GAAP net income came in at $340.15 million. The company’s income from operations rose 596.2% year-over-year to $172.39 million. Moreover, its adjusted earnings per share stood at $4.84.
Analysts expect JAZZ’s revenue for the quarter ending December 31, 2023, to increase 4.3% year-over-year to $1.01 billion. Its EPS for the quarter ending March 31, 2024, is expected to increase 9.2% year-over-year to $4.31. Over the past month, the stock has declined 2.9% to close the last trading session at $125.40.
JAZZ’s POWR Ratings reflect this positive outlook. It has an overall rating of A, which translates to a Strong Buy in our proprietary rating system.
Within the same industry, it is ranked #6. It has an A grade for Value and a B for Growth and Quality. To see the other JAZZ ratings for Momentum, Stability, and Sentiment, click here.
Stock #1: Vertex Pharmaceuticals Incorporated (VRTX)
VRTX is a biotechnology company that develops and commercializes therapies for treating cystic fibrosis (CF). It markets TRIKAFTA/KAFTRIO and SYMDEKO/SYMKEVI, ORKAMBI, and KALYDECO. The company’s pipeline includes VX-522, VX-548, Exa-cel, and VX-147, VX-880, VX-970, and VX-803 and VX-984.
In terms of the trailing-12-month EBITDA margin, VRTX’s 47.34% is 831.6% higher than the 5.08% industry average. Likewise, its 0.50x trailing-12-month asset turnover ratio is 30.8% higher than the 0.38x industry average. Likewise, its 40.60% trailing-12-month levered FCF margin is considerably higher than the 0.26% industry average.
For the fiscal third quarter ended September 30, 2023, VRTX’s net product revenues increased 6.4% year-over-year to $2.48 billion. Its non-GAAP operating income came in at $1.17 billion. The company’s non-GAAP net income increased 2.3% over the prior-year quarter to $1.06 billion. Also, its non-GAAP EPS came in at $4.08, representing an increase of 1.7% year-over-year.
Street expects VRTX’s EPS and revenue for the quarter ending December 31, 2023, to increase 8.4% and 9.3% year-over-year to $4.07 and $2.52 billion, respectively. It surpassed the consensus EPS estimates in each of the trailing four quarters. The stock has gained 21% year-to-date to close the last trading session at $349.34.
VRTX’s strong fundamentals are reflected in its POWR Ratings. It has an overall rating of A, which equates to a Strong Buy in our proprietary rating system.
It is ranked #2 in the Biotech industry. It has an A grade for Quality and a B for Value, Stability, and Sentiment. Click here to see the other ratings of VRTX for Growth and Momentum.
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AMGN shares fell $0.43 (-0.16%) in premarket trading Thursday. Year-to-date, AMGN has gained 6.72%, versus a 18.89% rise in the benchmark S&P 500 index during the same period.
About the Author: Dipanjan Banchur
Since he was in grade school, Dipanjan was interested in the stock market. This led to him obtaining a master’s degree in Finance and Accounting. Currently, as an investment analyst and financial journalist, Dipanjan has a strong interest in reading and analyzing emerging trends in financial markets.
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