The biotech sector is thriving as it advances in commercializing therapies for rare and new diseases, addressing unmet medical needs. Driven by rising global demand for quality healthcare, targeted treatments, and advanced technology, the industry's growth positions it as a promising investment opportunity for those seeking value in the healthcare landscape.
Hence, investors could consider buying undervalued biotech stocks: Harmony Biosciences Holdings, Inc. (HRMY), United Therapeutics Corporation (UTHR), and BioMarin Pharmaceutical Inc. (BMRN), which look ready for a breakout.
The biotech industry saw strong Q2 performance, driven by mergers and acquisitions, particularly in oncology and immunology. Major R&D breakthroughs included GLP-1 drugs, CAR-T therapies, nuclear medicine, and neurological treatments. In addition, venture capital funding surged, especially in biopharma innovation. The global biotech market is projected to reach $3.88 trillion by 2030, growing at a 14% CAGR.
Meanwhile, biotech is being revolutionized by AI innovations that optimize drug manufacturing, enhance protein structure analysis, and improve cancer detection through advanced blood tests, driving cost efficiency and scalability. Notably, the global AI market for pharma and biotech is projected to reach $4.20 billion by 2027, with a CAGR of 30.5%.
Furthermore, investors’ interest in biotech stocks is evident from the SPDR S&P Biotech ETF’s (XBI) 23.4% returns over the past nine months. Considering these conducive trends, let’s analyze the fundamental aspects of the three Biotech 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 with rare and other neurological diseases. The company offers WAKIX (pitolisant), a molecule with a novel mechanism of action for the treatment of excessive daytime sleepiness in adult patients with narcolepsy.
On June 24, 2024, HRMY Biosciences announced FDA approval for WAKIX (pitolisant) tablets to treat excessive daytime sleepiness in pediatric patients aged 6 and older with narcolepsy. WAKIX is now the first non-scheduled treatment for pediatric narcolepsy patients.
In terms of forward non-GAAP P/E, HRMY’s 12.42x is 41.5% lower than the 21.23x industry average. Its 0.54x forward non-GAAP PEG is 72.5% lower than the 1.98x industry average. Similarly, its 10.06x forward EV/EBITDA is 26.5% lower than the 13.68x industry average.
During the fiscal first quarter ended March 31, 2024, HRMY’s net product revenue increased 28.8% year-over-year to $172.81 million. The company’s gross profit of $140.67 million reflects a growth of 28.8% from the prior year’s quarter. Likewise, its non-GAAP adjusted net income was $60.61 million, or $1.05 per share, up 32.1% and 38.2% year-over-year, respectively.
Analysts expect HRMY’s revenue for the quarter ending September 30, 2024, to increase 15.2% year-over-year to $184.62 million. Its EPS for the same quarter is expected to grow 5.3% year-over-year to $0.66. The company surpassed the Street revenue estimates in each of the trailing four quarters. Over the past three months, the stock has gained 16.6%, closing the last trading session at $35.59.
HRMY’s POWR Ratings reflect its positive prospects. It has an overall B rating, equating to Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 distinct factors, with each factor weighted to an optimal degree.
HRMY has an A grade for Value and a B for Quality. Within the Biotech industry, it is ranked #29 out of 337 stocks. Click here for the additional POWR Ratings of HRMY (Growth, Momentum, Stability, and Sentiment).
Stock #2: United Therapeutics Corporation (UTHR)
UTHR is a biotechnology company that engages in the development and commercialization of products to address the unmet medical needs of patients with chronic and life-threatening diseases internationally.
In terms of forward EV/EBIT, UTHR’s 8.25x is 51.3% lower than the 16.93x industry average. Likewise, its 13.32x forward non-GAAP P/E is 37.3% lower than the 21.23x industry average. Also, its 0.96x forward non-GAAP PEG is 51.7% lower than the 1.98x industry average.
UTHR’s total revenues for the second quarter, which ended June 30, 2024, increased 19.8% year-over-year to $714.90 million. Its operating income rose 2.1% from the year-ago value to $319.90 million. For the same quarter, the company’s net income came in at $278.10 million, or $5.85 per common share, representing an increase of 7.3% and 11.6% over the prior-year quarter, respectively.
Street expects UTHR’s EPS and revenue for the quarter ending September 30, 2024, is expected to increase 20.8% and 19.3% year-over-year to $6.50 and $726.96 million, respectively. It surpassed the consensus EPS estimates in three of the trailing four quarters. UTHR’s stock has gained 57.5% year-to-date to close the last trading session at $346.32.
UTHR’s positive outlook is reflected in its POWR Ratings. It has an overall rating of B, equating to a Buy in our proprietary rating system.
It has an A grade for Value and a B for Quality. Within the same industry, it is ranked #22. Beyond what we stated above, we also have given UTHR grades for Growth, Momentum, Stability, and Sentiment. Get all the UTHR ratings here.
Stock #1: BioMarin Pharmaceutical Inc. (BMRN)
BMRN develops and commercializes therapies for people with serious and life-threatening rare diseases and medical conditions. Its commercial products include Vimizim, Naglazyme, and Kuvan.
On July 24, 2024, BMRN announced that the U.S. FDA approved BRINEURA (cerliponase alfa) for children under 3 years with CLN2 disease. The approval expands the treatment to all ages, including presymptomatic children, to slow the loss of ambulation.
In terms of forward non-GAAP PEG, BMRN’s 0.95x is 52.2% lower than the 1.98x industry average.
For the fiscal second quarter (ended June 30, 2024), BMRN’s total revenues increased 19.6% year-over-year to $712 million. Its non-GAAP net income and non-GAAP EPS rose 79.6% and 77.8% over the prior-year quarter to $188.90 million and $0.96, respectively.
Moreover, BMRN’s total cash, cash equivalents, and investments as of June 30, 2024, stood at $1.78 billion compared to $1.68 billion as of December 31, 2023.
For the quarter ending September 30, 2024, BMRN’s EPS and revenue are expected to increase 74% and 21.1% year-over-year to $0.80 and $704.18 million, respectively. BMRN surpassed the EPS estimates in three of the trailing four quarters. Over the past three months, the stock has gained 3.9% to close the last trading session at $83.96.
It’s no surprise that BMRN has an overall rating of B, which translates to a Buy in our proprietary rating system.
It is ranked #15 in the Biotech industry. It has an A grade for Growth and a B for Value, and Sentiment. Click here to see BMRN’s Momentum, Stability, and Quality ratings.
What To Do Next?
43 year investment veteran, Steve Reitmeister, has just released his 2024 market outlook along with trading plan and top 11 picks for the year ahead.
BMRN shares were trading at $83.67 per share on Monday afternoon, down $0.41 (-0.49%). Year-to-date, BMRN has declined -13.22%, versus a 15.35% rise in the benchmark S&P 500 index during the same period.
About the Author: Abhishek Bhuyan
Abhishek embarked on his professional journey as a financial journalist due to his keen interest in discerning the fundamental factors that influence the future performance of financial instruments.
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