The biotech industry thrives due to consistent innovation and steady demand for advanced healthcare. An aging population and the need for high-quality treatments for rare and common diseases back the optimism surrounding the industry.
Therefore, investors could consider investing in fundamentally strong biotech stocks Puma Biotechnology, Inc. (PBYI), Alnylam Pharmaceuticals, Inc. (ALNY), and Genmab A/S (GMAB).
Before delving deeper into their fundamentals, let’s discuss why the biotech industry is well-positioned for growth.
The biotech industry's expansion is being fueled by notable advancements in drug development and higher spending on research and development (R&D) and clinical trials. The industry played a pivotal role in vaccine development during the pandemic. A survey by ICON plc reveals that out of more than 130 biotech executives, 60% are expected to increase R&D spending.
The biotech industry's long-term growth will be fueled by more clinical trials, an expanding drug pipeline, and increased pharmaceutical R&D investment. Notably, the clinical trial market is projected to reach $120.97 billion in 2024, growing at a CAGR of 4.3% to reach $184.61 billion by 2034.
The sector is leveraging advanced technologies, notably AI and Big Data analytics, to lead innovation. AI-driven drug target identification, especially in anticancer programs, is rapidly growing. The global AI for Pharma and Biotech market, valued at $850 million in 2024, is forecasted to reach $4.20 billion by 2027, growing at a 30.5% CAGR.
Investors’ interest in biotech stocks can be gauged from the VanEck Vectors Biotech ETF’s (BBH) 12.9% returns over the past three months. Furthermore, biotechnology’s profitable applications, particularly in healthcare, promise sustained growth, with the global biotechnology market projected to grow at a CAGR of 12.8% to reach $3.21 trillion by 2030.
Considering these conducive trends, let’s analyze the fundamental aspects of the three Biotech picks, beginning with the third choice.
Stock #3: Puma Biotechnology, Inc. (PBYI)
PBYI is a biopharmaceutical company that focuses on developing and commercializing products to enhance cancer care in the United States and internationally. The company’s drug candidates include PB272 (neratinib, oral), PB272 (neratinib, intravenous), and PB357.
In terms of the trailing-12-month gross profit margin, PBYI’s 75.91% is 32.9% higher than the 57.13% industry average. Likewise, its 16.59% trailing-12-month EBITDA margin is 216.6% higher than the 5.24% industry average. Its 1.14x trailing-12-month asset turnover ratio is 191.7% higher than the 0.39x industry average.
PBYI’s total revenue for the nine months that ended September 30, 2023, increased 0.7% year-over-year to $163.50 million. Its income from operations rose 29.9% year-over-year to $17.80 million. Also, the company’s non-GAAP adjusted net income and net income per share came in at $17.10 million and $0.36, up 15.5% and 9.1% over the prior-year period, respectively.
Street expects PBYI’s revenue for the quarter ended December 31, 2023, to increase 12% year-over-year to $73.55 million. Its EPS for the quarter ending June 30, 2024, is expected to increase 40% year-over-year to $0.07. It surpassed the consensus EPS estimates in three of the trailing four quarters. Over the past nine months, the stock has gained 85.2% to close the last trading session at $4.89.
PBYI’s POWR Ratings reflect solid prospects. It has an overall rating of B, which translates to a Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
It is ranked #16 out of 349 stocks in the Biotech industry. It has an A grade for Value and a B for Growth and Quality. Click here to see PBYI’s Momentum, Stability, and Sentiment ratings.
Stock #2: Alnylam Pharmaceuticals, Inc. (ALNY)
ALNY focuses on discovering, developing, and commercializing novel therapeutics based on ribonucleic acid interference. The company's pipeline of investigational RNAi therapeutics focuses on genetic medicines, cardio-metabolic diseases, hepatic infectious diseases, and central nervous system (CNS)/ocular diseases.
In terms of the trailing-12-month gross profit margin, ALNY’s 84% is 47% higher than the 57.13% industry average. Likewise, its 0.47x trailing-12-month asset turnover ratio is 19.7% higher than the 0.39x industry average.
For the fiscal third quarter that ended September 30, 2023, ALNY’s total revenues increased 184% year-over-year to $750.53 million. Its non-GAAP operating income came at $277.80 million, compared to a non-GAAP operating loss of $129.92 million in the prior year quarter.
For the same quarter, its non-GAAP net income came in at $228.53 million, compared to a non-GAAP net loss of $193.37 million in the prior year quarter. Also, its non-GAAP net income per common share stood at $1.74, compared to a non-GAAP net loss per common share of $1.58 in the year-ago quarter.
For the quarter ended December 31, 2023, ALNY’s revenue is expected to increase 32% year-over-year to $442.30 million. Over the past three months, the stock has gained 11.4% to close the last trading session at $174.92.
ALNY’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 a B grade for Growth, Sentiment, and Quality. It is ranked #14 in the same industry. To see ALNY’s ratings for Value, Momentum, and Stability, click here.
Stock #1: Genmab A/S (GMAB)
Headquartered in Copenhagen, Denmark, GMAB develops antibody therapeutics for treating cancer and other diseases, primarily in Denmark. The company’s offerings include DARZALEX, a human monoclonal antibody; teprotumumab for treating thyroid eye disease; and Amivantamab for advanced or metastatic gastric or oesophageal cancer.
In terms of the trailing-12-month EBITDA margin, GMAB’s 39.56% is 655% higher than the 5.24% industry average. Likewise, its 99.41% trailing-12-month gross profit margin is 74% higher than the 57.13% industry average. Its 0.52x trailing-12-month asset turnover ratio is 32.3% higher than the 0.39x industry average.
GMAB’s revenue for the third quarter that ended September 30, 2023, increased 16.1% year-over-year to DKK4.74 billion ($688.40 million). Its operating profit came in at DKK1.72 billion ($249.80 million). Also, the company’s net profit and net profit per share came in at DKK2.13 billion ($309.35 million) and DKK32.32, respectively.
Street expects GMAB’s EPS for the quarter ended December 31, 2023, to increase 139.5% year-over-year to $0.30. Its revenue for the quarter ending March 31, 2024, is expected to increase 33.6% year-over-year to $562.53 million. Over the past three months, the stock has declined 2.7% to close the last trading session at $28.17.
It’s no surprise that GMAB has an overall rating of A, which translates to a Strong Buy in our proprietary rating system.
It has a B grade for Growth, Value, Sentiment, and Quality. Within the Biotech industry, it is ranked #11. Beyond what we stated above, we also have given GMAB grades for Momentum and Stability. Get all GMAB ratings here.
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ALNY shares were trading at $174.36 per share on Friday afternoon, down $0.56 (-0.32%). Year-to-date, ALNY has declined -8.91%, versus a 3.84% 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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