The biotech industry is primed for robust expansion, owing to increased investments in research and development, incorporation of advanced technologies, and growing demand for personalized medicine.
Given this backdrop, fundamentally strong biotech stocks Dynavax Technologies Corporation (DVAX), Entrada Therapeutics, Inc. (TRDA), and Shionogi & Co., Ltd. (SGIOY), trading under $15, could be solid buys now.
The biotech industry’s growth prospects appear promising thanks to the multibillion-dollar agreements. In 2024, an aggregate M&A deal value could reach $180 billion to $200 billion, driven by robust deal capacity and the urgency to replenish pipelines.
Driven by the need for economical, efficient, and innovative ideas, the next-generation sequencing market is evolving with the help of technological advancements in all the biotechnology fields through the implementation of NGS technology, like patterned flow cell technology. With the help of these growing trends, the global next-generation sequencing market is anticipated to reach roughly $60.18 billion by 2033, growing at a 21.7% CAGR.
Moreover, favorable government initiatives, growing demand for personalized drugs and cancer therapies, and new gene sequencing platforms utilized for DNA and RNA sequencing have bolstered the biotech industry substantially. Consequently, the global biotechnology market is projected to reach $3.88 trillion by 2030, growing at a CAGR of 14%.
Given the industry tailwinds, it's time to examine the fundamentals of the three stocks to buy under $15 in the Biotech industry, starting with the third in line.
Stock #3: Dynavax Technologies Corporation (DVAX)
DVAX develops and commercializes vaccines in the U.S. It markets HEPLISAV-B, a hepatitis B vaccine for the prevention of infection caused by all known subtypes of hepatitis B virus in age 18 years and older in the U.S. and Europe.
In terms of forward EV/Sales, DVAX is trading at 3.70x, 49.7% lower than the five-year industry average of 7.36x. The stock’s forward Price/Sales multiple of 5.35 is 28.7% lower than the five-year industry average of 7.51.
DVAX’s trailing-12-month levered FCF margin of 42.25% is significantly higher than the industry average of 0.90%. Similarly, its trailing-12-month cash from operations of $100.56 million is 163.9% higher than its five-year industry average of $38.11 million.
For the fiscal fourth quarter that ended December 31, 2023, DVAX’s total revenues and net income stood at $55.60 million and $219 thousand, respectively. Moreover, its total operating expenses declined 47.2% year-over-year to $64.09 million. As of December 31, 2023, DVAX’s total current liabilities amounted to $62.20 million, compared to $150.07 million as of December 31, 2022.
Street expects DVAX’s revenue for the fiscal year ending December 2024 to increase 26.6% year-over-year to $293.96 million. Its EPS is expected to be $0.26 for the same year. The company surpassed consensus revenue estimates in each of the trailing four quarters and consensus EPS estimates in three of the trailing four quarters, which is impressive.
The stock has gained 20.1% over the past year to close the last trading session at $12.05.
DVAX’s POWR Ratings reflect its positive prospects. The stock 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.
DVAX has a B grade for Value and Quality. Within the Biotech industry, it is ranked #29 out of 362 stocks.
To see additional POWR Ratings for Growth, Momentum, Stability, and Sentiment for DVAX, click here.
Stock #2: Entrada Therapeutics, Inc. (TRDA)
TRDA develops endosomal escape vehicle (EEV) therapeutics for the treatment of multiple neuromuscular diseases. Its EEV platform develops a portfolio of oligonucleotide, antibody, and enzyme-based programs.
In terms of forward EV/Sales, TRDA is trading at 2.63x, 26.5% lower than the industry average of 3.58x.
TRDA’s trailing-12-month cash per share of $2.10 is 70.6% higher than the industry average of $1.22. Similarly, its trailing-12-month levered FCF margin of 115.53% is significantly higher than the industry average of 0.90%.
For the fiscal fourth quarter that ended December 31, 2023, TRDA’s collaboration revenue stood at $41.85 million. Moreover, its income from operations and income before provision for income taxes came to $4.91 million and $9.20 million, compared to loss from operations and loss before provision for income taxes of $25.58 million and $24.63 million in the prior-year quarter, respectively.
As of December 31, 2023, TRDA’s cash, cash equivalents and marketable securities amounted to $351.97 million, compared to $188.71 million as of December 31, 2022.
Street expects TRDA’s revenue for the fiscal year ending December 2024 to be $61.91 million. The company surpassed consensus revenue estimates in three of the trailing four quarters.
The stock has gained 6.1% over the past month to close the last trading session at $13.45.
TRDA’s POWR Ratings reflect this promising outlook. It has an overall rating of B, which translates to a Buy in our proprietary rating system.
TRDA has an A grade for Value and a B for Quality. Within the same industry, it is ranked #23.
For TRDA’s other ratings (Growth, Momentum, Stability, and Sentiment), click here.
Stock #1: Shionogi & Co., Ltd. (SGIOY)
Headquartered in Osaka, Japan, SGIOY researches, develops, manufactures, and distributes pharmaceuticals, diagnostic reagents, and medical devices in Japan.
On March 28, SGIOY announced the acquisition of 1.08 million common shares, totaling ¥8.42 billion ($55.45 million), from March 1, 2024, to March 22, 2024, through discretionary trading on the Tokyo Stock Exchange. The total number of shares acquired under the resolution of March 22, 2024, is 10.84 million, with a total of ¥75 billion ($493.99 million).
On March 5, SGIOY obtained standard approval from the Ministry of Health, Labour and Welfare (MHLW) for Xocova, a novel anti-SARS-CoV-2 drug for the indication of SARS-CoV-2 infection in Japan. Xocova is the first COVID-19 treatment antiviral to receive standard approval in Japan.
This standard approval removes the need for written patient consent before prescribing Xocova, instilling greater confidence in its use and enhancing its contribution to treating a wide spectrum of COVID-19 patients, irrespective of severe disease risk factors.
Its annualized dividend rate of $0.26 per share translates to a dividend yield of 2.09% on the current share price. Its four-year average yield is 1.86%. Over the past three years, SGIOY’s dividend payments have grown at a 1.1% CAGR.
In terms of forward EV/EBIT, SGIOY is trading at 10.62x, 36.7% lower than the industry average of 16.78x. The stock’s forward P/E GAAP multiple of 13.82 is 48.5% lower than the industry average of 26.85.
SGIOY’s trailing-12-month cash per share of $7.03 is 470.8% higher than the industry average of $1.23. Its trailing-12-month EBIT and levered FCF margins of 35.64% and 15.01% are significantly higher than the industry averages of 1.09% and 0.90%, respectively.
For the nine months that ended December 31, 2023, SGIOY’s revenue stood at ¥336.82 billion ($2.22 billion), while gross profit increased marginally year-over-year to ¥294.42 billion ($1.94 billion). Moreover, its EBITDA stood at ¥160.16 billion ($1.05 billion), up 2% from the prior-year period.
For the same period, its profit attributable to owners of parent and earnings per share stood at ¥127.22 billion ($837.97 million) and ¥435.74, respectively.
Street expects SGIOY’s revenue for the fiscal year that ended March 2024 to increase 6.6% year-over-year to $2.93 billion. Its EPS is expected to be $0.90 for the same period. The company surpassed consensus revenue estimates in each of the trailing four quarters.
The stock has gained 19.3% over the past nine months to close the last trading session at $12.38. Over the past six months, it has gained 13.4%.
SGIOY’s robust prospects are reflected in its POWR Ratings. The stock has an overall B rating, equating to Buy in our proprietary rating system.
SGIOY has a B grade for Value and Quality. It is ranked #21 within the same industry.
Click here for the additional POWR Ratings for SGIOY (Growth, Momentum, Stability, and Sentiment).
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SGIOY shares were unchanged in premarket trading Tuesday. Year-to-date, SGIOY has gained 3.41%, versus a 9.71% rise in the benchmark S&P 500 index during the same period.
About the Author: Neha Panjwani
From her school days, Neha harbored a profound fascination for finance, a passion that steered her toward a career as an investment analyst following the completion of her bachelor's degree in commerce. Currently enrolled in the CFA program, Neha is dedicated to further enriching her comprehension of investment fundamentals. Neha's primary objective is to aid retail investors in discerning optimal investment opportunities by diligently evaluating crucial aspects of financial instruments, with a primary focus on stocks and ETFs. Her commitment lies in empowering individuals to make informed and strategic investment decisions in the dynamic world of finance.
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