The increasing prevalence of chronic and infectious diseases is significantly driving the global biopharmaceutical market revenue. Additionally, the rising number of clinical trials is a notable trend contributing to industry growth.
Given the industry’s bright prospects, it could be wise to invest in fundamentally strong biotech stocks, such as Alnylam Pharmaceuticals, Inc. (ALNY), Illumina, Inc. (ILMN), and Gilead Sciences, Inc. (GILD) for long-term growth.
The global biotechnology market is estimated to grow at a CAGR of 6.5% to reach $1.28 trillion by 2032. The market is being significantly driven by the rising investment in personalized medicine research and development, numerous advancements in genetic engineering, and the growing demand for sustainable agriculture.
Furthermore, the increase in clinical trials and substantial investments by companies in R&D for new biologics and biosimilars are expected to drive growth. Additionally, the rising number of registrations for bio-based pharmaceuticals, particularly those developed using innovative manufacturing technologies and platforms, is predicted to further boost market expansion.
Therefore, the biopharmaceuticals market is expected to grow at a CAGR of 7.6% by 2030.
Given these encouraging trends, let’s look at the fundamentals of the top Biotech stocks, beginning with the third choice.
Stock #3: Alnylam Pharmaceuticals, Inc. (ALNY)
ALNY pioneers RNA interference-based therapeutics. Its lineup stars ONPATTRO for hereditary transthyretin-mediated amyloidosis, GIVLAARI for acute hepatic porphyria in adults, and OXLUMO fighting primary hyperoxaluria type 1.
On April 30, 2024, ALNY and Medison Pharma, a global pharma company focused on providing access to highly innovative therapies for patients in international markets, announced a further expansion of their existing partnership in Central & Eastern Europe and Israel to also include selected markets in LATAM and APAC and additional international markets.
This partnership is expected to ensure that ALNY's commercial therapies are made available across multiple international markets, thus enhancing the company’s income streams.
On April 7, ALNY announced positive results from the KARDIA-2 Phase 2 study, which assessed the effectiveness and safety of a single subcutaneous dose of zilebesiran alongside one of three standard-of-care antihypertensive medications: indapamide, amlodipine, or olmesartan.
Zilebesiran, an investigational RNAi therapeutic, targets liver-expressed angiotensinogen (AGT) and is being developed for hypertension treatment, potentially requiring biannual dosing.
ALNY’s total assets grew at a CAGR of 5.5% over the past three years. Also, its revenue grew at a CAGR of 52% during the same period.
ALNY’s trailing-12-month levered FCF margin of 8.63% is significantly higher than the industry average of 1.31%. Also, its trailing-12-month gross profit margin of 83.95% is 46.7% higher than the industry average of 57.23%.
During the fiscal first quarter that ended March 31, 2024, ALNY’s net product revenues increased 32.1% year-over-year to $365.16 million. Its royalty revenue rose 63.4% from the year-ago value to $10.62 million. As of March 31, 2024, its total current assets stood at $2.99 billion, compared to $2.98 billion as of December 31, 2023.
Analysts predict ALNY’s revenue for the fiscal second quarter ending June 2024 to increase 39.9% year-over-year to $446.06 million. Moreover, the company has an excellent earnings surprise history, surpassing consensus EPS estimates in three of the trailing four quarters.
Shares of ALNY have gained 63.8% over the past month to close the last trading session at $260.51.
ALNY’s solid fundamentals are reflected in its POWR Ratings. The stock has an overall rating of B, which translates to a Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, each weighted to an optimal degree.
ALNY has a B grade for Sentiment, Growth, and Quality. ALNY is ranked #27 among 341 stocks in the Biotech industry.
Click here to access additional ALNY ratings (Momentum, Value, and Stability).
Stock #2: Illumina, Inc. (ILMN)
ILMN develops, manufactures, and markets life science tools and integrated systems for large-scale analysis of genetic variation and function. It operates through the Core Illumina and GRAIL segments. It provides sequencing and array-based instruments and consumables, whole-genome sequencing, genotyping, NIPT, and product support services.
On June 24, 2024, ILMN announced the successful completion of GRAIL's spin-off. This milestone follows the company's previously announced plans to divest GRAIL, which is now a public and independent company.
ILMN’s total assets grew at a CAGR of 4.7% over the past three years. Also, its revenue grew at a CAGR of 9% during the same period.
ILMN’s trailing-12-month levered FCF margin of 15.58% is significantly higher than the industry average of 1.24%. Also, its trailing-12-month gross profit margin of 65.72% is 14.8% higher than the industry average of 57.23%.
For the first quarter that ended March 31, 2024, ILMN reported product revenue of $876 million. Its gross profit increased 1.8% from the prior year’s quarter to $667 million. The company’s non-GAAP net income and EPS were $14 million and $0.09, up 7.7% and 12.5% year-over-year, respectively.
Analysts predict ILMN’s revenue for the fiscal third quarter ending September 2024 to be $1.11 billion. Its EPS for the same quarter is expected to grow 194.6% year-over-year to $0.79. Moreover, the company has an excellent earnings surprise history, surpassing consensus revenue and EPS estimates in three of the trailing four quarters.
Over the past month, ILMN’s stock has gained 7% to close the last trading session at $116.09.
ILMN’s bright prospects are reflected in its POWR Ratings. The stock has an overall rating of B, equating to a Buy in our proprietary rating system.
ILMN has a B grade for Quality, Sentiment, and Growth. It is ranked #24 in the same industry.
In addition to the POWR Ratings we’ve stated above, we also have ILMN ratings for Momentum, Value, and Stability. Get all ILMN ratings here.
Stock #1: Gilead Sciences, Inc. (GILD)
GILD is a biopharmaceutical company that discovers, develops, and commercializes medicines in the areas of unmet medical needs internationally. The company provides products, including Biktarvy, Genvoya, Descovy, and Odefsey for the treatment of HIV/AIDS, Veklury for COVID-19, and Epclusa for viral hepatitis.
GILD’s levered FCF grew at a CAGR of 8.7% over the past three years. Also, its revenue grew at a CAGR of 4.2% during the same period.
GILD’s trailing-12-month gross profit margin of 77.52% is 35.3% higher than the industry average of 57.31%. Also, its trailing-12-month EBIT margin of 36.15% is significantly higher than the industry average of 1.91%. Similarly, its trailing-12-month EBITDA margin of 46.14% is 665.2% higher than the industry average of 6.03%.
GILD’s total revenues increased 5.4% year-over-year to $6.69 billion during the first quarter, which ended March 31, 2024. Its product sales came in at $6.65 billion, up 5.4% from the prior year’s period. The company generated $2.20 billion in operating cash flow during the first quarter. As of March 31, 2024, its cash, cash equivalents, and marketable debt securities were $4.72 billion.
As per the full-year 2024 guidance, GILD expects an operating income of $7 billion-$7.5 billion and non-GAAP EPS between $0.10 and $0.50.
Street expects GILD’s revenue for the second quarter (ended June 2024) to increase 1.6% year-over-year to $6.70 billion, while its EPS for the same quarter is expected to grow 17.4% year-over-year to $1.57. Moreover, the company has surpassed the consensus revenue estimates in each of the trailing four quarters.
GILD has gained 2.8% over the past three months, closing the last trading session at $69.96.
GILD’s POWR Ratings reflect its promising outlook. The stock has an overall rating of A, which translates to a Strong Buy in our proprietary rating system.
The stock has an A grade for Value and a B for Growth and Quality. Within the same industry, GILD is ranked first in the same industry.
Click here to access additional ratings of GILD for Stability, Sentiment, and Momentum.
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.
GILD shares were trading at $70.92 per share on Monday afternoon, up $0.96 (+1.37%). Year-to-date, GILD has declined -10.47%, versus a 19.00% rise in the benchmark S&P 500 index during the same period.
About the Author: Nidhi Agarwal
Nidhi is passionate about the capital market and wealth management, which led her to pursue a career as an investment analyst. She holds a bachelor's degree in finance and marketing and is pursuing the CFA program. Her fundamental approach to analyzing stocks helps investors identify the best investment opportunities.
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