3 Biotech Stocks for Sustainable Returns

The biotechnology market is growing steadily due to personalized medicine trends, with significant investments in research and innovative therapies further propelling its expansion. Therefore, investors could consider investing in top biotech stocks, Immunocore Holdings plc (IMCR), Halozyme Therapeutics, Inc. (HALO), and Entrada Therapeutics, Inc. (TRDA).

This year, the biotech industry is expected to see AI-driven innovations and continued growth in RNA technology, CRISPR, and stem cell research, shaping drug discovery and therapeutic interventions. The global biotechnology market is estimated to grow at a CAGR of 15.5% and be worth $1.35 trillion by 2030.

Besides, the outlook for 2024 in the life sciences sector includes a potential 20% recovery in the XBI Biotech Index, a sustained 30% increase in M&A activity, treatment access for over 2% of United States sickle cell disease patients with new gene therapies, and the advancement of at least 30 drug candidates with AI platforms in clinical development.

In addition, IQVIA forecasts that biotech will account for 39% of global medicine spending, surpassing $892 billion by 2028, while specialty medicines are anticipated to constitute approximately 43% of global spending in 2028 and 55% of total spending in leading developed markets.

Moreover, the life science industry's adoption of AI solutions, accelerated by the COVID-19 pandemic, is driven by the need for novel drug therapies and cost-effective drug development processes. The global AI in drug discovery market is expected to expand at a CAGR of 29.6% by 2030.

Considering these conducive trends, let’s examine the fundamentals of three Biotech stock picks, beginning with the third choice.

Stock #3: Immunocore Holdings plc (IMCR)

Based in Abingdon, the United Kingdom, IMCR is a biotech firm pioneering immunotherapy treatments for cancer, infectious, and autoimmune diseases. Its portfolio includes KIMMTRAK for uveal melanoma and a pipeline of candidates in clinical trials targeting various cancers and infectious conditions.

IMCR’s trailing-12-month asset turnover ratio of 0.42x is 7.2% higher than the industry average of 0.39x. Its trailing-12-month cash per share of $8.90 is 605.4% higher than the industry average of $1.26.

During the fourth quarter, which ended December 31, 2023, IMCR’s total revenue soared 22.4% year-over-year to $70.16 million. Also, its total revenue from the sale of therapies rose 34.1% from a year-ago quarter to $67.59 million.

As of December 31, 2023, the company's total assets and cash & cash equivalents (end of year) amounted to $597 million and $442.63 million, showing an increase from $526.76 million and $402.47 million as of December 31, 2022, respectively.

IMCR’s revenue is expected to grow 32.5% year-over-year to $74.49 million for the fiscal first quarter ending March 2024. Its EPS for the same quarter is expected to improve 14% year-over-year. The company surpassed its revenue estimates in each of the trailing four quarters, which is notable.

The stock has surged 26.2% over the past year and 22.7% over the past six months to close the last trading session at $69.21.

IMCR’s POWR Ratings reflect this strong outlook. The stock has an overall B rating, translating to a Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.

It has a B grade for Quality. Within the Biotech industry, it is ranked #24 among 359 stocks.

Click here to see IMCR’s ratings for Growth, Value, Momentum, Stability, and Sentiment.

Stock #2: Halozyme Therapeutics, Inc. (HALO)

HALO pioneers enzyme-based technologies for enhanced drug delivery, focusing on injectable biologics and therapeutic molecules. The company's innovative solutions address various medical conditions, from HIV and cancer to autoimmune diseases.

HALO’s trailing-12-month EBIT margin of 41.01% is significantly higher than the industry average of 0.16%. The stock’s trailing-12-month EBITDA margin of 50.28% is 802.3% higher than the industry average of 5.57%.

HALO’s total revenues grew 26.7% from the prior-year quarter to $230.04 million in the fourth quarter that ended December 31, 2023. Its net income and adjusted EBITDA increased 48% and 46.6% year-over-year to $85.39 million and $121.73 million, respectively. Also, its non-GAAP EPS for the same quarter rose 70.8% from a year-ago quarter to $0.82.

For the fiscal year 2024, the company anticipates total revenue in the range of $915 million to $985 million, alongside adjusted EBITDA between $535 million and $585 million. Additionally, non-GAAP EPS is projected to fall within the range of $3.55 to $3.90.

Street expects HALO’s revenue and EPS to grow 15.4% and 31.3% year-over-year to $956.78 million and $3.64, respectively, for the fiscal year ending December 2024.

HALO’s shares have increased 19.6% over the past nine months and 16% over the past month to close the last trading session at $39.69.

HALO’s POWR Ratings reflect its robust prospects. The stock has an overall rating of B, equating to a Buy in our proprietary rating system.

HALO has a B grade for Growth, Value, and Quality. Within the same industry, it is ranked #16.

In addition to the POWR Ratings stated above, one can access HALO’s additional Momentum, Stability, and Sentiment ratings here.

Stock #1: Entrada Therapeutics, Inc. (TRDA)

TRDA develops innovative therapies for neuromuscular disorders, utilizing their endosomal escape vehicle platform. Its lead candidates, including ENTR-601-44 and ENTR-601-45, show promise in preclinical trials for Duchenne muscular dystrophy and myotonic dystrophy type 1.

TRDA’s trailing-12-month gross profit margin of 76.29% is 33.1% higher than the industry average of 57.33%. Its trailing-12-month CAPEX/Sales of 6.13% is 49.3% higher than the industry average of 4.11%.

In the third quarter, which ended September 30, 2023, TRDA generated collaboration revenue of $43.74 million. The company’s income from operations and net income came in at $14.01 million and $35.46 million, up significantly from the prior-year quarter’s loss from operations and net loss of $25.94 million and $25.14 million, respectively. Its net income per share stood at $1.02 compared to a year-ago net loss per share of $0.80.

Analysts expect its revenue to be $57.76 million for the fiscal year ending December 2024. The stock has gained 10.5% over the past nine months to close the last trading session at $12.99.

TRDA’s POWR Ratings reflect this optimistic outlook. The stock has an overall A rating, translating to a Strong Buy in our proprietary rating system.

It has an A grade for Value and a B for Growth, Sentiment, and Quality. In the same industry, it is ranked #6.

To access additional ratings for TRDA’s Momentum and Stability, click here.

What To Do Next?

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HALO shares were trading at $40.23 per share on Thursday morning, up $0.54 (+1.36%). Year-to-date, HALO has gained 8.85%, versus a 6.97% rise in the benchmark S&P 500 index during the same period.

Her interest in risky instruments and passion for writing made Kritika an analyst and financial journalist. She earned her bachelor's degree in commerce and is currently pursuing the CFA program. With her fundamental approach, she aims to help investors identify untapped investment opportunities.

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