After thriving with the inventions of vaccines and antivirals that helped the world fight the COVID-19 pandemic, the biotech industry witnessed a slowdown this year due to the broader market correction.
However, the breakthrough developments in treating and preventing major life-threatening diseases, rising demand from the aging population, and successful trial results have created fruitful growth opportunities for this sector. The global biotechnology market is expected to grow at a CAGR of 9.9% to $852.55 billion by 2030.
With the stock market expected to remain under pressure in the upcoming months due to the Fed’s aggressive interest rate hikes and recession fears, it could be wise to invest in fundamentally strong biotech stocks that are defying the bear market based on their fundamental strength and the inelastic demand for biotech products.
Fundamentally strong stocks Amgen Inc. (AMGN) and Gilead Sciences, Inc. (GILD) have been defying the market sell-off this year. So, it could be wise to buy these stocks now.
On the other hand, fundamentally weak biotech stock Timber Pharmaceuticals, Inc. (TMBR) has performed poorly. Hence, this stock is best avoided now.
Stocks to Buy:
Amgen Inc. (AMGN)
AMGN is engaged in the global discovery, manufacturing, and delivery of human therapeutics. It focuses on therapies for inflammation, oncology/hematology, bone health, cardiovascular disease, nephrology, and neuroscience.
On August 4, 2022, the company announced the acquisition of ChemoCentryx, Inc. (CCXI), a biopharma company engaged in treating life-threatening diseases through oral therapeutics. This acquisition brings a compelling opportunity to add TAVNEOS and transform first-in-class treatment for patients with serious autoimmune diseases.
On September 12, 2022, AMGN presented new data from the Phase 1b CodeBreaK 101 study of LUMAKRAS® (sotorasib) with Vectibix® in patients with KRAS G12C-mutated colorectal cancer (CRC).
“CodeBreaK 101 results, which show that LUMAKRAS plus Vectibix achieved a 30% confirmed objective response rate in patients with KRAS G12C-mutated metastatic colorectal cancer. These data are encouraging as we continue to focus on combination approaches in colorectal cancer, including advancing CodeBreaK 300, the Phase 3 LUMAKRAS plus Vectibix trial in the chemotherapy-refractory patient population," said David M. Reese, M.D., executive VP of Research and Development at AMGN.
For the fiscal second quarter of 2022, AMGN’s total revenues increased marginally year-over-year to $6.59 billion. Its non-GAAP operating income grew 107.6% from the year-ago value to $3.34 billion, while its non-GAAP net income increased 145.3% year-over-year to $2.50 billion. Also, its non-GAAP EPS came in at $4.65, up 162.7% from the prior-year quarter.
Street expects AMGN’s revenue for the fiscal year ending December 31, 2022, to be $26.16 billion, representing a marginal increase year-over-year. Its EPS is expected to increase 2% year-over-year to $17.45 in the current year. The company has surpassed the EPS estimates in each of the trailing four quarters.
AMGN’s shares have gained 16.5% over the past nine months to close the last trading session at $247.69.
AMGN’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall rating of B, translating to Buy in our rating system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
It has an A grade for Quality and a B for Value. Among the 397 stocks in the Biotech industry, it is ranked #8. To see the other ratings of AMGN for Growth, Momentum, Stability, and Sentiment, click here.
Gilead Sciences, Inc. (GILD)
GILD is a biopharmaceutical company focusing on developing and commercializing medicine for treating life-threatening diseases, including HIV, viral hepatitis, and cancer.
On August 15, 2022, GILD announced that it would acquire the remaining worldwide rights of Trodelvy. With this acquisition, the company aims to advance the clinical potential and commercialization of Trodelvy across the Asian markets.
GILD’s total revenue increased marginally year-over-year to $6.26 billion for the fiscal second quarter that ended June 30, 2022. The company’s total product sales from the HIV segment increased 7.3% year-over-year to $4.22 billion. Its current liabilities declined 20.5% to $9.22 billion for the quarter ended June 30, 2022, compared to $11.61 billion for the fiscal year ended December 31, 2022.
For the quarter ending December 31, 2022, GILD’s EPS is expected to increase 102.6% year-over-year to $1.40. It has surpassed the consensus EPS estimates in three of the trailing four quarters. Over the past six months, the stock has gained 10.6% to close the last trading session at $65.28.
GILD’s POWR Ratings reflect this promising outlook. The stock has an overall B rating, translating 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 #13. Click here to see the other ratings of GILD for Growth, Momentum, Stability, and Sentiment.
Stock to Avoid:
Timber Pharmaceuticals, Inc. (TMBR)
TMBR is a clinical-stage biopharmaceutical company that develops and commercializes treatments for orphan dermatologic diseases. The company’s lead product candidates include TMB-001 and TMB-002.
On August 29, 2022, TMBR announced that it had received a deficiency letter from NYSE American LLC stating that the company is not in compliance with the continued listing standards as set forth in Section 1003(f)(v) of the NYSE American Company Guide as the company's common stock has been trading for a low price per share for a substantial period of time.
However, the letter does not have an immediate delisting of the company's common stock from the Exchange. TMBR is currently developing plans to regain compliance with the NYSE American's continued listing standards within the cure period.
For the fiscal second quarter that ended June 30, TMBR’s total operating expenses increased 180.2% year-over-year to $9.40 million. Its loss from operations widened 216.9% from the prior-year quarter to $9.40 million. The company’s net loss widened 220.1% year-over-year to $9.50 million. Net loss per share came in at $0.15, up 87.5% year-over-year.
Analysts expect EPS to remain negative for fiscal 2022. The consensus revenue for the current year is expected to decline 90.6% year-over-year to $83K. The stock has declined 87.8% over the past year and 73% over the past nine months to close the last trading session at $0.11.
TMBR’s POWR Ratings reflect its bleak prospects. The stock has an overall F rating, equating to a Strong Sell in our proprietary rating system. It has an F grade for Quality and a D for Momentum, Stability, and Sentiment. It is ranked #480 in the same industry. Click here to see additional ratings of TMBR for Growth and Value.
AMGN shares were unchanged in after-hours trading Monday. Year-to-date, AMGN has gained 8.21%, versus a -12.83% rise in the benchmark S&P 500 index during the same period.
About the Author: Shweta Kumari
Shweta's profound interest in financial research and quantitative analysis led her to pursue a career as an investment analyst. She uses her knowledge to help retail investors make educated investment decisions.
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