Fostered by rapid technological advancements and evolving industry dynamics, the biotech industry is well-positioned to experience growth and expansion. The increasing M&A activities and collaboration are driving the market's prospects.
Considering the industry’s bright outlook, it could be wise to invest in fundamentally sound biotech stocks Vertex Pharmaceuticals Incorporated (VRTX), SIGA Technologies Inc. (SIGA), and Gilead Sciences Inc. (GILD) for potential gains.
Increasing technological advancements and shifting market dynamics are transforming the biotechnology industry. Trends like surging AI applications, RNA technology sophistication, continued growth in the CRISPR sector, and the growing merger and acquisition (M&A) activities are boosting the market.
The increasing M&A activities strongly favor the industry involving strategic alliances, big pharma companies acquiring some larger biotech and partnering activities.
The global biotechnology market is estimated to reach $5.81 trillion by 2033, growing at a notable CAGR of 14%. Factors attributable to the industry growth include new avenues for drug discovery, personalized medicine, and agricultural improvements, backed by investment in biotechnology and accelerated innovation.
Further, the industry remains optimistic about a recovery in biotech funding despite a decline in venture financing and macroeconomic pressures. Recent developments, such as new approvals as the first CRISPR gene therapy, are propelling the industry. In 2024, the launch of up to 21 cell therapies and 31 gene therapies is projected.
Also, biotech companies are increasingly emphasizing Artificial Intelligence (AI). It accelerates research by optimizing experiments, enabling virtual screening, leading to faster detection, and more. The global AI in drug discovery market is expected to be valued at $4.90 billion by 2028, growing at a CAGR of 40.2%.
With these encouraging trends in mind, let’s delve into the fundamentals of the three top Biotech stock picks, beginning with the third choice.
Stock #3: Vertex Pharmaceuticals Incorporated (VRTX)
VRTX is a biotechnology company that engages in developing and commercializing therapies for treating cystic fibrosis (CF). The company markets TRIKAFTA/KAFTRIO, SYMDEKO/SYMKEVI, ORKAMBI, and KALYDECO. It sells its products to specialty pharmacies and retail pharmacies or pharmacy chains, hospitals, and clinics.
On April 10, 2024, VRTX and Alpine Immune Sciences, Inc. (ALPN), a biotechnology company focused on discovering and developing innovative, protein-based immunotherapies, entered into a definitive agreement under which VRTX will acquire Alpine for $65 per share or around $4.9 billion in cash.
The strategic acquisition of Alpine should align well with VRTX’s objective of applying scientific innovation and creating transformative medicines targeting serious diseases. Alpine’s lead product Povetacicept exhibits potential as a ‘pipeline-in-a-product' and its protein engineering and immunotherapy expertise will help augment VRTX’s toolbox and capabilities.
On April 1, 2024, VRTX announced that inaxaplin (VX-147) advanced into the Phase 3 portion of the global Phase 2/3 pivotal clinical trial in APOL1-mediated kidney disease (AMKD), to compare a 45 mg once daily oral dose with a placebo. Also, the trial has now been expanded to include adolescents with AMKD ages 10 to 17 years.
When successfully approved, inaxaplin has significant potential to transform the care of AMKD and enhance patients’ lives.
Also, on March 21, 2024, VRTX announced the FDA clearance of an Investigational New Drug Application (IND) for VX-407, an investigational first-in-class small molecule corrector targeting the underlying cause of autosomal dominant polycystic kidney disease (ADPKD).
During the fourth quarter that ended December 31, 2023, VRTX’s net product revenues rose 9.3% year-over-year to $2.52 billion. Its non-GAAP operating income grew marginally from the year-ago value to $1.15 billion. The company’s non-GAAP net income came in at $1.10 billion or $4.20 per common share, indicating increases of 12.1% and 11.7% from the prior year’s quarter, respectively.
As of December 31, 2023, the company’s total assets stood at $22.73 billion, compared to $18.15 billion as of December 31, 2022.
As per the company’s full-year 2024 financial guidance, VRTX expects its total product revenue to be between $10.55 billion and $10.75 billion.
Street expects VRTX’s revenue and EPS for the first quarter (ended March 2024) to increase 8.5% and 33% year-over-year to $2.58 billion and $4.06, respectively. Furthermore, the company has topped the consensus EPS estimates in all four trailing quarters, which is impressive.
Over the past six months, VRTX’s stock has surged 9.6%. It gained 23.2% over the past year to close the last trading session at $400.23.
VRTX’s POWR Ratings reflect its robust outlook. The stock has an overall rating of B, which translates to Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
VRTX has a B grade for Value, Sentiment, and Quality. It is ranked #10 out of 361 stocks in the Biotech industry.
In addition to the POWR Ratings we’ve stated above, we also have VRTX’s ratings for Growth, Momentum, and Stability. Get all VRTX ratings here.
Stock #2: SIGA Technologies Inc. (SIGA)
SIGA is a commercial-stage pharmaceutical company that emphasizes health security related markets. The company’s lead product includes TPOXX, an oral formulation antiviral drug for treating human smallpox disease caused by the variola virus.
On March 12, 2024, SIGA’s board of directors declared a special cash dividend of $0.60 per share on its common stock. This represents an increase of $0.15 per share, or 33%, over the June 2023 special dividend, reflecting the company’s robust capital structure and ability to provide stable growth in the long run.
The dividend was paid on April 11, 2024, to shareholders of record at the close of business on March 26, 2024.
On October 23, 2023, SIGA announced the creation of a joint procurement mechanism by the European Commission’s DG HERA (Health Emergency Preparedness and Response Authority) under which 13 participating countries from the European Union and the European Free Trade Association could efficiently order oral TPOXX.
For the fiscal year that ended December 31, 2023, SIGA’s total revenues increased 26.3% year-over-year to $139.92 million, and its operating income grew 95.8% from the prior period to $83.62 million. The company’s net income and EPS of $68.07 million and $0.95 indicate growths of 100.8% and 106.5% year-over-year, respectively.
In addition, as of December 31, 2023, the company’s cash and cash equivalents were $150.14 million versus $98.79 million as of December 31, 2022.
Analysts expect SIGA’s revenue and EPS for the current fiscal year (ending December 2024) to grow 36.2% and 24.2% year-over-year to $190.60 million and $1.18, respectively.
Shares of SIGA have gained 89.9% over the past month and 66.2% over the past six months to close the last trading session at $9.21.
SIGA’s sound fundamentals are reflected in its POWR Ratings. 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, Growth, and Quality. Within the Biotech industry, SIGA is ranked #7 of 361 stocks.
Click here to access additional ratings of SIGA for Momentum, Sentiment, and Stability.
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 like Biktarvy, Genvoya, Descovy, and Odefsey for the treatment of HIV/AIDS, Veklury for COVID-19, and Epclusa for viral hepatitis.
On March 28, 2024, GILD announced the FDA approval of the supplemental new drug application for Vemlidy® (tenofovir alafenamide) for treating chronic hepatitis B virus (HBV) infection in pediatric patients aged six years and older and weighing at least 25 kg with compensated liver disease.
The expanded indication for Vemlidy is a testament to the therapy’s safety, tolerability, and efficacy profile, and it can potentially help many patients.
On the same day, GILD and Xilio Therapeutics, Inc. (XLO), a clinical-stage biotechnology company, entered into an exclusive license agreement to develop and commercialize Xilio’s Phase 1 tumor-activated IL-12 program, XTX301. The IL-12 program has the potential to treat a broad range of tumor types.
Under the agreement, Xilio granted GILD an exclusive global license to develop and commercialize IL-12, and Xilio will receive $43.5 million in upfront payments. The tumor-activation platform complements GILD’s clinical development program in difficult-to-treat cancers and will expand its focus in immuno-oncology.
On March 22, GILD acquired CymaBay Therapeutics, Inc. (CBAY) for nearly $4.3 billion in total equity value. The addition of CymaBay’s investigational lead product candidate, seladelpar, includes pruritus and aligns with GILD’s existing liver portfolio and its long-standing commitment to offering transformational medicines to patients.
GILD reported total revenues of $7.12 billion during the fourth quarter, which ended December 31, 2023. The company’s non-GAAP operating income grew 1.5% from the year-ago value to $2.74 billion. Non-GAAP net income attributable to GILD and non-GAAP EPS came in at $2.16 billion and $1.72, up 2.6% and 3% year-over-year, respectively.
In addition, the company’s cash, cash equivalents, and marketable debt securities stood at $8.43 billion as of December 31, 2023, compared to $7.63 billion as of December 31, 2022.
As per the fiscal full-year 2024 guidance, GILD expects total product sales of $27.1 billion-$27.5 billion and its non-GAAP EPS is expected between $6.85 and $7.25.
Street expects GILD’s revenue for the second quarter (ending June 2024) to increase 2.8% year-over-year to $6.79 billion, while its EPS for the same quarter is expected to grow 27.2% year-over-year to $1.70. Moreover, the company has surpassed the consensus revenue estimates in each of the trailing four quarters.
Shares of GILD have plunged 9.3% over the past month to close the last trading session at $68.65.
GILD’s POWR Ratings reflect its bright prospects. The stock has an overall rating of A, which equates to a Strong Buy in our proprietary rating system.
The stock has an A grade for Value and a B for Quality. GILD is ranked #5 of 361 stocks in the same industry.
Click here to access additional ratings of GILD for Momentum, Growth, Sentiment, and Stability.
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.
VRTX shares were trading at $398.49 per share on Friday morning, down $1.74 (-0.43%). Year-to-date, VRTX has declined -2.06%, versus a 8.23% rise in the benchmark S&P 500 index during the same period.
About the Author: Anushka Dutta
Anushka is an analyst whose interest in understanding the impact of broader economic changes on financial markets motivated her to pursue a career in investment research.
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