Key trends, including advancements in gene editing technologies with the introduction of CRISPR-Cas9, the development of personalized medicines, rising applications in agriculture and industrial processing, the surge of synthetic biology, and supportive government funding and incentives, will shape the biotech industry this year and beyond.
Given the industry tailwinds, it could be wise to invest in fundamentally sound biotech stocks United Therapeutics Corporation (UTHR), Puma Biotechnology, Inc. (PBYI), and Genmab A/S (GMAB) for future solid returns.
The biotechnology industry continues to foster significant developments in healthcare, agriculture, and industrial processes. The industry is transforming healthcare by enabling personalized medicine, gene therapy, and regenerative medicine. The pharma sector also uses biotechnology to accelerate drug discovery and development processes.
From biofuels to bioplastics, biotechnology is accelerating the development of sustainable alternatives to traditional fossil fuels and plastics. In addition, there are growing applications of biotech in agriculture, as it has improved crop yield, lowered dependency on chemical pesticides, and developed crops with increased nutritional value.
According to the Transparency Market Research report, the agricultural biotechnology market is expected to reach $64.70 billion by 2031, growing at a CAGR of 9.5%. Several factors, like the growing need to increase food production, the demand for sustainable agriculture, and the rapidly rising global population, will drive the market’s growth.
Overall, the global biotechnology market is projected to reach $3.88 trillion by 2030, expanding at a CAGR of 14% from 2024 to 2030. The market growth is driven by government initiatives emphasizing the modernization of regulatory framework, improvements in approval processes & reimbursement policies, and standardization of clinical studies.
The biotechnology market’s potential to revolutionize everyday life, with scientists and researchers using it to make rapid advances in medical treatment, genetic engineering in agriculture and novel biomaterials, has caught the attention of both the Chinese and U.S. governments, driving innovations and growth opportunities.
That also led to the Biden administration putting forth a “whole-of-government approach” to enhance biotechnology and biomanufacturing, which are crucial for health, climate change, energy, food security, agriculture, and supply chain resilience.
Also, in today’s dynamic landscape of technological advancements, the biotechnology market stands at the forefront, projecting a plethora of top trends. One such trend is the integration of artificial intelligence (AI) and machine learning (ML) in biotechnological research and development.
Investors’ interest in biotech stocks is evident from the SPDR Series Trust SPDR S&P Biotech ETF (XBI) 21.3% returns over the past six months.
With these encouraging trends in mind, let’s delve into the fundamentals of the three Biotech stock picks, beginning with the third choice.
Stock #3: Genmab A/S (GMAB)
Headquartered in Copenhagen, Denmark, GMAB develops antibody therapeutics for the treatment of cancer and other diseases, primarily in Denmark. The company markets DARZALEX, teprotumumab, and Amivantamab.
On February 27, 2024, GMAB announced that the U.S. FDA granted Priority Review for the supplemental Biologics License Application (sBLA) for epcoritamab-bysp, a T-cell engaging bispecific antibody administered subcutaneously, for treating adult patients with relapsed or refractory (R/R) follicular lymphoma (FL) after two or more lines of systemic therapy.
sBLA submission reflects GMAB’s commitment to exploring the potential utility of epcoritamab across B-cell malignancies.
During the fourth quarter of 2023, GMAB announced that the EMA validated for review a Type II variation application for epcoritamab as monotherapy for the treatment of adult patients with relapsed or refractory FL after two or more lines of systemic therapy. Data from the FL cohort of the EPCORE NHL-1 trial supported the application.
In terms of forward non-GAAP PEG, GMAB is trading at 1.30x, 33.5% lower than the industry average of 1.95x. Likewise, the stock’s forward EV/EBIT multiple of 15.79 is 2.2% lower than the industry average of 16.15.
GMAB’s trailing-12-month gross profit margin and EBITDA margin of 98.63% and 33.76% are 71.6% and 515.8% higher than the respective industry averages of 57.46% and 5.48%. Also, the stock’s trailing-12-month asset turnover ratio of 0.50x is 28.2% higher than the industry average of 0.39x.
For the fiscal year 2023, which ended December 31, 2023, GMAB’s revenue increased 13.6% year-over-year to DKK 16.47 billion ($2.39 billion), and its operating profit for the year was DKK 5.32 billion ($772.80 million). The company’s net profit came in at DKK 4.35 billion ($632.07 million) and DKK 66.02 per share, respectively.
In addition, as of December 31, 2023, the company’s total assets stood at DKK 35.29 billion ($5.12 billion), compared to DKK 30.12 billion ($4.37 billion) as of December 31, 2022.
As per the fiscal year 2024 outlook, GMAB expects revenue between DKK 18.70 billion ($2.71 billion) and DKK 20.50 billion ($2.98 billion). And its gross profit is expected to range from DKK 18 billion ($2.61 billion) to DKK 19.50 billion ($2.83 billion).
Analysts expect GMAB’s revenue and EPS for the first quarter (ending March 2024) to increase 37.9% and 306.7% year-over-year to $580.33 million and $0.21, respectively. Also, the company has surpassed the consensus revenue estimates in each of the trailing four quarters.
Shares of GMAB have surged marginally over the past month to close the last trading session at $27.77.
GMAB’s POWR Ratings reflect its robust outlook. 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, with each factor weighted to an optimal degree.
GMAB has a B grade for Quality and Value. It is ranked #13 out of 360 stocks in the Biotech industry.
In addition to the POWR Ratings we’ve stated above, we also have GMAB’s ratings for Sentiment, Momentum, Stability, and Growth. Get all GMAB ratings here.
Stock #2: Puma Biotechnology, Inc. (PBYI)
PBYI is a biopharmaceutical company that engages in the development and commercialization of products to enhance cancer care globally. Its drug candidates include PB272 (neratinib, oral). Its product portfolio also comprises PB272 (neratinib, intravenous) and PB357.
On February 13, 2024, PBYI announced the initiation of its ALISertib in CAncer (ALISCA-Lung1) Phase II trial of alisertib monotherapy for the treatment of patients with extensive stage small cell lung cancer.
"We are pleased to initiate this Phase II trial, and we hope that the study will provide much needed insight into the clinical activity of alisertib in small cell lung cancer and, more specifically, in patients with molecularly defined tumors that may be targetable with an aurora kinase A inhibitor like alisertib,” said Alan H. Auerbach, Chief Executive Officer, President and Founder of PBYI.
Also, on September 21, 2023, PBYI announced that the U.S. FDA granted Orphan Drug Designation to alisertib, a selective, small-molecule, orally administered inhibitor of aurora kinase A, for the treatment of patients with small cell lung cancer (SCLC).
In terms of forward Price/Sales, PBYI is trading at 1.30x, 67.8% lower than the industry average of 4.03x. Further, the stock’s forward EV/EBIT multiple of 9.48 is 41.3% lower than the industry average of 16.1. Likewise, its forward non-GAAP P/E of 8.79x is 55.7% lower than the industry average of 19.85x.
During the fourth quarter that ended December 31, 2023, PBYI’s total revenue increased 9.9% year-over-year to $72.20 million. The company’s income from operations was $14.80 million, up 48% from the previous year’s quarter.
Further, the company’s non-GAAP adjusted net income came in at $14.80 million, or $0.31 per share, compared to a non-GAAP adjusted net loss of $3.0 million or $0.07 per share for the fourth quarter of 2022, respectively. Its cash and cash equivalents stood at $84.60 million as of December 31, 2023, versus $76.20 million as of December 31, 2022.
As per the financial outlook, PBYI expects net product revenue between $38 - $40 million for the first quarter and $183 - $190 million for the full year 2024. Also, its net income for the full year is estimated to range between $12 and $15 million.
Street expects PBYI’s revenue for the second quarter (ending June 2024) to grow 11.7% year-over-year to $61 million, and its EPS is estimated to increase 40% year-over-year to $0.07. Additionally, PBYI topped the consensus EPS estimates in three of the trailing four quarters.
Over the past six months, PBYI’s stock has gained 68.1% and 61.1% over the past year to close the last trading session at $6.22.
PBYI’s sound 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 stock has an A grade for Value and a B for Growth and Quality. Within the Biotech industry, PBYI is ranked #10 of 360 stocks.
Click here to access additional ratings of PBYI for Momentum, Sentiment, and Stability.
Stock #1: United Therapeutics Corporation (UTHR)
UTHR is a biotechnology company engaged in the development and commercialization of products to address the unmet medical needs of patients with chronic and life-threatening diseases internationally. It offers Tyvaso DPI, Tyvaso, Remodulin (treprostinil) injection, Orenitram, and Adcirca.
On December 13, 2023, UTHR, through its wholly-owned subsidiary, Morpheus Subsidiary Inc., acquired all outstanding shares of Miromatrix Medical Inc. (MIRO) for a purchase price of $3.25 per share in cash at closing and an additional $1.75 per share in cash.
This was upon the achievement of a clinical development milestone related to Miromatrix’s development-stage, fully-implantable manufactured kidney product known as mirokidney™ by December 31, 2025. The acquisition aligns with the company’s future objectives.
On September 22, UTHR announced the achievement of two milestones for its xenotransplantation programs. These milestones were the second transplant of a UHeart™ xenoheart into a living person and a 61-day study of the UThymoKidney™ xenokidney and thymus in a human pre-clinical model.
In terms of forward non-GAAP P/E, UTHR is trading at 9.30x, 52.8% lower than the industry average of 19.68x. Also, the stock’s forward EV/Sales multiple of 2.43 is 36.5% lower than the industry average of 3.82. Further, its forward Price/Cash Flow of 9.65x is lower than the industry average of 15.74x.
UTHR’s total revenues increased 25.1% year-over-year to $614.70 million for the fourth quarter, which ended December 31, 2023. Its operating income grew 48.1% from the year-ago value to $260.10 million. The company’s net income came in at $217.10 million, or $4.36 per share, up 64.3% and 63.3% from the previous year’s period, respectively.
As of December 31, 2023, the company’s cash, cash equivalents and marketable investments were $4.90 billion, compared to $4.15 billion as of December 31, 2022.
Analysts expect UTHR’s revenue for the first quarter (ending March 2024) to increase 23.5% year-over-year to $625.91 million. The consensus EPS estimate for the ongoing quarter of $5.61 indicates a 15.4% year-over-year growth. Moreover, UTHR surpassed the consensus EPS estimates in all four trailing quarters.
UTHR’s stock has surged 4.4% over the past month to close the last trading session at $225.64.
UTHR’s POWR Ratings reflect its bright prospects. The stock has an overall rating of A, which translates to a Strong Buy in our proprietary rating system.
UTHR has an A grade for Value and a B for Sentiment and Quality. It is ranked #7 among 360 stocks in the Biotech industry.
To access UTHR’s ratings (Growth, Stability, and Momentum), click here.
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.
GMAB shares rose $0.54 (+1.94%) in premarket trading Friday. Year-to-date, GMAB has declined -12.78%, versus a 6.89% rise in the benchmark S&P 500 index during the same period.
About the Author: Mangeet Kaur Bouns
Mangeet’s keen interest in the stock market led her to become an investment researcher and financial journalist. Using her fundamental approach to analyzing stocks, Mangeet’s looks to help retail investors understand the underlying factors before making investment decisions.
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