The biotech industry thrived and drew much attention during the pandemic years due to the production of new life-saving drugs, vaccines, and therapeutics. The bioscience industry's economic impact on the U.S. economy amounted to $2.9 trillion in 2021.
On top of it, lucrative government investments should keep the sector buoyed. For instance, last year, the White House unveiled its plans to invest more than $2 billion in the U.S. biotechnology sector.
Moreover, with recessionary fears hovering, experts anticipate the sector will not likely be affected by the headwinds. Raj Lala, president and CEO of Evolve Funds, believes that even if the U.S. economy enters into recession, biotech companies will “continue to perform well” since investors tend to prefer “defensive sectors.”
Furthermore, the global biotechnology market is projected to grow at a CAGR of 13.9% from 2022 to 2030. Against this backdrop, the fundamentally strong stock Gilead Sciences, Inc. (GILD) might be an ideal buy in January.
However, given the macroeconomic headwinds, the fundamentally weak biotech stock Stoke Therapeutics, Inc. (STOK) might be best avoided now.
Stock to Buy:
Gilead Sciences, Inc. (GILD)
Biopharmaceutical company GILD discovers, develops, and commercializes medicines in the areas of unmet medical need in the United States, Europe, and internationally.
On January 3, 2023, GILD announced that the European Medicines Agency (EMA) had approved the Marketing Authorization Application (MAA) for Trodelvy to treat adult patients with previously-treated HR+/HER2-metastatic breast cancer. This is anticipated to help expand patient access to Trodelvy throughout the EU.
On the same day, GILD and EVOQ Therapeutics, Inc. announced a collaboration and licensing agreement to advance EVOQ’s proprietary technology for treating rheumatoid arthritis (RA) and lupus. Under the agreement, GILD would receive the rights to exclusively license EVOQ’s NanoDisc technology to develop and commercialize immunotherapy products clinically.
On October 27, 2022, GILD declared a quarterly dividend of $0.73 per share of common stock for the fourth quarter. This reflects the company’s cash generation abilities.
GILD’s total product sales, excluding Veklury, came in at $6.05 billion for the third quarter that ended September 30, up 11.4% year-over-year. Non-GAAP net income attributable to GILD and non-GAAP EPS came in at $2.39 billion and $1.90, respectively. The company’s cash and cash equivalents at the end of the period rose 7.7% from the prior-year period to $4.70 billion.
For the second quarter ending June 2023, Street expects GILD’s EPS to increase 9.3% year-over-year to $1.73. Its revenue for the same quarter is expected to come in at $6.36 billion, indicating an increase of 1.6%. It surpassed consensus EPS estimates in three of the four trailing quarters.
Over the past six months, the stock has gained 38.2% to close the last trading session at $84.02. It has gained 21.8% over the past three months.
This promising outlook is reflected in GILD’s POWR Ratings. The stock’s overall A rating equates to a Strong Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
GILD has an A grade for Value and a B for Quality and Sentiment. Among the 400 stocks in the Biotech industry, it is ranked #4.
Click here for the additional POWR Ratings for Growth, Stability, and Momentum for GILD.
Stock to Avoid:
Stoke Therapeutics, Inc. (STOK)
STOK is an early-stage biopharmaceutical company that develops novel antisense oligonucleotide (ASO) medicines to treat the underlying causes of severe genetic diseases. Its lead clinical candidates are STK-001 and STK-002.
In terms of its forward EV/Sales, STOK is trading at 10.61x, 158.5% higher than the industry average of 4.11x, while its forward Price/Sales multiple of 31.62 is 573.3% lower than the industry average of 4.70x.
For the fiscal third quarter that ended September 30, STOK’s loss from operations increased 19.7% year-over-year to $27.15 million. Net loss and net loss per share stood at $26.11 million and $0.66, up 15.6% and 8.2% from the prior-year period.
Street expects STOK’s revenue for the fiscal year ending December 2023 to decline 16.4% year-over-year to $9.78 million. Its EPS for the same period is expected to come in at negative $2.93, representing a decline of 10.2% from the prior year.
The stock has declined 39.5% over the past six months and 34.3% over the past three months to close its last trading session at $9.39.
STOK’s POWR Ratings reflect its weak prospects. The stock has an overall D rating, which equates to Sell in our proprietary rating system.
STOK has a D grade for Stability and Sentiment. It is ranked #219 within the same industry.
In addition to the POWR Ratings we’ve stated above, one can see STOK ratings for Growth, Value, Momentum, and Quality here.
GILD shares fell $0.19 (-0.23%) in premarket trading Wednesday. Year-to-date, GILD has declined -2.13%, versus a 4.65% rise in the benchmark S&P 500 index during the same period.
About the Author: Sristi Suman Jayaswal
The stock market dynamics sparked Sristi's interest during her school days, which led her to become a financial journalist. Investing in undervalued stocks with solid long-term growth prospects is her preferred strategy. Having earned a master's degree in Accounting and Finance, Sristi hopes to deepen her investment research experience and better guide investors.
1 Biotech Stock to Buy in January 2023 and 1 to Sell StockNews.com
