Given increasing healthcare spending, rising research and development (R&D) in personalized medicine, several advancements in genetic engineering, regulatory support, and the rapid adoption of AI, the biotechnology industry is well-poised to witness robust growth in the foreseeable future.
Given the industry’s bright prospects, it could be wise to invest in fundamentally strong biotech stocks Royalty Pharma plc (RPRX), Anika Therapeutics, Inc. (ANIK), and Innoviva, Inc. (INVA) this month.
The biotechnology industry is expanding, driven by the growing prevalence of chronic illnesses and government support via measures targeted at modernizing the regulatory framework, enhancing approval processes, and reimbursement policies. Also, the rising adoption of organic food products necessitates the use of biotech in the agriculture sector.
IMARC Group expects the global biotechnology market to total $1.28 trillion by 2032, growing at a CAGR of 6.5% from 2024 to 2032. Besides, global medicine spending is projected to reach $2.3 trillion by 2028, growing at 5% to 8% annually. The biotech sector is expected to represent 39% of global spending and will likely exceed $892 billion by 2028.
In biotech, AI is becoming increasingly essential for accelerating innovation in laboratories and throughout a drug’s lifecycle. The AI in the biotechnology market is poised to grow at a CAGR of 29.7% by 2032.
Additionally, investors’ interest in biotech stocks is evident from the SPDR Series Trust SPDR S&P Biotech ETF’s (XBI) 29.8% returns over the past six months.
Given these encouraging trends, let’s look at the fundamentals of the top Biotech stocks, beginning with the third choice.
Stock #3: Royalty Pharma plc (RPRX)
RPRX operates as a buyer of biopharmaceutical royalties and a funder of innovations in the biopharmaceutical industry. The company’s portfolio consists of royalties on nearly 35 commercial products and 14 development-stage product candidates that address therapeutic areas like diabetes, cancer, neuroscience, immunology, respiratory, and hematology.
On April 17, 2024, RPRX’s Board of Directors approved a dividend for the second quarter of fiscal 2024 of $0.21 per Class A ordinary share, payable on June 14. RPRX pays $0.84 annually as dividends, which translates to a yield of 3% on the current market price.
RPRX’s trailing-12-month EBIT margin of 63.37% is significantly higher than the industry average of 0.60%. Likewise, the stock’s trailing-12-month gross profit margin of 76.19% is 35.4% higher than the industry average of 56.27%.
During the fiscal year that ended December 31, 2023, RPRX’s total income and other revenues increased 5.3% year-over-year to $2.36 billion. The company’s operating income came in at $1.49 billion, up 386% from the prior year. Net income attributable to RPRX was $1.14 billion, indicating a growth of 2,539.5% year-over-year.
In addition, the company’s adjusted EBITDA rose 9.3% year-over-year to $2.81 billion. And its non-GAAP portfolio cash flow grew 11.8% from the previous year to $2.71 billion.
According to its guidance for the full year 2024, RPRX expects portfolio receipts to be between $2.60 billion and $2.70 billion.
Analysts expect RPRX’s revenue and EPS for the second quarter (ending June 2024) to increase 16.9% and 13.4% year-over-year to $628.80 million and $0.96, respectively. Furthermore, the company surpassed the consensus EPS estimates in each of the trailing four quarters.
Shares of RPRX have gained 3.8% over the past six months to close the last trading session at $27.70.
RPRX’s solid 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 POWR Ratings are calculated by considering 118 different factors, each weighted to an optimal degree.
RPRX has a B grade for Sentiment. RPRX is ranked #26 among 359 stocks in the Biotech industry.
Click here to access additional RPRX’s ratings (Momentum, Value, Growth, Quality, and Stability).
Stock #2: Anika Therapeutics, Inc. (ANIK)
ANIK is a joint preservation company that creates and delivers advancements in early intervention orthopedic care in the areas of osteoarthritis (OA) pain management, regenerative solutions, sports medicine, and arthrosurface joint solutions internationally.
On February 13, 2024, ANIK highlighted recently launched products in high-growth segments of joint preservation and restoration from its Regenerative Solutions, Sports Medicine, and Arthrosurface Joint Solutions businesses during the 2024 American Academy of Orthopedic Surgeons (AAOS) Annual Meeting in San Francisco, CA.
Throughout the event, the company featured its differentiated shoulder portfolio, such as the recently launched Integrity Implant System for rotator cuff repair, RevoMotion Reverse Shoulder Arthroplasty (RSA) System with newly launched AIMTM surgical planning software, X-Twist Fixation System with biocomposite suture anchor, and more of its early intervention orthopedic solutions.
ANIK’s trailing-12-month levered FCF margin of 7.55% is 935.2% higher than the industry average of 0.73%. Also, its trailing-12-month gross profit margin of 62.30% is 10.7% higher than the industry average of 56.27%.
For the fourth quarter that ended December 31, 2023, ANIK’s revenue increased 8.5% year-over-year to $42.97 million. Its adjusted EBITDA was $5.80 million, up 320.3% from the prior year’s period. Its adjusted net income came in at $772 thousand, compared to a net loss of $3.01 million in the previous-year quarter.
Additionally, Anika’s adjusted net income per share was $0.05, compared to a net loss per share of $0.21 in the previous year’s quarter.
As per the full-year 2024 guidance, the company expects its revenue to range between $168 million and $173 million.
Analysts predict ANIK’s revenue for the fiscal year ending December 2025 to increase 6.8% year-over-year to $181.83 million. Its EPS for the same year is expected to grow 209.6% from the prior year to $0.86. Moreover, the company has an excellent earnings surprise history, surpassing consensus revenue estimates in each of the trailing four quarters.
Over the past six months, ANIK’s stock has gained 36.3% to close the last trading session at $25.89.
ANIK’s bright prospects are reflected in its POWR Ratings. The stock has an overall rating of B, equating to a Buy in our proprietary rating system.
ANIK has a B grade for Growth. It is ranked #25 in the same industry.
In addition to the POWR Ratings we’ve stated above, we also have ANIK ratings for Momentum, Sentiment, Value, Quality, and Stability. Get all ANIK ratings here.
Stock #1: Innoviva, Inc. (INVA)
INVA engages in developing and commercializing pharmaceutical products in the U.S. and internationally. The company’s products include RELVAR/BREO ELLIPTA, ANORO ELLIPTA, and TRELEGY ELLIPTA.
In April 2024, INVA announced positive results from the Phase 3 oral zoliflodacin trial through an oral presentation given by the Global Antibiotic Research & Development Partnership at the European Society of Clinical Microbiology and Infectious Disease Global Congress in Barcelona, Spain.
Zoliflodacin is a first-in-class spiropyrimidinetrione, single-dose, oral antibiotic that is being developed in partnership with GARDP for treating uncomplicated gonorrhea.
INVA’s trailing-12-month gross profit margin of 84.09% is 49.5% higher than the 56.27% industry average. Likewise, the stock’s 45.43% trailing-12-month EBIT margin is significantly higher than the 0.60% industry average. Also, its 38.85% trailing-12-month levered FCF margin is substantially higher than the 0.73% industry average.
INVA’s total revenue for the fourth quarter that ended December 31, 2023, increased 30.4% year-over-year to $85.84 million, and its net product sales rose 34.9% over the prior-year quarter to $19.68 million. Its income before income taxes was $61.20 million versus a loss before income taxes of $64.69 million in the prior year’s quarter.
In addition, net income attributable to INVA stockholders and net income per share came in at $61.53 million and $0.76, respectively, compared to a net loss and net loss per share of $68.31 million and $0.98, respectively, in the year-ago quarter.
Street expects INVA’s EPS for the second quarter (ending June 30, 2024) to increase considerably year-over-year to $0.22. Its revenue for the quarter (ending September 30, 2024) is expected to grow 8.7% year-over-year to $73.14 million. Moreover, the company surpassed consensus revenue estimates in three of the trailing four quarters.
Over the past year, INVA’s stock has surged 28.8% to close the last trading session at $15.11.
INVA’s POWR Ratings reflect its promising outlook. 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 in Quality. Within the same industry, INVA is ranked #24.
Click here to access additional ratings of INVA for Stability, Growth, Sentiment, and Momentum.
What To Do Next?
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RPRX shares fell $0.19 (-0.69%) in premarket trading Wednesday. Year-to-date, RPRX has declined -1.36%, versus a 5.74% rise in the benchmark S&P 500 index during the same period.
About the Author: Nidhi Agarwal
Nidhi is passionate about the capital market and wealth management, which led her to pursue a career as an investment analyst. She holds a bachelor's degree in finance and marketing and is pursuing the CFA program. Her fundamental approach to analyzing stocks helps investors identify the best investment opportunities.
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