The biotech sector is rapidly expanding due to the rising global demand for therapeutics, and the development, manufacturing, and commercialization of medicines for various diseases, such as cancer and neurodegenerative disorders. This dynamic landscape presents savvy investors with opportunities to capitalize on significant profit potential.
In this favorable environment, investors might consider investing in fundamentally strong biotech stocks like Amgen Inc. (AMGN), Regeneron Pharmaceuticals, Inc. (REGN), and Biogen Inc. (BIIB) for potential substantial gains.
The biotech sector targets new and rare diseases, emphasizing innovative vaccines and therapies. The increasing incidence of various illnesses demands greater R&D investments and advancements in biotechnology to enhance prevention and treatment across all age groups. This growing demand for personalized medicine, coupled with supportive government initiatives, significantly boosts sales in the biotech industry.
Consequently, the global biotechnology market is projected to reach $3.88 trillion by 2030, growing at a CAGR of 14%. Notably, the future of biotech appears promising, driven by sophisticated innovations such as gene editing, CRISPR diagnostics, bioprinting, and tissue engineering. Moreover, the integration of AI enhances accessibility and affordability, instilling optimism in the biotech sector's potential.
Furthermore, investors’ interest in biotech stocks is evident from the SPDR S&P Biotech ETF’s (XBI) 36% returns over the past year. Considering these conducive trends, let’s analyze the fundamental aspects of the three Biotech picks, beginning with the third choice.
Stock #3: Amgen Inc. (AMGN)
AMGN discovers, develops, manufactures, and delivers human therapeutics worldwide. It focuses on inflammation, oncology/haematology, bone health, cardiovascular disease, nephrology, and neuroscience areas. Its product portfolio includes Enbrel, Neulasta, Prolia, and Xgeva.
On June 6, 2024, AMGN announced FDA approval of BLINCYTO for CD19-positive Philadelphia chromosome-negative B-cell precursor acute lymphoblastic leukemia (B-ALL) in the consolidation phase. This marks the third indication for BLINCYTO and demonstrated superior overall survival versus chemotherapy alone.
On August 20, 2024, AMGN announced that Otezla (apremilast) is now available in the U.S. for treating moderate to severe plaque psoriasis in children and adolescents aged 6-17. It is the first FDA-approved oral treatment for this condition in this age group.
AMGN’s trailing-12-month gross profit margin of 63.41% is 10.6% higher than the industry average of 57.35%. Likewise, its trailing-12-month EBIT margin and levered FCF margin of 20.99% and 9.74% are 628% and 492.5% higher than the industry averages of 2.88% and 1.64%, respectively.
During the fiscal second quarter, which ended on June 30, 2024, AMGN’s total revenues and non-GAAP operating income increased by 20.1% and 10.2% year-over-year, reaching $8.39 billion and $3.87 billion, respectively. Moreover, its non-GAAP net income grew marginally compared to the previous year, reaching $2.69 billion. Also, its non-GAAP earnings per share was $4.97.
Analysts expect AMGN’s revenue for the quarter ending September 30, 2024, to increase 23.3% year-over-year to $8.51 billion. Its EPS for the same quarter is expected to grow 3.7% year-over-year to $5.14. The company surpassed the Street EPS estimates in three of the trailing four quarters. Over the past year, the stock has gained 25.4%, closing the last trading session at $335.61.
AMGN’s POWR Ratings reflect its positive prospects. It has an overall B rating, equating to Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 distinct factors, with each factor weighted to an optimal degree.
AMGN has a B grade for Quality. Within the Biotech industry, it is ranked #17 out of 335 stocks. Click here for the additional POWR Ratings of AMGN (Growth, Value, Momentum, Stability, and Sentiment).
Stock #2: Regeneron Pharmaceuticals, Inc. (REGN)
REGN discovers, invents, develops, manufactures, and commercializes medicines for treating various diseases worldwide. The company's products include EYLEA injection, Dupixent injection, Libtayo injection, Praluent injection, REGEN-COV for COVID-19, and Kevzara solution.
On September 13, 2024, REGN and Sanofi announced that the FDA approved Dupixent for adolescents aged 12-17 with chronic rhinosinusitis with nasal polyps (CRSwNP). Dupixent is now the first and only treatment available for this age group with inadequately controlled CRSwNP.
On August 26, 2024, REGN announced that the European Commission approved Ordspono (odronextamab) for treating relapsed/refractory follicular lymphoma and diffuse large B-cell lymphoma. This is REGN’s first bispecific antibody approval, offering an off-the-shelf treatment option with the potential for complete remission.
In terms of the trailing-12-month levered FCF margin, REGN’s 15.50% is significantly higher than the 1.64% industry average. Similarly, its 30.14% trailing-12-month EBIT margin is 945.6% higher than the 2.88% industry average. Moreover, its 5.50% trailing-12-month Capex / Sales is 65.5% higher than the industry average of 3.32%.
In the fiscal second quarter, which ended on June 30, 2024, REGN’s revenues amounted to $3.55 billion indicating a 12.3% increase year-over-year. Likewise, the company’s non-GAAP net income rose 14.3% from the year-ago value to $1.35 billion, while its non-GAAP net income per share grew 12.9% year-over-year to $11.56.
Street expects REGN’s EPS and revenue for the quarter ending September 30, 2024, to increase 1.5% and 8.7% year-over-year to $11.76 and $3.66 billion, respectively. It surpassed the consensus EPS estimates in three of the trailing four quarters. Over the past year, the stock has gained 32.4%, closing the last trading session at $1,091.98.
REGN’s positive outlook is reflected in its POWR Ratings. It has an overall rating of B, equating to a Buy in our proprietary rating system.
It has a B grade for Value and Quality. Within the same industry, it is ranked #9. Beyond what we stated above, we also have given REGN grades for Growth, Momentum, Stability, and Sentiment. Get all the REGN ratings here.
Stock #1: Biogen Inc. (BIIB)
BIIB discovers, develops, manufactures, and delivers therapies for treating neurological and neurodegenerative diseases in the United States, Europe, Asia, and internationally.
On August 22, 2024, BIIB and Eisai announced that their Alzheimer's drug Leqembi (lecanemab) was authorized for early Alzheimer’s treatment in Great Britain. It is the first medicine in Europe targeting the underlying cause of Alzheimer’s disease to be approved.
In terms of the trailing-12-month EBITDA margin, BIIB’s 28.22% is 331.2% higher than the 6.54% industry average. Likewise, its 76.45% trailing-12-month gross profit margin is 33.3% higher than the 57.35% industry average. In addition, its 13.09% trailing-12-month levered FCF margin is 696.4% higher than the 1.64% industry average.
For the fiscal second quarter (ended June 30, 2024), BIIB’s total revenue increased marginally year-over-year to $2.46 billion. Its non-GAAP net income attributable for the quarter amounted to $770.90 million, or $5.28 per share, up 31.9% and 31.3%, respectively, from the same period last year. Additionally, its free cash flow rose 42.4% year-over-year to $592.30 million.
For the quarter ending December 31, 2024, BIIB’s EPS and revenue are expected to increase 14.7% and 2.4% year-over-year to $3.38 and $2.44 billion, respectively. BIIB surpassed the EPS estimates in three of the trailing four quarters. Over the past month, the stock has declined 4.5% to close the last trading session at $195.81.
It’s no surprise that BIIB has an overall rating of A, which translates to a Strong Buy in our proprietary rating system.
It is ranked #7 in the Biotech industry. It has an A grade for Value and a B for Growth. Click here to see BIIB’s Momentum, Stability, Sentiment, and Quality ratings.
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AMGN shares were trading at $332.28 per share on Tuesday afternoon, down $3.33 (-0.99%). Year-to-date, AMGN has gained 17.91%, versus a 20.81% rise in the benchmark S&P 500 index during the same period.
About the Author: Abhishek Bhuyan
Abhishek embarked on his professional journey as a financial journalist due to his keen interest in discerning the fundamental factors that influence the future performance of financial instruments.
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