President Joe Biden signed an executive order last year and launched a national initiative to invest more than $2 billion in the U.S. biotechnology sector. Additionally, the U.S. Department of Energy (DOE) is committed to taking key steps to advance the Biden-Harris Administration’s National Biotechnology and Biomanufacturing Initiative. Favorable government initiatives like these are likely to propel the industry’s growth.
Moreover, the increasing adoption of organic food products necessitates the use of biotechnology in agriculture, which will drive the biotechnology market revenue growth. According to Data Bridge Market Research, the biotechnology market is expected to grow at a CAGR of 29% from 2023 to 2030.
On top of it, following the resurgence of COVID-19 in China, investors’ interest in biotech stocks is heightened, as evident from the iShares Biotechnology ETF’s (IBB) 13.4% gains over the past three months, higher than the S&P 500’s 9.2% gain over the same period.
Therefore, fundamentally sound biotech stocks Vertex Pharmaceuticals Incorporated (VRTX), Biogen Inc. (BIIB), and Jazz Pharmaceuticals plc (JAZZ) might be ideal additions to your portfolio now.
Vertex Pharmaceuticals Incorporated (VRTX)
VRTX engages in developing and commercializing therapies for treating cystic fibrosis; and has multiple current clinical and research activities to expand and extend its treatment. The company uses its understanding of causal human biology to develop exploratory medicines for other severe diseases.
On October 11, VRTX announced the FDA approval of the IND application for VX-634, allowing the business to begin a first-in-human clinical trial in healthy volunteers for this small molecule AAT corrector. This might help VRTX develop transformational small-molecule medications for AATD patients to target both the liver and lung symptoms of the disease.
In the third quarter that ended September 30, 2022, VRTX’s net product revenue increased 17.7% year-over-year to $2.33 billion. Its non-GAAP net income increased 14% year-over-year to $1.04 billion, while its non-GAAP net income per share increased 14.3% from its year-ago value to $4.01. Also, the company’s non-GAAP operating income grew 11% year-over-year to $1.29 billion in the same quarter.
Analysts expect VTRX’s revenue for the fourth quarter ending December 2022 to be $2.30 billion, representing 11% year-over-year growth. The company’s EPS will likely increase 4.8% year-over-year to $3.53 in the same fiscal quarter.
The company has an impressive earnings surprise history, as it surpassed the consensus EPS estimates in three of the trailing four quarters and its revenue estimates in each of the trailing four quarters.
VRTX has gained 29.2% over the past year and closed its last trading session at $292.25.
VRTX’s POWR Ratings reflect this promising outlook. The company has an overall A rating, which translates to Strong Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
It is rated A for Quality and B for Value. Among the 398 stocks in the Biotech industry, it is ranked #2.
Beyond what we’ve stated above, we have also given VRTX grades for Momentum, Growth, Stability, and Sentiment. Get all VRTX ratings here.
Biogen Inc. (BIIB)
BIIB discovers, develops, manufactures, and delivers therapies for treating neurological and neurodegenerative diseases.
On January 10, BIIB and Eisai Co Ltd announced that Eisai had submitted a marketing authorization application (MAA) for lecanemab, an investigational anti-amyloid beta protofibril antibody, for the treatment of early Alzheimer’s disease to the European Medicines Agency (EMA).
Eisai and BIIB have collaborated on the joint development and commercialization of AD treatments since 2014. Eisai serves as the lead of lecanemab development and regulatory submissions globally, with both companies co-commercializing and co-promoting the product.
On December 19, 2022, BIIB agreed on the commercialization and sharing of economics for glofitamab with Genentech, a Roche Group member. Glofitamab is an investigational CD20xCD3 T-cell engaging bispecific antibody being developed by Roche for the treatment of B-cell non-Hodgkin’s lymphomas. The sale of glofitamab is expected to add to BIIB’s revenues.
BIIB’s net income increased 244.7% year-over-year to $1.13 billion in the third quarter ended September 30, 2022. Its EPS grew 253.2% from the year-ago value to $7.84, while its total cost and expenses declined 54.3% year-over-year to $1.14 billion.
The consensus EPS estimate of $3.50 for the fourth fiscal quarter of 2022 represents a 3.1% improvement year-over-year. Its revenue will likely come in at 2.44 billion in the same quarter. The company has surpassed the consensus revenue estimates in each of the trailing four quarters, which is impressive.
The stock has gained 35.3% over the past nine months to close the last trading session at $285.03. It has gained 12.2% over the past three months.
It is no surprise that BIIB has an overall rating of A, which translates to a Strong Buy in our proprietary rating system. It also has an A grade in Quality, Value, and Sentiment. Within the same industry, it is ranked #3.
To see additional POWR Ratings for Growth, Stability, and Momentum for BIIB, click here.
Jazz Pharmaceuticals plc (JAZZ)
Headquartered in Dublin, Ireland, JAZZ identifies, develops, and commercializes pharmaceutical products for various unmet medical needs in the United States, Europe, and internationally. The company has a portfolio of products and product candidates focusing on neuroscience, including sleep medicine and movement disorders, and oncology, including hematologic and solid tumors.
On December 21, 2022, JAZZ and Zymeworks Inc. (ZYME) announced their agreement in which JAZZ will continue with its exclusive development and commercialization rights to ZYME’s zanidatamab in key markets of the U.S., Europe, and Japan.
“This important milestone strengthens our confidence in advancing this therapy for cancer patients with significant unmet need,” said Rob Iannone, executive vice president and global head of research and development of Jazz Pharmaceuticals.
JAZZ’s total revenue increased 12.2% year-over-year to $940.65 million in the third quarter, which ended September 30, 2022. The company’s non-GAAP net income increased 41.7% from the year-ago value to $370.44 million, while its non-GAAP EPS grew 23.1% year-over-year to $5.17.
The company’s EPS is expected to grow 6% year-over-year to $4.46 for the fourth quarter ending December 2022. Street expects JAZZ’s revenue to increase 8.6% year-over-year to $973.37 million in the same quarter. The company has surpassed the consensus EPS and revenue estimates in three of the trailing four quarters.
Over the past three months, the stock has gained 16.1%, closing the last trading session at 154.89.
JAZZ’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall rating of A, which equates to a Strong Buy in our proprietary rating system.
JAZZ also has an A grade for Value and a B for Sentiment and Growth. The stock is ranked #6 in the same industry.
In addition to the POWR Ratings grades I’ve highlighted, you can see the JAZZ ratings for Quality, Momentum, and Stability.
VRTX shares were trading at $292.19 per share on Thursday morning, down $0.06 (-0.02%). Year-to-date, VRTX has gained 1.18%, versus a 3.34% rise in the benchmark S&P 500 index during the same period.
About the Author: Kritika Sarmah
Her interest in risky instruments and passion for writing made Kritika an analyst and financial journalist. She earned her bachelor's degree in commerce and is currently pursuing the CFA program. With her fundamental approach, she aims to help investors identify untapped investment opportunities.
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