The biotech industry thrives due to consistent innovations and sustained demand for cutting-edge drugs and therapies. The sector is capitalizing on an aging population and the growing demand for effective treatments for both uncommon and prevalent illnesses, thereby contributing to its promising prospects.
Therefore, it could be wise to consider buying fundamentally strong biotech stocks: Innoviva, Inc. (INVA), ANI Pharmaceuticals, Inc. (ANIP), and United Therapeutics Corporation (UTHR).
Before delving deeper into their fundamentals, let’s discuss why the biotech industry is well-positioned for growth.
Advancements in gene editing, personalized medicine, synthetic biology, and government initiatives shape the biotech industry's growth. A survey by ICON plc, involving more than 130 biotech executives, showed that 60% of respondents expected a rise in R&D spending, while only 2% expected a reduction in funding.
The growing need for personalized medicine and the creation of additional orphan drug formulations to combat the escalating prevalence of chronic and rare diseases are generating new avenues for biotechnological applications and fostering the rise of biotech firms.
The sector’s sustained expansion is driven by an increase in clinical trials, expansion of drug pipelines, and increased investments in pharmaceutical R&D. The clinical trial market is forecasted to reach $120.97 billion in 2024. It is expected to grow at a CAGR of 4.3% to reach $184.61 billion by 2034.
Notably, biotech companies are leveraging cutting-edge technologies like artificial intelligence (AI) and Big Data analytics to drive innovation and drug development. AI has taken significant strides in identifying drug targets, particularly in anticancer efforts. The global AI for Pharma and Biotech market, valued at $850 million this year, is forecasted to grow at a 30.5% CAGR to reach $4.20 billion by 2027.
Investors’ interest in biotech stocks is evident from the VanEck Biotech ETF’s (BBH) 4.2% returns over the past month. Furthermore, the global biotechnology market is projected to reach $3.88 trillion by 2030, expanding at a CAGR of 14% from 2024 to 2030.
Considering these conducive trends, let’s analyze the fundamental aspects of the three Biotech picks, beginning with the third choice.
Stock #3: Innoviva, Inc. (INVA)
INVA engages in the development and commercialization of pharmaceutical products in the United States and internationally. The company's products include RELVAR/BREO ELLIPTA, ANORO ELLIPTA, and TRELEGY ELLIPTA.
On March 4, 2024, INVA entered into a $35 million secured credit agreement with Armata Pharmaceuticals, Inc. (ARMP). The agreement was aimed at supporting the advancement of clinical trials for ARMP’s phage-based therapeutic candidates targeting antibiotic-resistant infections. This move demonstrated INVA’s continued support for ARMP’s initiatives in combating antibiotic resistance.
In terms of the trailing-12-month EBITDA margin, INVA’s 56.93% is 914.2% higher than the 5.61% industry average. Likewise, its 45.43% trailing-12-month EBIT margin is significantly higher than the 0.49% industry average. Additionally, its 38.85% trailing-12-month levered FCF margin is substantially higher than the 0.35% industry average.
INVA’s total revenue for the fourth quarter that ended December 31, 2023, rose 30.4% to $85.84 million. The company’s net product sales rose 34.9% over the prior-year quarter to $19.68 million.
In addition, its net income attributable to INVA’s 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.
Analysts expect INVA’s EPS for the 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 increase 8.7% year-over-year to $73.14 million. Over the past year, INVA’s stock has gained 35.2% to close the last trading session at $14.75.
INVA’s POWR Ratings reflect solid prospects. It has an overall rating of B, which translates to a Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
It is ranked #38 out of 362 stocks in the Biotech industry. It has an A grade for Value and a B for Quality. Click here to see INVA’s Growth, Momentum, Stability, and Sentiment ratings.
Stock #2: ANI Pharmaceuticals, Inc. (ANIP)
ANIP is a biopharmaceutical company that develops, manufactures, and markets branded and generic prescription pharmaceuticals in the United States and Canada. The company manufactures oral solid dose products, semi-solids, liquids, and topicals, as well as controlled substances and potent products.
On January 23, 2024, ANIP announced the launch of Pentoxifylline Extended-Release Tablets, USP 400mg, the generic version of Trental. With an annual U.S. market estimated at approximately $19.7 million, ANIP aims to enhance patient access to high-quality therapeutics, emphasizing its commitment to growth and supply reliability in the generics business.
On January 16, 2024, ANIP announced the FDA approval and launch of Indomethacin Oral Suspension, USP, a generic version of Indocin Oral Suspension, with a Competitive Generic Therapy (CGT) designation and 180-day exclusivity, emphasizing expanded access to high-quality generics for limited competition products.
In terms of the trailing-12-month gross profit margin, ANIP’s 62.71% is 9.5% higher than the 57.29% industry average. Likewise, its 23.17% trailing-12-month levered FCF margin is significantly higher than the 0.35% industry average. Also, its 0.58x trailing-12-month asset turnover ratio is 49.2% higher than the 0.39x industry average.
For the fourth quarter that ended December 31, 2023, ANIP’s net revenues increased 39.7% year-over-year to $131.65 million. Its adjusted EBITDA grew 29.5% from the year-ago value to $30.20 million. Additionally, adjusted net income available to common shareholders and adjusted earnings per share rose 54.3% and 31.6% from the prior year’s period to $19.20 million and $1, respectively.
Street expects ANIP’s revenue for the quarter ending March 31, 2024, to increase 17.9% year-over-year to $125.93 million. Likewise, its EPS for fiscal 2025 is expected to increase 12.8% year-over-year to $5.03. It surpassed the Street EPS estimates in each of the trailing four quarters. Over the past year, the stock has gained 61.5% to close the last trading session at $66.23.
ANIP’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 an A grade for Growth and Sentiment and a B for Value. It is ranked #16 in the same industry. To see ANIP’s ratings for Momentum, Stability, and Quality, click here.
Stock #1: United Therapeutics Corporation (UTHR)
United Therapeutics Corporation is a biotechnology company that engages in the development and commercialization of products to address the unmet medical needs of patients with chronic and life-threatening diseases internationally.
On December 13, 2023, UTHR and Miromatrix Medical Inc. (MIRO) announced the successful completion of the tender offer and merger, with UTHR acquiring all outstanding shares of MIRO, solidifying its position as a wholly owned subsidiary and furthering the development of MIRO’s mirokidney product.
In terms of the trailing-12-month Capex/Sales, UTHR’s 9.90% is 142.2% higher than the 4.09% industry average. Likewise, its 26.09% trailing-12-month levered FCF margin is considerably higher than the 0.35% industry average. Additionally, its 53.24% trailing-12-month EBITDA margin is 848.5% higher than the 5.61% industry average.
UTHR’s total revenues for the fourth quarter, which ended December 31, 2023, increased 25.1% year-over-year to $614.70 million. Its operating income rose 48.1% year-over-year 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% over the prior-year quarter, respectively.
For the quarter ending March 31, 2024, UTHR’s EPS is expected to increase 16% year-over-year to $5.64. Its revenue for the same quarter is expected to increase 22.9% year-over-year to $622.92 million. It surpassed the consensus EPS estimates in each of the trailing four quarters. Over the past month, the stock has gained 12.9% to close the last trading session at $241.27.
It’s no surprise that UTHR has an overall rating of A, which translates to a Strong Buy in our proprietary rating system.
It has a B grade for Value and Quality. Within the Biotech industry, it is ranked #9. Beyond what we stated above, we also have given UTHR grades for Growth, Momentum, Stability, and Sentiment. Get all UTHR ratings 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.
UTHR shares were unchanged in premarket trading Thursday. Year-to-date, UTHR has gained 9.72%, versus a 8.55% 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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