The growing global demand for quality healthcare, targeted therapies, and advanced technology is driving the biotech sector's expansion. This sector focuses on meeting the needs of patients with chronic and life-threatening diseases by commercializing medicines for areas with unmet medical needs.
Amid this favorable backdrop, investors could consider buying fundamentally strong biotech stocks: Amgen Inc. (AMGN), United Therapeutics Corporation (UTHR), and Gilead Sciences, Inc. (GILD).
The biotech sector is thriving due to ongoing innovations and the growing need for advanced healthcare solutions. It focuses on treating rare diseases and developing innovative vaccines and therapies. The sector is also set for expansion, supported by investments in R&D, an aging population, rising demand for personalized medicines, and government initiatives.
Notably, the global biotechnology market is projected to reach $3.88 trillion by 2030, with a CAGR of 14%. Furthermore, advances in AI and machine learning are driving innovation in the biotech industry. These technologies accelerate drug development, support the growing demand for personalized medicines, enhance synthetic biology and biomanufacturing, and enable faster, more affordable diagnostics.
Additionally, the global AI market for Pharma and Biotech is projected to reach $4.20 billion by 2027, with a CAGR of 30.5%. Investors' interest in biotech stocks is evident from the SPDR S&P Biotech ETF's (XBI) 18% returns over the past six months.
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 May 16, 2024, AMGN announced that the FDA approved IMDELLTRA to treat adults with extensive-stage small cell lung cancer who have progressed after platinum-based chemotherapy. This approval represents a significant advancement for patients with this aggressive disease.
AMGN's trailing-12-month gross profit margin of 66.49% is 16.7% higher than the industry average of 56.99%. Likewise, its trailing-12-month EBIT margin and levered FCF margin of 24% and 12.71% are considerably higher than the industry averages of 1.46% and 1.14%, respectively.
During the fiscal first quarter that ended March 31, 2024, AMGN's total revenues and non-GAAP operating income increased 22% and 9.1% year-over-year to $7.45 billion and $3.08 billion, respectively. Its free cash flow stood at $459 million. Moreover, its non-GAAP net income amounted to $2.14 billion. Also, its non-GAAP earnings per share came in at $3.96.
Analysts expect AMGN's revenue for the quarter ending June 30, 2024, to increase 19.1% year-over-year to $8.32 billion. Its EPS for the quarter ending September 30, 2024, is expected to grow 3.8% year-over-year to $5.15. The company surpassed the Street EPS estimates in three of the trailing four quarters, which is impressive. Over the past year, the stock has gained 38.6%, closing the last trading session at $305.85.
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 #22 out of 357 stocks. Click here for the additional POWR Ratings of AMGN (Growth, Value, Momentum, Stability, and Sentiment).
Stock #2: United Therapeutics Corporation (UTHR)
UTHR 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 April 24, 2024, UTHR announced the world's first successful transplant of a genetically modified xenothymokidney into a living person, along with a heart pump implant. This marks significant progress in xenotransplantation and advances in their efforts to address organ shortages.
In terms of the trailing-12-month Capex / Sales, UTHR's 9.10% is 149% higher than the 3.65% industry average. Likewise, its 23.17% trailing-12-month levered FCF margin is considerably higher than the 1.14% industry average. Additionally, its 53.55% trailing-12-month EBITDA margin is 824% higher than the 5.69% industry average.
UTHR's total revenues for the fourth quarter, which ended March 31, 2024, increased 33.7% year-over-year to $677.70 million. Its operating income rose 25.3% from the year-ago value to $356.30 million.
For the same quarter, the company's net income came in at $306.60 million, or $6.17 per common share, representing an increase of 27.3% and 26.9% over the prior-year quarter, respectively.
Street expects UTHR's EPS for the quarter ending June 30, 2024, is expected to increase 19.4% year-over-year to $6.26. Its revenue for the same quarter is expected to increase 14.7% year-over-year to $684.32 million. It surpassed the consensus EPS and revenue estimates in three of the trailing four quarters. UTHR's stock has gained 31.2% over the past year to close the last trading session at $275.13.
UTHR'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 Value and a B for Quality. Within the same industry, it is ranked #15. Beyond what we stated above, we also have given UTHR grades for Growth, Momentum, Stability, and Sentiment. Get all the UTHR ratings here.
Stock #1: Gilead Sciences, Inc. (GILD)
GILD discovers, develops, and commercializes medicines in the areas of unmet medical need in the United States, Europe, and internationally.
On April 26, 2024, GILD announced FDA approval for an updated Biktarvy label, reinforcing its safety and efficacy for pregnant adults with HIV. This update includes new data supporting its use during pregnancy and for those trying to conceive.
On March 22, 2024, GILD completed its $4.3 billion acquisition of CymaBay Therapeutics Inc. (CBAY), enhancing its liver disease treatment portfolio with CymaBay's lead candidate, seladelpar, for primary biliary cholangitis.
Daniel O'Day, Chairman and CEO at GILD, said, "The acquisition of CymaBay brings us a potential best in disease therapy that could transform the treatment landscape for people with primary biliary cholangitis."
In terms of the trailing-12-month EBITDA margin, GILD's 46.14% is 711.3% higher than the 5.69% industry average. Likewise, its 77.52% trailing-12-month gross profit margin is 36% higher than the 56.99% industry average. Additionally, its 0.46x trailing-12-month asset turnover ratio is 15.9% higher than the 0.40x industry average.
For the fiscal first quarter (ended March 31, 2024), GILD's total revenues increased 5.4% year-over-year to $6.69 billion. Its product sales amounted to $6.65 billion, up 5.4% from the prior year's period. In addition, As of March 31, 2024, its total liabilities and stockholders' equity stood at $56.29 billion, compared to $62.13 billion as of December 31, 2023.
For the quarter ending June 30, 2024, GILD's EPS and revenue are expected to increase 18% and 1.6% year-over-year to $1.58 and $6.70 billion, respectively. It surpassed the revenue estimates in each of the trailing four quarters. Over the past month, the stock has declined marginally to close the last trading session at $64.27.
It's no surprise that GILD has an overall rating of A, which translates to a Strong Buy in our proprietary rating system.
It is ranked first in the Biotech industry. It has an A grade for Value and a B for Growth, and Quality. Click here to see GILD's Momentum, Stability, and Sentiment ratings.
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.
AMGN shares were trading at $306.91 per share on Monday afternoon, up $1.06 (+0.35%). Year-to-date, AMGN has gained 8.15%, versus a 10.92% 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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