The biotech sector is set for strong growth thanks to ongoing innovations like gene editing and tissue engineering and the use of machine learning, and big data analytics tools. With a growing demand for advanced healthcare solutions, innovative vaccines, and therapies, coupled with investments in R&D, an aging population, and government initiatives, the industry looks well-positioned for expansion.
Amid this backdrop, investors could consider adding fundamentally strong biotech stocks Innoviva, Inc. (INVA), Halozyme Therapeutics, Inc. (HALO), Jazz Pharmaceuticals plc (JAZZ), and Entrada Therapeutics, Inc. (TRDA).
The global biotech industry is flourishing due to major strides in drug development, a growing demand for personalized medicines, advancements in synthetic biology and biomanufacturing, and faster, more affordable diagnostic methods. Increased investment in R&D and an uptick in clinical trials are expected to further bolster the industry's prospects.
As a result, the global biotechnology market is projected to reach $3.88 trillion by 2030, with a CAGR of 14%.
Also, the global AI for Pharma and Biotech market is projected to reach $4.20 billion by 2027, with a 30.5% CAGR. This growth is attributed to drug discovery and development advances, bringing innovation. AI, disease prediction models, and digital tools are aiding in drug development and streamlining manufacturing processes, contributing significantly to the industry's expansion.
Considering these conducive trends, let's take a look at the fundamentals of the four Biotech stock picks, beginning with the fourth choice.
Stock #4: Innoviva, Inc. (INVA)
INVA engages in developing and commercializing pharmaceutical products in the United States and internationally. The company's products include RELVAR/BREO ELLIPTA, ANORO ELLIPTA, and TRELEGY ELLIPTA.
On May 20, 2024, INVA's Specialty Therapeutics and Zai Lab announced NMPA approval for XACDURO (sulbactam-durlobactam) to treat hospital-acquired and ventilator-associated pneumonia caused by Acinetobacter baumannii-calcoaceticus complex in China. The approval is based on clinical data showing robust activity against carbapenem-resistant bacterial strains. This approval marks a significant advancement in addressing the growing threat of antibiotic resistance in the region.
On May 04, 2024, INVA announced a $35 million secured credit agreement with Armata Pharmaceuticals to advance its clinical trials for phage-based therapeutic candidates. This funding will support trials targeting Pseudomonas aeruginosa and Staphylococcus aureus infections, potentially leading to new therapies and enhancing the value of INVA's investment in Armata.
INVA and Armata Pharmaceuticals are collaborating to develop phage-based therapies for antibiotic-resistant infections, accelerating research and bringing innovative treatments to market.
In terms of the trailing-12-month gross profit margin, INVA's 86.74% is 51.7% higher than the 57.17% industry average. Likewise, its 43.95% trailing-12-month EBIT margin is significantly higher than the 1.48% industry average. Additionally, its 41.61% trailing-12-month levered FCF margin is substantially higher than the 1.12% industry average.
INVA's total revenue for the first quarter ended March 31, 2024, rose 1.5% to $77.50 million. The company's net product sales increased 65.7% over the prior-year quarter to $19.08 million. In addition, its net income and comprehensive income, and net income per share, came in at $36.53 million and $0.46, respectively, up 4.8% and 9.5% year-over-year.
Analysts expect INVA's EPS for the quarter ending June 30, 2024, to increase considerably year-over-year to $0.25. Its revenue for the quarter ending September 30, 2024, is expected to grow 9.1% year-over-year to $73.38 million. Over the past nine months, INVA's stock has gained 18.6% to close the last trading session at $15.35.
INVA's POWR Ratings reflect strong prospects. It has an overall rating of B, translating to a Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
It has an A grade for Value and a B for Quality. It is ranked #17 out of 356 stocks in the Biotech industry. Beyond what we stated above, we also have given INVA grades for Growth, Momentum, Stability, and Sentiment. Get all the INVA's ratings here.
Stock #3: Halozyme Therapeutics, Inc. (HALO)
HALO is a biopharma technology platform company that researches, develops, and commercializes proprietary enzymes and devices internationally. The company's products are based on the patented recombinant human hyaluronidase enzyme (rHuPH20), which enables the delivery of injectable biologics, such as monoclonal antibodies and other therapeutic molecules, as well as small molecules and fluids.
In terms of the trailing-12-month asset turnover ratio, HALO's 0.49x is 20.9% higher than the 0.40x industry average. Similarly, its 53.12% trailing-12-month EBITDA margin is 842.7% higher than the 5.63% industry average. In addition, its 44.24% trailing-12-month EBIT margin is substantially higher than the 1.48% industry average.
HALO's total revenues for the first quarter ended March 31, 2024, rose 20.8% year-over-year to $195.88 million. Its operating income came in at $95.54 million, up 77.6% over the year-ago quarter.
For the same quarter, the company's net income and EPS grew 93.9% and 106.9% from the year-ago values to $76.82 million, or $0.60 per share, respectively. In addition, its adjusted EBITDA rose 55.9% year-over-year to $115.75 million.
For the quarter ending September 30, 2024, HALO's revenue is expected to increase 18.3% year-over-year to $255.54 million. Its EPS for the quarter ending June 30, 2024, is expected to increase marginally year-over-year to $0.74. It surpassed the Street EPS estimates in three of the trailing four quarters. Over the past year, the stock has gained 32% to close the last trading session at $43.35.
HALO's POWR Ratings reflect a favorable outlook. It has an overall rating of B, which translates to a Buy in our proprietary rating system.
It has a B grade for Value, and Quality. It is ranked #16 in the same industry. To see HALO's Growth, Momentum, Stability, and Sentiment ratings, click here.
Stock #2: Jazz Pharmaceuticals plc (JAZZ)
Headquartered in Dublin, Ireland, JAZZ identifies, develops, and commercializes pharmaceutical products for unmet medical needs in the U.S., Europe, and internationally.
JAZZ's trailing-12-month EBITDA margin of 35.73% is 534% higher than the industry average of 5.63%. Similarly, its trailing-12-month EBIT margin and levered FCF margin of 18.95% and 27.02% are considerably higher than the industry averages of 1.48% and 1.12%, respectively.
For the fiscal first quarter that ended December 31, 2023, JAZZ's total revenues increased 1% year-over-year to $901.98 million. Its income from operations stood at $66.21 million. For the same quarter, its non-GAAP net income and EPS stood at $182.22 million and $2.68, respectively.
In addition, as of March 31, 2024, JAZZ's total current assets amounted to $3.54 billion, compared to $3.44 billion as of December 31, 2023.
Street expects JAZZ's EPS and revenue for the quarter ending June 30, 2024, to increase 5.1% and 4.9% year-over-year to $4.74 and $1 billion, respectively. JAZZ's shares has gained 1.2% intraday, closing the last trading session at $105.46.
It's no surprise that JAZZ has an overall rating of B, which translates to a Buy in our proprietary POWR Ratings system.
It is ranked #10 in the Biotech industry. It has an A grade for Value and a B for Quality. Click here to see JAZZ's Growth, Momentum, Stability, and Sentiment ratings.
Stock #1: Entrada Therapeutics, Inc. (TRDA)
TRDA develops endosomal escape vehicle (EEV) therapeutics for the treatment of multiple neuromuscular diseases. Its endosomal escape vehicle platform develops a portfolio of oligonucleotide, antibody, and enzyme-based programs.
In terms of the trailing-12-month EBIT margin, TRDA's 14.57% is 884.9% higher than the 1.48% industry average. Likewise, its 16.56% trailing-12-month EBITDA margin is 193.8% higher than the 5.63% industry average.
TRDA's collaboration revenues for the fiscal first quarter ended March 31, 2024, grew 134% from the year-ago value to $59.12 million. The company's net income was $23.50 million, significantly higher than the net loss of $6.67 million in the prior-year quarter. Additionally, its net income per share was $0.68, compared to a net loss per share of $0.21 in the year-ago quarter.
For the quarter ending June 30, 2024, TRDA's revenue is expected to increase 98.5% year-over-year to $36.08 million. Over the past year, the stock has gained 41.8% to close the last trading session at $15.63.
TRDA's POWR Ratings reflect its bright prospects. It has an overall rating of A, which translates to a Strong Buy in our proprietary rating system.
It has an A grade for Sentiment and a B for Value, and Quality. It is ranked #5 in the same industry. To access the additional ratings of TRDA for Growth, Momentum, and Stability, click here.
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JAZZ shares were trading at $106.24 per share on Friday afternoon, up $0.78 (+0.74%). Year-to-date, JAZZ has declined -13.63%, versus a 9.61% 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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