Despite the lingering macroeconomic headwinds, mergers and acquisitions in the biotech industry are getting back to normal levels as larger companies are making acquisitions to realize their growth plans and gain access to innovative technologies. Moreover, telehealth, health tech, and analytics companies will likely continue to boost growth in the sector.
The biotechnology market is driven by strong government support aimed at the modernization of the regulatory framework, improvements in approval processes & reimbursement policies, and standardization of clinical studies.
Furthermore, the rise in R&D regarding nanorobots and significant investments in nano-biotech clinical trials by the government and private sector is also contributing toward the growth of the biotechnology market. The nanobiotechnology segment is expected to expand at a CAGR of 14.8% until 2030.
Given the solid prospects of the biotechnology industry, fundamentally strong biotech stocks Amgen Inc. (AMGN), Vertex Pharmaceuticals Incorporated (VRTX), United Therapeutics Corporation (UTHR), Jazz Pharmaceuticals plc (JAZZ), and Exelixis, Inc. (EXEL) might be ideal investments for steady returns in the coming years.
Amgen Inc. (AMGN)
AMGN discovers, develops, manufactures, and delivers human therapeutics worldwide. It focuses on inflammation, oncology/hematology, bone health, cardiovascular disease, nephrology, and neuroscience areas.
On February 2, AMGN and AstraZeneca PLC (AZN) announced that the U.S. Food and Drug Administration (FDA) had approved TEZSPIRE for self-administration in a pre-filled, single-use pen for patients aged 12 years and older with severe asthma. TEZSPIRE is the only biologic approved for severe asthma with no phenotype or biomarker limitation within its approved label.
Murdo Gordon, executive vice president of Global Commercial Operations at AMGN, said, “People with severe asthma will now have the flexibility to administer TEZSPIRE at home or continue to receive their medicine in their doctor’s office.”
AMGN’s trailing 12-month EBITDA margin of 61.46% is significantly higher than the 3.91% industry average. Its trailing 12-month gross profit margin of 84.99% is 53.8% higher than the 55.26% industry average.
On December 12, 2022, AMGN announced a quarterly dividend of $2.13 per share, payable on March 8.
AMGN pays $8.52 annually as dividends. This translates to a yield of 3.49% at the current price, higher than the 4-year average dividend yield of 2.88%. Its dividend payouts have grown at 10.2% CAGR over the past three years. Also, it has paid dividends for 11 consecutive years.
AMGN’s product sales increased 4.5% year-over-year to $6.55 million in the fiscal fourth quarter, which ended December 31, 2022. The company’s non-GAAP operating income increased marginally year-over-year to $3.01 billion, while its non-GAAP operating expense decreased marginally year-over-year to $3.83 billion.
Analysts expect AMGN’s revenue for the current fiscal year ending December 2023 to be $26.75 billion, indicating a 1.6% year-over-year growth. The company’s EPS is expected to rise 1.6% year-over-year to $17.97 for the current year. Additionally, it has topped consensus revenue estimates in each of the trailing four quarters, which is impressive.
The stock has gained 9.2% over the past year to close the last trading session at $244.00.
AMGN’s POWR Ratings reflect its promising outlook. The stock has an overall rating of B, which translates to a Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
AMGN also has an A grade for Quality and B for Stability and Value. It is ranked #11 of 402 stocks in the Biotech industry.
To access additional ratings for AMGN’s Growth, Sentiment, and Momentum, click here.
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.
VRTX’s trailing-12-month EBITDA margin of 38.54% is 885.7% higher than the 3.91% industry average. Its trailing 12-month asset turnover ratio of 0.59x is 76.2% higher than the 0.34x industry average.
VRTX’s total revenue increased 11.1% year-over-year to $2.30 billion in the fourth quarter that ended December 31, 2022. The company’s non-GAAP net income grew 25.9% year-over-year to $978 million. Also, its non-GAAP net income per common share increased 24.5% year-over-year to $3.76 in the same quarter.
Street expects VTRX’s revenue for the current quarter ending March to be $2.28 billion, representing 8.9% year-over-year growth. The company’s EPS will likely increase 3.3% year-over-year to $3.64 for the same fiscal quarter. The company has an impressive earnings surprise history, surpassing the consensus revenue and EPS estimates in three of the trailing four quarters.
VRTX has gained 26.8% over the past year to close its last trading session at $308.54
It’s no surprise that the stock has an overall rating of A, which translates to a Strong Buy in our proprietary rating system.
VRTX also has an A grade for Quality and B for Value and Sentiment. It is ranked #3 in the same industry.
Click here to access additional ratings for VRTX (Growth, Stability, and Momentum).
United Therapeutics Corporation (UTHR)
UTHR engages in developing and commercializing products to address the unmet medical needs of patients with chronic and life-threatening diseases in the United States and internationally.
UTHR’s trailing-12-month EBITDA margin of 55.43% is remarkably higher than the 3.91% industry average. Its trailing 12-month gross profit margin of 93.15% is 68.5% higher than the 55.29% industry average.
During the third quarter of fiscal 2022 ended September 30, 2022, UTHR’s revenues increased 16% year-over-year to $516 million. The company’s net income increased 47.1% year-over-year to $239.30 million, and net income per share increased 43.6% year-over-year to $4.91.
UTHR’s EPS for the fourth quarter that ended December 2022 is expected to be $5.21, indicating a 48.4% year-over-year growth. The company’s revenue is expected to grow 25.1% year-over-year to $519.20 million for the same quarter. Additionally, UTHR has topped consensus revenue estimates in three of the trailing four quarters.
The stock has gained 38.9% over the past nine months, closing the last trading session at $255.65.
UTHR has an overall rating of A, which equates to a Strong Buy in our POWR Ratings system.
It has a grade B for Quality, Growth, and Value. UTHR is ranked first in the same industry.
In addition to the POWR ratings above, we have also rated UTHR for Momentum, Stability, and Sentiment. Get all the UTHR ratings 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 milestone strengthens the company’s position in advancing therapy for cancer patients.
JAZZ’s trailing-12-month EBITDA margin of 45.14% is significantly higher than the 3.91% industry average. Its trailing-12-month gross profit margin of 93.54% is 69.2% higher than the 55.29% industry average.
JAZZ’s total revenue increased 12.2% year-over-year to $940.65 million in the third quarter that ended September 30, 2022. The company’s non-GAAP net income increased 41.7% from the prior-year quarter to $370.44 million, while its non-GAAP EPS grew 23.1% year-over-year to $5.17.
Street expects JAZZ’s revenue to increase 18.4% year-over-year in the fiscal year ended December 2022 to $3.66 billion. The company’s EPS is expected to grow marginally year-over-year to $16.39 for the same year. The company has surpassed the consensus EPS and revenue estimates in three of the trailing four quarters.
The stock has gained 9.5% over the past year, closing the last trading session at $154.51.
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 POWR Ratings system.
JAZZ also has an A grade for Growth and Value and a B for Sentiment. The stock is ranked #6 in the same industry.
Beyond the POWR Ratings grades just highlighted, you can access JAZZ ratings for Quality, Momentum, and Stability here.
Exelixis, Inc. (EXEL)
EXEL is an oncology-focused biotechnology company that focuses on the discovery, development, and commercialization of new medicines to treat cancers.
EXEL’s trailing-12-month EBITDA margin of 23.38% is 498% higher than the 3.91% industry average. Its trailing-12-month gross profit margin of 96.65% is 74.8% higher than the 55.29% industry average.
EXEL’s net product revenue increased 24.7% year-over-year to $377.42 million in the fourth quarter that ended December 31, 2022. Its interest income grew 1078.9% from the prior-year quarter to $16.99 million in the same quarter.
Analysts expect EXEL’s revenue to be $28.01 million for the current fiscal quarter ending March 2023, representing a 20.2% improvement year-over-year. Its EPS is expected to be $0.16 in the same quarter. The company has surpassed the consensus EPS estimates in each of the trailing four quarters.
The stock has gained 5.8% over the past three months to close the last trading session at $17.29.
EXEL’s POWR Ratings reflect its fundamental strength. The stock has an overall rating of B, which translates to a Buy in our proprietary rating system.
EXEL is graded an A in Value and a B for Quality. Within the same industry, it is ranked #23.
Click here to see additional POWR Ratings for EXEL (Growth, Stability, Sentiment, and Momentum).
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AMGN shares were trading at $241.11 per share on Wednesday afternoon, down $2.89 (-1.18%). Year-to-date, AMGN has declined -8.20%, versus a 7.62% 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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