The biotech industry’s growth prospects look promising due to technological advancements in drug development, the rise in chronic diseases, the growing popularity of personalized medicine, progression in gene therapy, an aging population, and expanding healthcare needs.
Considering this favorable backdrop, investors could look to buy fundamentally strong biotech stocks Biogen Inc. (BIIB) and BioNTech SE (BNTX). However, not all biotech stocks are likely to capitalize on the industry’s growth prospects. Therefore, it could be wise to avoid Kura Oncology, Inc. (KURA), given its poor fundamentals and growth prospects.
Before diving deeper into the fundamentals of these stocks, let’s understand the industry’s landscape better and discuss what’s driving the prospects of the biotech industry.
In today’s world, the biotech industry is playing a crucial role in meeting people's unmet medical needs by harnessing the power of biology, technology, and chemistry. The industry invests heavily in research and development (R&D) and clinical trials before sending it to the regulators for approval.
However, there exists the risk of the product candidates never making it to the market. Moreover, the industry faces the challenges of increasing costs of drug development and strict regulations from regulatory bodies like the U.S. Food and Drug Administration (FDA).
Despite the challenges, the sector remains well-positioned to meet the unmet healthcare needs and improve patient outcomes by using advanced technologies like AI, big data analytics, and machine learning to accelerate drug discovery, develop therapies, identify targeted diseases, and come up with targeted treatments.
The biotech sector is adapting to trends such as AI-driven drug development and shortened life cycles, driving innovation, particularly in fields like oncology and rare diseases. The industry is embracing strategic partnerships in earlier stages, and the integration of AI analytics into clinical trials is enhancing the dynamic landscape of biotechnology.
The use of AI In the Life Sciences Market is estimated to reach $2.88 billion in 2024 and is expected to grow at a CAGR of 25.2% to reach $8.88 billion by 2029. Also, the global biotechnology market is projected to grow at a CAGR of 13.8% until 2032 to reach $5.01 trillion.
Furthermore, the increasing personalization of medicines is transforming the biotech industry by tailoring treatments to individual patients, improving efficacy, and minimizing side effects. This trend fosters a more precise and targeted approach, advancing the field's capabilities in addressing diverse health conditions.
The global personalized medicine market size was estimated at $2.48 trillion in 2023 and is expected to grow at a CAGR of 11.2% until 2032.
Let’s now take a look at the fundamentals of the three above-mentioned Biotech stocks.
Stocks to Buy:
Biogen Inc. (BIIB)
BIIB discovers, develops, manufactures, and delivers therapies for treating neurological and neurodegenerative diseases. It offers TECFIDERA, VUMERITY, AVONEX, PLEGRIDY, TYSABRI, and FAMPYRA for treating multiple sclerosis; SPINRAZA for spinal muscular atrophy; ADUHELM for treating Alzheimer’s; and FUMADERM for the treatment of severe plaque psoriasis.
In terms of forward non-GAAP P/E, BIIB’s 16.56x is 14.1% lower than the 19.27x industry average. Its 3.62x forward Price/Sales is 9% lower than the 3.98x industry average. Likewise, its 2.44x forward Price/Book is 10.7% lower than the 2.73x industry average.
On January 9, 2024, BIIB and Eisai Co., Ltd. announced the approval of LEQEMBI in China for treating mild cognitive impairment due to Alzheimer's disease (AD) and mild AD dementia. The drug, shown to slow disease progression, is expected to launch in Q2 of Eisai's FY 2024.
The approval of LEQEMBI in China expands BIIB's market presence and potential revenue streams, contributing to its global efforts in Alzheimer's disease treatment.
BIIB’s total revenue for the fiscal third quarter, which ended September 30, 2023, increased marginally year-over-year to $2.53 billion. The company’s contract manufacturing, royalty and other revenue rose 134.9% year-over-year to $304.20 million. The company’s non-GAAP total net income attributable to BIIB stood at $635.50 million. Also, its non-GAAP EPS came in at $4.36.
BIIB’s EPS for the quarter ending March 31, 2024, is expected to increase 1.6% year-over-year to $3.45. It surpassed the Street EPS estimates in each of the trailing four quarters. Over the past three months, the stock has declined 0.7% to close the last trading session at $251.68.
BIIB’s solid prospects are reflected in its POWR Ratings. It has an overall rating of B, which translates to Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
It has a B grade for Value and Sentiment. Within the Biotech industry, it is ranked #35. Beyond what is stated above, we’ve also rated BIIB for Growth, Momentum, Stability, and Quality. Get all the BIIB ratings here.
BioNTech SE (BNTX)
Headquartered in Mainz, Germany, BNTX is a biotechnology company that develops and commercializes immunotherapies for cancer and other infectious diseases. The company is developing FixVac product candidates, including BNT111, BNT112, BNT113, BNT115, BNT116, BNT151, BNT152, BNT153, BNT211, etc.. It has BNT122, BNT131, BNT141, and BNT142 under various stages of clinical trials.
In terms of forward EV/Sales, BNTX’s 1.62x is 56.7% lower than the 3.74x industry average. Its 6.85x forward EV/EBITDA is 49.4% lower than the 13.54x industry average. Likewise, its 7.65x forward EV/EBIT is 56% lower than the 17.39x industry average.
For the fiscal third quarter, which ended September 30, 2023, BNTX’s total revenues amounted to €895.30 million ($973.13 million). Its cash and cash equivalents increased 0.5% year-over-year to €13.50 billion ($14.67 billion). The company’s profit for the period stood at €160.60 million ($174.56 million). Also, its EPS came in at €0.67.
Analysts expect BNTX’s revenue for the quarter ending June 30, 2024, to increase 13.1% year-over-year to $208.80 million. It surpassed the Street EPS estimates in three of the trailing four quarters, which is impressive. Over the past three months, the stock has gained 8.4% to close the last trading session at $100.29.
BNTX’s POWR Ratings reflect its positive outlook. 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. It is ranked #32 in the same industry. To see the additional ratings of BTNX for Growth, Momentum, Stability, and Sentiment, click here.
Stock to Sell:
Kura Oncology, Inc. (KURA)
KURA is a clinical-stage biopharmaceutical company that develops medicines for the treatment of cancer in the U.S. The company’s pipeline consists of small molecule product candidates that target cancer. Its lead product candidates are ziftomenib and tipifarnib.
In terms of trailing-12-month Price/Book, KURA’s 2.32x is 2.9% higher than the 2.25x industry average.
KURA’s total operating expenses for the third fiscal quarter, which ended September 30, 2023, increased 16.1% year-over-year to $42.47 million. Its net loss widened 8.7% over the prior year quarter to $38.60 million. The company’s net loss per share came in at $0.50.
Street expects KURA’s EPS for the quarter ended December 31, 2023, to remain negative. Over the past year, the stock has declined 3.9% to close the last trading session at $13.42.
KURA’s weak fundamentals are reflected in its POWR Ratings. It has an overall rating of D, equating to a Sell in our proprietary rating system.
KURA is ranked #183 within the Biotech industry. It has a D grade for Growth, Momentum, and Stability. To see the additional KURA ratings for Value, Sentiment, and Quality, click 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.
BIIB shares were trading at $248.97 per share on Wednesday morning, down $2.71 (-1.08%). Year-to-date, BIIB has declined -3.79%, versus a 2.77% rise in the benchmark S&P 500 index during the same period.
About the Author: Dipanjan Banchur
Since he was in grade school, Dipanjan was interested in the stock market. This led to him obtaining a master’s degree in Finance and Accounting. Currently, as an investment analyst and financial journalist, Dipanjan has a strong interest in reading and analyzing emerging trends in financial markets.
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