With rapid developments in biotechnology, primarily in areas like genetic engineering, synthetic biology, and gene editing, growing demand for personalized medicine, and regulatory support, the biotech industry is well-placed to experience significant growth in the foreseeable future. The adoption of advanced technologies further boosts the industry’s outlook.
Given the industry’s bright prospects, it could be ideal to invest in solid biotech stocks Exelixis, Inc. (EXEL), Vertex Pharmaceuticals Incorporated (VRTX), and Vanda Pharmaceuticals Inc. (VNDA) for potential gains.
After the revolutionary year 2023 with new approvals, such as the first CRISPR gene therapy, the prospects of the biotech industry appear promising. Companies are committed to launching novel cell and gene therapies to revolutionize patients' lives, which can potentially be realized through effective preparation of the market, products, and internal go-to-market strategies.
In 2024 alone, the launch of up to 21 cell therapies and 31 gene therapies is anticipated. Also, personalized mRNA vaccines in cancer (such as melanoma, pancreas, and others) will be seen as an emerging therapy this year.
Furthermore, increased government support through initiatives emphasizing the modernization of regulatory framework, improvements in approval processes & reimbursement policies, and standardization of clinical studies are driving the biotechnology market’s growth.
According to the Grand View Research report, the global biotechnology market is projected to reach $3.88 trillion by 2030, growing at a CAGR of 14% during the forecast period (2024-2030). The rising adoption of personalized medicine and surging orphan drug formulations will boost the market revenue.
Moreover, the convergence of biotech with advanced technologies, like AI, robotics, and data analytics, is creating new possibilities for innovation and product development. In the upcoming years, the incorporation of AI is going to be one of the key biotechnology trends.
AI algorithms revolutionize drug discovery by sifting through large datasets to find possible drug targets and speed up the development process. The artificial intelligence in biotechnology market is expected to expand at a CAGR of 29.7% between 2023 and 2032.
Investors’ interest in biotech stocks is evident from VanEck Vectors Biotech ETF’s (BBH) 11.5% returns over the past three months.
Given the industry’s bright prospects, let’s delve into the fundamentals of the three best Biotech stock picks, beginning with the third choice.
Stock #3: Vanda Pharmaceuticals Inc. (VNDA)
VNDA is a biopharmaceutical company that emphasizes the development and commercialization of therapies to address high unmet medical needs globally. The company’s pipeline products include HETLIOZ (tasimelteon), Fanapt (iloperidone), and Tradipitant (VLY-686).
On January 31, 2024, VNDA announced that the U.S. Food and Drug Administration (FDA) approved the Investigational New Drug (IND) application to evaluate VTR-297 for the treatment of onychomycosis. Onychomycosis, or tinea unguium, is a fungal infection of the nail that can result in discoloration of the nail and onycholysis (separation from the nail).
"The initiation of clinical studies with VTR-297 in the treatment of onychomycosis is an important milestone in studying and developing potential new therapies for this common disorder," said Mihael H. Polymeropoulos, M.D., Vanda’s President, CEO and Chairman of the Board.
On January 23, VNDA received the FDA approval to proceed with the Investigational New Drug (IND) application to evaluate VCA-894A for treating patients with Charcot-Marie-Tooth disease, axonal, type 2S (CMT2S), caused by cryptic splice site variants within the IGHMBP2 gene.
CMT2S is a rare subtype of Charcot-Marie-Tooth disease (CMT), an inherited peripheral neuropathy for which there is no available treatment. The approval marks a significant milestone in the pursuit of personalized medicine.
Further, on December 7, 2023, VNDA acquired U.S. and Canadian rights to PONVORY® (ponesimod) from Actelion Pharmaceuticals Ltd. (Janssen), a Johnson & Johnson Company. PONVORY® is approved by the U.S. Food and Drug Administration (FDA) and Health Canada to treat adults with relapsing forms of multiple sclerosis (RMS).
For the fourth quarter that ended December 31, 2023, VNDA reported total revenues of $45.27 million, while its PONVORY® net product sales came in at $1.60 million. Its other income was $5.43 million for the quarter, up 82.1% year-over-year. As of December 31, 2023, the company’s total assets were $648.44 million, compared to $634.25 million as of December 31, 2022.
Analysts expect VNDA’s revenue for the second quarter (ending June 2024) to increase 3.1% year-over-year to $47.50 million, and an EPS of $0.03 is expected for the same period. Furthermore, the company has surpassed the consensus EPS estimates in each of the four trailing quarters.
Shares of VNDA have surged 16.5% over the past month to close the last trading session at $4.45.
VNDA’s POWR Ratings reflect its robust 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.
VNDA has an A grade for Value and a B for Sentiment and Quality. It is ranked #36 out of 357 stocks in the Biotech industry.
In addition to the POWR Ratings we’ve stated above, we also have VNDA’s ratings for Growth, Momentum, and Stability. Get all VNDA ratings here.
Stock #2: Vertex Pharmaceuticals Incorporated (VRTX)
VRTX operates as a biotechnology company that engages in developing and commercializing therapies for treating cystic fibrosis (CF). It markets TRIKAFTA/KAFTRIO, SYMDEKO/SYMKEVI, ORKAMBI, and KALYDECO. The company sells its products to specialty pharmacies and retail pharmacies or pharmacy chains, hospitals, and clinics.
On February 23, 2024, VRTX announced that the European Medicines Agency’s (EMA’s) Committee for Medicinal Products for Human Use (CHMP) adopted a positive opinion for the label expansion of KALYDECO® (ivacaftor) as a treatment of infants with cystic fibrosis (CF) ages one month to less than four months old.
If it is approved, KALYDECO® will become the first and only medicine approved in Europe to treat the underlying cause of cystic fibrosis in infants as young as one month with specific mutations in the CFTR gene.
On February 13, VRTX announced that the European Commission had granted conditional marketing authorization to CASGEVY™, a CRISPR/Cas9 gene-edited therapy. CASGEVY is approved for the treatment of patients 12 years of age and older with severe sickle cell disease (SCD).
“With this approval, CASGEVY is now approved for sickle cell disease and transfusion-dependent beta thalassemia in multiple geographies making tens of thousands of patients eligible for this potentially transformative therapy,” said Reshma Kewalramani, M.D., Chief Executive Officer and President of Vertex.
Also, on January 16, VRTX’s CASGEVY™ got approved by the FDA. With this approval, about 1,000 patients in the U.S., 12 years of age and older, became eligible for this one-time treatment.
VRTX’s net product revenues increased 9.3% year-over-year to $2.52 billion for the fourth quarter ended December 31, 2023, and its non-GAAP operating income grew marginally from the year-ago value to $1.15 billion. The company’s non-GAAP net income came in at $1.09 billion, or $4.20 per common share, up 12.1% and 11.7% from the previous year’s period, respectively.
As of December 31, 2023, the company’s total assets were $22.73 billion, compared to $18.15 billion as of December 31, 2022.
As per its full-year 2024 financial guidance, VRTX’s total product revenue is expected to range between $10.55 billion and $10.75 billion.
Street expects VRTX’s revenue for the first quarter (ending March 2024) to increase 8.9% year-over-year to $2.59 billion, and its EPS is expected to grow 33.3% year-over-year to $4.07 for the current quarter. Additionally, the company has topped the consensus EPS estimates in all trailing four quarters.
Over the past six months, VRTX’s stock has climbed 22.7% and 47% over the past year to close the last trading session at $430.11.
VRTX’s bright prospects are reflected in its POWR Ratings. The stock has an overall rating of B, equating to a Buy in our proprietary rating system.
The stock has a B grade for Value and Quality. VRTX is ranked #9 of 357 stocks in the Biotech industry.
Click here to access additional ratings of VRTX for Momentum, Sentiment, Growth, and Stability.
Stock #1: Exelixis, Inc. (EXEL)
EXEL, an oncology company, focuses on the discovery, development, and commercialization of new medicines for difficult-to-treat cancers. The company offers CABOMETYX tablets and COMETRIQ capsules. It also offers COTELLIC, an inhibitor of MEK to treat specific forms of advanced melanoma, and MINNEBRO, an oral non-steroidal selective blocker.
On January 25, 2024, EXEL announced detailed results from CONTACT-02, a phase 3 pivotal study evaluating cabozantinib (CABOMETYX®) in combination with atezolizumab in patients with metastatic castration-resistant prostate cancer (mCRPC) and measurable extra-pelvic soft tissue disease who have progressed on one prior NHT.
The combination reduced the risk of disease progression or death by 35% in patients with metastatic castration-resistant prostate cancer and has the potential to be a widely available treatment option for patients.
On January 22, EXEL and Bristol Myers Squibb (BMY) announced four-year follow-up results of their CheckMate -9ER trial evaluating Opdivo® (nivolumab) in combination with CABOMETYX® (cabozantinib) against sunitinib, in patients having previously untreated advanced or metastatic renal cell carcinoma (RCC).
The follow-up results proved superior progression-free survival (PFS) and objective response rates (ORR) in patients treated with Opdivo plus CABOMETYX over sunitinib. Opdivo plus CABOMETYX also reduced the risk of death by 23% in the first-line treatment of advanced renal cell carcinoma vs. sunitinib.
On December 4, 2023, EXEL entered into a clinical trial collaboration with Arcus Biosciences (RCUS) for STELLAR-009, a phase 1b/2 trial evaluating zanzalintinib, EXEL’s next-generation tyrosine kinase inhibitor (TKI), in combination with AB521, an inhibitor of the transcription factor HIF-2⍺.
It is for patients with advanced solid tumors, including clear cell renal cell carcinoma (ccRCC). Patient enrollment for the STELLAR-009 phase 1b/2 clinical trial began during year-end 2023.
During the fourth quarter that ended December 31, 2023, EXEL’s total revenues increased 13.1% year-over-year to $479.65 million. The company’s income from operations came in at $81.79 million, against a loss from operations of $48.08 million in the prior year’s quarter. Its non-GAAP net income was $104.19 million, or $0.33 per share, respectively.
In addition, the company’s cash and cash equivalents and total assets totaled $262.99 million and $2.94 billion as of December 31, 2023, respectively.
According to its guidance for fiscal year 2024, EXEL expects total revenue to be in the range of $1.82 billion and $1.92 billion. Also, the company’s net product revenues are expected to be between $1.65 billion and $1.75 billion.
Street expects EXEL’s revenue and EPS for the first quarter (ending March 2024) to increase 10.4% and 94.2% year-over-year to $451.27 million and $0.23, respectively. For the fiscal year 2024, the company’s revenue is expected to grow 4.1% year-over-year to $1.91 billion, while its EPS is expected to increase 85.7% year-over-year to $1.21.
Shares of EXEL have gained 23.5% over the past year to close the last trading session at $21.53.
EXEL’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall rating of A, translating to a Strong Buy in our proprietary rating system.
EXEL has an A grade for Value and Quality. The stock also has a B grade for Sentiment and Growth. It has topped the list of 357 stocks in the Biotech industry.
To access EXEL’s ratings for Stability and Momentum, click here.
What To Do Next?
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VRTX shares were unchanged in premarket trading Monday. Year-to-date, VRTX has gained 5.71%, versus a 6.85% rise in the benchmark S&P 500 index during the same period.
About the Author: Mangeet Kaur Bouns
Mangeet’s keen interest in the stock market led her to become an investment researcher and financial journalist. Using her fundamental approach to analyzing stocks, Mangeet’s looks to help retail investors understand the underlying factors before making investment decisions.
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