The biotechnology industry has experienced significant growth of late – canvassing various aspects of life from pharmaceuticals to food production and digital technology – thanks to monumental advances in drug development, increased merger and acquisition activity, technological innovation, and governmental support.
Given this backdrop, fundamentally strong biotech stocks Illumina, Inc. (ILMN), Protalix BioTherapeutics, Inc. (PLX), and Alnylam Pharmaceuticals, Inc. (ALNY) could be wise portfolio additions to garner significant returns in 2024.
The wide-reaching impact of the biotech industry on society and the global economy is evident. This fact has only been highlighted further during the pandemic, with the industry's profitable applications demonstrating its potential for future growth and progress.
As it stands, biotech leads in innovation and underpins the overall economic structure. Executives within biotech corporations are investing heavily to expedite research and development. According to a survey of 130 executives conducted by ICON plc (ICLR), 60% of participants anticipated increased spending on R&D. Governmental initiatives serve to encourage these efforts, proving critical in bolstering the long-term viability of the biotech industry.
Early 2024 has already seen a tremendous resurgence in the industry, similar to a phoenix rising from the ashes. The year looks promising for recovery, particularly given the FDA's approval of 55 novel therapies in 2023, a near 50% increase. This substantial uptick indicates a renewal of dynamism within the industry.
The industry's ascent was catalyzed by multibillion-dollar agreements, positive clinical outcomes, and trailblazing developments like gene editing.
Increased emphasis on R&D expenditures, technological advancements, heightened FDA approvals, and expectations of substantial investments in the sector suggest a prosperous future for the industry. Consequently, the global biotechnology market is expected to grow at a CAGR of 20.4% to reach $4.15 trillion by 2030.
Given the industry tailwinds, it's time to examine the fundamentals of the top three stocks to buy in the Biotech industry, starting with the third in line.
Stock #3: Illumina, Inc. (ILMN)
ILMN develops, manufactures, and markets life science tools and integrated systems for large-scale analysis of genetic variation and function. It operates through Core Illumina and GRAIL segments.
On January 15, Concentric by Ginkgo, which is building the leading platform for cell programming and biosecurity, entered into a Co-Marketing Agreement with ILMN to partner on expanding biosecurity capabilities globally.
Under the agreement, the partners aim to demonstrate the use of ILMN products with Concentric's bioradar to accelerate the expansion of the pathogen monitoring network in a way that empowers countries, as well as increase the scale and scope of pathogen genomic surveillance globally. This should bode well for ILMN.
On January 5, ILMN signed an agreement with Janssen Research & Development, LLC. This collaboration will be the first relating to the development of ILMN's novel molecular residual disease assay, a whole-genome sequencing multi-cancer research solution that detects circulating tumor DNA to better understand the persistence or recurrence of disease following clinical intervention.
ILMN’s trailing-12-month cash per share of $5.87 is 363.5% higher than the industry average of $1.27. Its trailing-12-month gross profit and EBITDA margins of 65.78% and 7.10% are 15.4% and 40.3% higher than the industry averages of 57.02% and 5.06%, respectively.
Over the past three and five years, its revenue grew at CAGRs of 11.3% and 6.6%, respectively, while its total assets grew at 11% and 8.4% CAGRs over the same periods.
For the fiscal third quarter that ended October 1, 2023, ILMN’s total revenue increased marginally year-over-year to $1.12 billion, while non-GAAP gross profit stood at $732 million. Moreover, its free cash flow came at $94 million, compared to a negative $119 million in the prior-year quarter.
For the same quarter, its non-GAAP net income and non-GAAP earnings per share stood at $52 million and $0.33, respectively. As of October 1, 2023, its total current liabilities came at $1.48 billion, compared to $2.77 billion as of January 1, 2023.
Street expects ILMN’s revenue and EPS for the fiscal first quarter ending March 2024 to be $1.06 billion and $0.06, respectively. The company surpassed consensus revenue and EPS estimates in three of the trailing four quarters, which is impressive.
The stock has gained 21.5% over the past three months to close the last trading session at $141.01. Over the past month, it has gained marginally. Wall Street analysts expect the stock to reach $144.39 in the next 12 months, indicating a potential upside of 2.4%. The price target ranges from a low of $80 to a high of $258.
ILMN’s POWR Ratings reflect its positive prospects. The stock 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.
The stock has a B grade for Growth, Sentiment, and Quality. Within the Biotech industry, it is ranked #35 out of 348 stocks.
To see additional POWR Ratings for Value, Momentum, and Stability for ILMN, click here.
Stock #2: Protalix BioTherapeutics, Inc. (PLX)
PLX pioneers the advancement, production, and commercialization of recombinant therapeutic proteins using its exclusive ProCellEx plant cell-based protein expression system. Furthermore, the company provides Elelyso, addressing Gaucher disease, while also advancing PRX-102, a therapeutic protein for Fabry disease treatment.
PLX’s trailing-12-month asset turnover ratio of 0.88x is 125.5% higher than the industry average of 0.39x, while its trailing-12-month EBITDA margin of 23.16% is 357.2% higher than the industry average of 5.06%.
Over the past three and five years, its revenue grew at CAGRs of 1.3% and 17.7%, respectively, while its total assets grew at 6.6% and 5.9% CAGRs over the same periods.
For the nine months that ended September 30, 2023, PLX’s total revenue stood at $55.01 million, up 41% year-over-year. Its operating income came to $16.08 million, compared to an operating loss of $10.52 million in the year-ago period.
For the same period, its balance of cash and cash equivalents at end of period increased 90.4% from the prior-year period to $20.41 million. As of September 30, 2023, PLX’s total current assets stood at $72.62 million, compared to $44.88 million as of December 31, 2022.
The consensus revenue estimate of $62.15 million for the fiscal year ending December 2024. Its EPS is expected to grow at 38.1% year-over-year to $0.15 for the same period. The company surpassed consensus revenue and EPS estimates in each of the trailing four quarters.
The stock has gained 2.8% over the past year to close the last trading session at $1.47. Wall Street analysts expect the stock to reach $10 in the next 12 months, indicating a potential upside of 580.3%.
PLX’s POWR Ratings reflect this promising outlook. The stock has an overall B rating, equating to Buy in our proprietary rating system.
PLX also has an A grade for Value and a B for Sentiment. It is ranked #27 within the same industry.
Click here for the additional POWR Ratings for Growth, Momentum, Stability, and Quality for PLX.
Stock #1: Alnylam Pharmaceuticals, Inc. (ALNY)
ALNY is a biopharmaceutical company that focuses on discovering, developing, and commercializing novel therapeutics based on ribonucleic acid interference.
ALNY’s trailing-12-month cash per share of $8.23 is 552.2% higher than the industry average of $1.26, while its trailing-12-month gross profit margin of 84% is 47.3% higher than the industry average of 57.01%.
Over the past three and five years, its revenue grew at CAGRs of 62.6% and 79.8%, respectively, while its total assets grew at 5.1% and 18% CAGRs over the same periods.
For the fiscal third quarter that ended September 30, 2023, ALNY’s total revenues increased 184% year-over-year to $750.53 million. Moreover, its non-GAAP operating income came at $277.80 million, compared to a non-GAAP operating loss of $129.92 million in the prior year quarter.
For the same quarter, its non-GAAP net income came to $228.53 million, compared to a non-GAAP net loss of $193.37 million in the prior year quarter. Also, its non-GAAP net income per common share stood at $1.74, compared to a non-GAAP net loss per common share of $1.58 in the year-ago quarter.
Analysts expect ALNY’s revenue to come in at $1.77 billion for the fiscal year ending December 2024. The company surpassed consensus revenue and EPS estimates in three of the trailing four quarters.
The stock has gained 13% over the past three months to close the last trading session at $185.20. Wall Street analysts expect the stock to reach $227.94 in the next 12 months, indicating a potential upside of 23.1%. The price target ranges from a low of $135 to a high of $395.
ALNY’s robust prospects are reflected in its POWR Ratings. The stock has an overall B rating, equating to Buy in our proprietary rating system.
ALNY has a B grade for Growth, Sentiment, and Quality. It is ranked #14 within the same industry.
Beyond what is stated above, we’ve also rated ALNY for Value, Momentum and Stability. Get all ALNY ratings here.
What To Do Next?
Discover 10 widely held stocks that our proprietary model shows have tremendous downside potential. Please make sure none of these “death trap” stocks are lurking in your portfolio:
ALNY shares were unchanged in premarket trading Thursday. Year-to-date, ALNY has declined -3.24%, versus a 2.12% rise in the benchmark S&P 500 index during the same period.
About the Author: Sristi Suman Jayaswal
The stock market dynamics sparked Sristi's interest during her school days, which led her to become a financial journalist. Investing in undervalued stocks with solid long-term growth prospects is her preferred strategy. Having earned a master's degree in Accounting and Finance, Sristi hopes to deepen her investment research experience and better guide investors.
Will These 3 Biotech Stocks Make Gains in 2024? StockNews.com
