Following its prominence during the COVID-19 pandemic, the biotech industry has resumed its regular pace, with the focus on combating the virus diminishing. However, the industry looks well-positioned for long-term growth.
Therefore, it could be wise to buy fundamentally strong biotech stocks, Entrada Therapeutics (TRDA) and ProQR Therapeutics N.V. (PRQR). On the other hand, 4D Molecular Therapeutics, Inc.’s (FDMT) poor fundamentals and growth prospects make it best avoided now.
Before diving deeper into the fundamentals of these stocks, let’s take a closer look at why the biotech industry is well-positioned for growth.
The industry focuses on developing cutting-edge solutions for various diseases and medical conditions. With a rapidly aging population and the prevalence of chronic diseases, the need for effective drugs, advanced therapies, and treatments will drive the industry’s growth.
The global biotechnology market revenues are expected to grow at a CAGR of 14% to reach $3.88 trillion by 2030.
Stocks to Buy
Entrada Therapeutics, Inc. (TRDA)
TRDA develops endosomal escape vehicle (EEV) therapeutics for treating multiple neuromuscular diseases. Its endosomal escape vehicle platform develops a portfolio of oligonucleotide, antibody, and enzyme-based programs.
On February 9, 2023, TRDA announced the expiration of the waiting period under the Hart-Scott-Rodino (HSR) Antitrust Improvements Act of 1976 and the closing of its strategic collaboration and license agreement with Vertex. TRDA will receive $224 million upfront and a $26 million equity investment.
It is also eligible to receive up to $485 million based on certain research, development, regulatory, and commercial milestones and royalties from future sales of any products resulting from the collaboration.
In terms of the trailing-12-month gross profit margin, TRDA’s 70.77% is 26.7% higher than the 55.84% industry average. Likewise, its 15.68% trailing-12-month Capex/Sales is 234.9% higher than the 4.68% industry average.
TRDA’s collaboration revenues for the fiscal first quarter ended March 31, 2023, came in at $25.26 million. The company’s total other income rose 453.5% year-over-year to $2.66 million.
Its total assets came in at $475.57 million, compared to $252.06 million for the fiscal year ended December 31, 2022. In addition, its cash and cash equivalents came in at $227.65 million, compared to $45.16 million for the fiscal year ended December 31, 2022.
Over the past month, the stock has gained 4.3% to close the last trading session at $12.27.
TRDA’s POWR Ratings reflect its positive outlook. It has an overall rating of B, which translates to a Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
It has a B for Value and Sentiment. It is ranked #18 out of 385 stocks in the Biotech industry. To see TRDA’s ratings for Growth, Momentum, Stability, and Quality, click here.
ProQR Therapeutics N.V. (PRQR)
Headquartered in Leiden, the Netherlands, PRQR focuses on discovering and developing novel therapeutic medicines. The company's products pipeline includes AX-0810 for cholestatic diseases targeting Na-taurocholate cotransporting polypeptide (NTCP); and AX-1412 for cardiovascular diseases (CVDs) targeting Beta-1,4-galactosyltransferase 1 (B4GALT1).
In terms of the trailing-12-month gross profit margin, PRQR’s 271.2% is 385.7% higher than the 55.84% industry average. Likewise, its 14.06% trailing-12-month Capex/Sales is 200.2% higher than the 4.68% industry average.
For the first quarter that ended March 31, 2023, PRQR’s total revenues came in at €655 thousand ($$716.81 thousand.). Its cash generated by operations came in at €44.55 million ($48.75 million), compared to cash generated used in operations of €19.24 million ($21.06 million).
Street expects PRQR’s revenue for the quarter ending June 30, 2023, to increase 14.6% year-over-year to $1.32 million.
Over the past nine months, the stock has gained 122.6% to close the last trading session at $1.66.
PRQR’s POWR Ratings reflect solid prospects. It has an overall rating of B, which translates to a Buy in our proprietary rating system.
It has a B grade for Value, Sentiment, and Quality. It is ranked #29 in the Biotech industry. Click here to see PRQR’s ratings for Growth, Momentum, and Stability.
Stock to Sell
4D Molecular Therapeutics, Inc. (FDMT)
FDMT, a clinical-stage biotherapeutics company, develops genetic medicines using its therapeutic vector evolution platform. It develops a portfolio of genetic medicine product candidates focused on three therapeutic areas: ophthalmology, cardiology, and pulmonology.
FDMT’s 0.01x trailing-12-month asset turnover ratio is 97.8% lower than the 0.35x industry average.
FDMT’s collaboration and license revenue for the first quarter ended March 31, 2023, decreased 75.6% year-over-year to $298 thousand. Its total operating expenses rose 10.1% year-over-year to $30.40 million. The company’s loss from operations widened 14.1% year-over-year to $30.11 million. Its net loss widened 8.9% over the prior-year quarter to $28.68 million. Also, its net loss per share widened 7.3% year-over-year to $0.88.
For the quarter ending June 30, 2023, FDMT’s EPS is expected to remain negative. Its revenue for fiscal 2024 is expected to decline 13.4% year-over-year to $3.26 million. The stock has declined 18.7% year-to-date to close the last trading session at $18.06.
FDMT’s weak prospects are reflected in its POWR Ratings. It has an overall rating of F, equating to a Strong Sell in our proprietary rating system.
Within the Biotech industry, it is ranked #374. It has an F grade for Sentiment and a D for Value, Momentum, and Quality. To see FDMT’s rating for Growth and Sentiment, click here.
What To Do Next?
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FDMT shares were trading at $18.32 per share on Wednesday afternoon, up $0.26 (+1.44%). Year-to-date, FDMT has declined -17.51%, versus a 15.18% 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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