The biotech industry is thriving due to consistent innovation and a sustained demand for cutting-edge healthcare solutions. The fast-aging demographic and the increasing requirement for high-quality treatments for both rare and common diseases contribute to the positive outlook surrounding the industry.
Therefore, investors could consider investing in fundamentally strong biotech stocks Genmab A/S (GMAB), Entrada Therapeutics, Inc. (TRDA), and Gilead Sciences, Inc. (GILD).
Before delving deeper into their fundamentals, let’s discuss why the biotech industry is well-positioned for growth.
The biotech industry’s expansion is being shaped by significant advancements in drug development, increased spending on research and development (R&D), and clinical trials. The industry played a crucial role in vaccine development during the pandemic. A survey conducted by ICON plc indicates that out of over 130 biotech executives, 60% of respondents anticipate an increase in R&D spending.
The industry’s long-term growth will be driven by an increase in clinical trials, expansion of the drug pipelines, and higher investments in pharmaceutical R&D. The clinical trial market is forecasted to reach $120.97 billion in 2024 and is expected to grow at a CAGR of 4.3% to reach $184.61 billion by 2034.
Biotech companies are leveraging advanced technologies like AI and Big Data analytics to drive innovation. AI is quickly growing in identifying drug targets, particularly in anticancer programs. The global AI for Pharma and Biotech market, valued at $850 million in 2024, is forecasted to reach $4.20 billion by 2027, growing at a 30.5% CAGR.
Investors’ interest in biotech stocks is evident from the VanEck Vectors Biotech ETF (BBH) 10.4% returns over the past three months. Furthermore, biotechnology’s profitable applications, particularly in healthcare, promise sustained growth, with the global biotechnology market projected to grow at a CAGR of 12.8% to reach $3.21 trillion by 2030.
Considering these conducive trends, let’s analyze the fundamental aspects of the three Biotech picks, beginning with the third choice.
Stock #3: Genmab A/S (GMAB)
Headquartered in Copenhagen, Denmark, GMAB develops antibody therapeutics for treating cancer and other diseases, primarily in Denmark. The company’s offerings include DARZALEX, a human monoclonal antibody; teprotumumab for treating thyroid eye disease; and Amivantamab for advanced or metastatic gastric or oesophageal cancer.
In terms of the trailing-12-month EBITDA margin, GMAB’s 39.56% is 703.8% higher than the 4.92% industry average. Likewise, its 99.41% trailing-12-month gross profit margin is 74% higher than the 57.15% industry average. Its 0.52x trailing-12-month asset turnover ratio is 32.8% higher than the 0.39x industry average.
GMAB’s revenue for the third quarter that ended September 30, 2023, increased 16.1% year-over-year to DKK4.74 billion ($685.66 million). Its operating profit came in at DKK1.72 billion ($248.80 million). Also, the company’s net profit and net profit per share came in at DKK2.13 billion ($308.11 million) and DKK32.32, respectively.
Street expects GMAB’s EPS for the quarter ended December 31, 2023, to increase 139.5% year-over-year to $0.30. Its revenue for the quarter ending March 31, 2024, is expected to increase 33.6% year-over-year to $562.53 million. Over the past three months, the stock has declined 10.7% to close the last trading session at $27.84.
GMAB’s POWR Ratings reflect solid prospects. It has an overall rating of A, which translates to a Strong Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
It is ranked #8 out of 351 stocks in the Biotech industry. It has a B grade for Growth, Value, Sentiment, and Quality. Click here to see GMAB’s Momentum and Stability ratings.
Stock #2: Entrada Therapeutics, Inc. (TRDA)
TRDA develops endosomal escape vehicle (EEV) therapeutics for the treatment of multiple neuromuscular diseases. Its endosomal escape vehicle platform develops a portfolio of oligonucleotide, antibody, and enzyme-based programs.
In terms of the trailing-12-month gross profit margin, TRDA’s 76.29% is 33.5% higher than the 57.15% industry average. Likewise, its 6.13% trailing-12-month Capex/Sales is 46.6% higher than the 4.18% industry average.
TRDA's collaboration revenues for the fiscal third quarter ended September 30, 2023, amounted to $43.74 million. The company's net income was $35.46 million, significantly higher than the net loss of $25.14 million in the prior-year quarter. Additionally, its net income per share was $1.02, compared to a net loss per share of $0.80 in the year-ago quarter.
Over the past nine months, the stock has gained 24.1% to close the last trading session at $15.13.
TRDA’s positive outlook is reflected in its POWR Ratings. It has an overall rating of A, equating to a Strong Buy in our proprietary rating system.
It has an A grade for Value and a B grade for Growth, Sentiment, and Quality. It is ranked #7 in the same industry. To see TRDA’s ratings for Momentum and Stability, click here.
Stock #1: Gilead Sciences, Inc. (GILD)
GILD discovers, develops, and commercializes medicines in the areas of unmet medical need in the United States, Europe, and internationally.
In terms of the trailing-12-month EBITDA margin, GILD’s 46.34% is 841.5% higher than the 4.92% industry average. Likewise, its 77.99% trailing-12-month gross profit margin is 36.5% higher than the 57.15% industry average. Additionally, its 0.43x trailing-12-month asset turnover ratio is 11.3% higher than the 0.39x industry average.
GILD's total revenues for the fiscal fourth quarter (ended December 31, 2023) were $7.12 billion. The company's non-GAAP operating income rose 1.5% year-over-year to $2.74 billion. Its non-GAAP net income attributable to GILD and non-GAAP EPS came in at $2.16 billion and $1.72, up 2.6% and 3%, respectively, over the prior-year quarter.
For the quarter ending March 31, 2024, GILD’s EPS and revenue are expected to increase 15% and 0.2% year-over-year to $1.58 and $6.36 billion, respectively. Over the past three months, the stock has declined 1.8% to close the last trading session at $73.67.
It’s no surprise that GILD has an overall rating of A, which translates to a Strong Buy in our proprietary rating system.
It has an A grade for Value and a B for Quality. Within the Biotech industry, it is ranked #6. Beyond what we stated above, we also have given GILD grades for Growth, Momentum, Stability, and Sentiment. Get all GILD ratings here.
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GILD shares were trading at $74.22 per share on Monday afternoon, up $0.55 (+0.75%). Year-to-date, GILD has declined -8.38%, versus a 5.86% rise in the benchmark S&P 500 index during the same period.
About the Author: Abhishek Bhuyan
Abhishek embarked on his professional journey as a financial journalist due to his keen interest in discerning the fundamental factors that influence the future performance of financial instruments.
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