With an aging population and rising healthcare needs, there is a growing demand for quality healthcare, innovative treatments, and advanced healthcare solutions. Given the industry’s rapid innovation and significant growth potential, investing in biotech stocks could be attractive.
Therefore, investors could consider buying these three fundamentally sound biotech stocks: Exelixis, Inc. (EXEL), Gilead Sciences, Inc. (GILD), and Halozyme Therapeutics, Inc. (HALO). These companies are slated to release their second-quarter earnings this week.
The biotech sector is buzzing with renewed energy thanks to a surge in investments that are fueling rapid advancements in research and development across the industry. January’s impressive $6 billion raised in equity capital marks the largest influx since February 2021, signaling a robust rebound from a challenging period marked by financial strain and industry setbacks.
Biotech’s ongoing innovations in gene therapy, personalized medicine, and advanced diagnostics, coupled with the transformative potential of Generative AI in drug discovery, are propelling the sector upward. The McKinsey Global Institute predicts GenAI could add up to $110 billion annually in economic value for the pharma and medtech sectors.
Moreover, the U.S. biotech market is expected to reach $763.82 billion by 2033, growing at a CAGR of 11.9%. As a result, biotech investments offer opportunities for high returns while contributing to advancements in healthcare and improving patient outcomes.
With that in mind, let’s evaluate the three Biotech picks, beginning with the third choice.
Stock #3: Halozyme Therapeutics, Inc. (HALO)
HALO is a biopharmaceutical company advancing disruptive solutions to improve patient experiences and outcomes for emerging and established therapies. It has two commercial proprietary products, Hylenex and XYOSTED, partnered commercial products, and ongoing product development programs with several pharmaceutical companies. The company is scheduled to release its second-quarter results tomorrow, August 06, 2024.
On June 25, HALO announced that Roche received European Commission (EC) marketing authorization for OCREVUS® (ocrelizumab) SC, co-formulated with Halozyme’s ENHANZE® technology. This subcutaneous formulation, utilizing the company’s proprietary recombinant human hyaluronidase enzyme, rHuPH20, is approved for treating relapsing multiple sclerosis (RMS) and primary progressive multiple sclerosis (PPMS).
Dr. Helen Torley, HALO’s president and CEO, stated, “With OCREVUS SC, multiple sclerosis patients in the EU can now have their medicine administered in just 10 minutes, twice per year, and without the need for an IV facility.” This approval enhances treatment flexibility for patients and providers, showcasing HALO’s breakthrough technologies in improving treatment options.
On June 6, the company raised its full-year guidance and updated its five-year outlook following the issuance of a new European patent for ENHANZE®. The patent is through March 6, 2029, and will be validated in 37 European countries. This patent covers all of HALO’s ENHANZE® licenses, including DARZALEX SC, which will retain its original royalty rate in Europe under the new patent.
As per the updated guidance for the fiscal year 2024, HALO forecasts total revenues of $935 million to $1.02 billion, a 13% to 22% increase from 2023, primarily driven by higher royalty and collaboration revenue and growth in XYOSTED® sales. The company also expects adjusted EBITDA of $520 million to $555 million, up 16% to 24%, and non-GAAP EPS between $3.65 and $4.05, reflecting 30% to 44% growth over 2023.
During the first quarter that ended March 31, 2024, HALO reported total revenues of $195.88 million, reflecting an increase of 20.8% year-over-year. The company’s adjusted EBITDA increased 55.9% from the year-ago value to $115.75 million. Its net income and non-GAAP earnings per share came in at $76.82 million and $0.79 per share, up 93.9% and 68.1% year-over-year, respectively.
Analysts expect HALO’s revenue for the second quarter (ended June 2024) to increase 26.5% year-over-year to $273.19 million, while its EPS for the same period is expected to grow 6.5% from the prior year to $0.79. Moreover, the company topped the consensus EPS estimates in three of the trailing four quarters.
HALO shares have surged 57.9% over the past nine months and 46.4% year-to-date to close the last trading session at $54.09.
HALO’s bright prospects are reflected in its POWR Ratings. The stock has an overall rating of B, which translates to Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
It also has a B grade for Value and Quality. Among the 340 stocks in the Biotech industry, it is ranked #16. Click here to see HALO’s ratings for Growth, Momentum, Stability, and Sentiment.
Stock #2: Gilead Sciences, Inc. (GILD)
GILD is a biopharmaceutical company dedicated to advancing treatments for life-threatening diseases such as human immunodeficiency virus (HIV), viral hepatitis, COVID-19, and cancer. Its portfolio of marketed products includes Biktarvy, Genvoya, Odefsey, Truvada, Harvoni, Vemlidy, and Veklury, among others. GILD will unveil its second-quarter results on August 08, 2024.
On July 22, GILD and the Elton John AIDS Foundation (EJAF) extended their RADIAN ®partnership for five years. The renewed RADIAN 2.0 initiative will focus on tackling the structural drivers of the HIV epidemic, bolstering local health systems, and empowering grassroots organizations in Eastern Europe and Central Asia for a lasting impact.
On June 20, GILD announced topline results from an interim analysis of its pivotal Phase 3 PURPOSE 1 trial indicating that the company’s twice-yearly injectable HIV-1 capsid inhibitor, lenacapavir, demonstrated 100% efficacy for the investigational use of HIV prevention in cisgender women. This groundbreaking result marks the first Phase-3 HIV prevention trial to report zero infections, underscoring lenacapavir’s potential as a major advancement in HIV prevention.
For the fiscal first quarter, which ended on March 31, 2024, GILD’s total revenues increased 5.3% year-over-year to $ 6.69 billion. The company’s sales from Biktarvy and Oncology grew by 10% and 17.8% from the prior year to $2.95 billion and $789 million, respectively. In addition, its net cash provided by operating activities rose 27.2% from the year-ago value to $2.22 billion, while its free cash flow for the quarter stood at $2.11 billion, up 29.3% year-over-year.
According to the full-year guidance, GILD forecasts product sales to range from $27.10 billion to $27.50 billion. The company also expects non-GAAP EPS to be between $3.45 and $3.85, an increase from the previous guidance of $6.85 to $7.25.
The consensus revenue estimate of $6.74 billion for the fiscal second quarter (ended June 2024) represents a 2.1% increase year-over-year. The consensus EPS estimate of $1.60 for the about-to-be-reported quarter indicates a 19.3% improvement year-over-year. The company has an excellent surprise history; it surpassed the consensus revenue estimates in each of the trailing four quarters.
Over the past three months, the stock has gained 17.5%, closing the last trading session at $76.77.
It’s no surprise that GILD has an overall A rating, equating to a Strong Buy in our POWR Ratings system. It has an A grade for Value and a B for Growth and Quality. Within the same industry, it is ranked #4.
Beyond what is stated above, we’ve also rated GILD for Momentum, Stability, and Sentiment. Get all GILD ratings here.
Stock #1: Exelixis, Inc. (EXEL)
EXEL is a global oncology leader specializing in innovative cancer treatments and combination therapies. Its portfolio includes four marketed products: CABOMETYX, COMETRIQ, COTELLIC, and MINNEBRO. The company will release its second-quarter earnings on August 06, 2024.
On May 20, EXEL announced a Settlement and License Agreement with Cipla Ltd. and Cipla USA, Inc. (collectively Cipla), resolving two patent litigations over Cipla’s Abbreviated New Drug Application (ANDA) for generic CABOMETYX® (cabozantinib). Under the agreement, Cipla will be licensed to market a generic version of CABOMETYX in the United States starting January 1, 2031, pending FDA approval.
EXEL’s total revenues for the first quarter (ended March 31, 2024) increased by 4% from the year-ago value to $425.23 million. Its income from operation rose 2.2% from the prior-year quarter to $29.46 million, while its non-GAAP net income came in at $51.98 million and $0.17 per share.
Looking ahead, EXEL forecasts full-year 2024 revenues to range between $1.83 billion and $1.93 billion, with net product revenues expected to be between $1.65 billion and $1.75 billion.
Street expects EXEL’s revenue for the fiscal second quarter (ended June 2024) to decline marginally from the prior-year quarter to $465.11 million, while the EPS is estimated to increase 22.9% year-over-year to $0.31. For the fiscal year ending December 2024, its EPS and revenue are forecasted to grow by 73.8% and 2.6% year-over-year, reaching $1.13 and $1.88 billion, respectively.
The stock has gained 20.1% over the past nine months to close the last trading session at $24.17.
EXEL’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall rating of A, which translates to a Strong Buy in our proprietary rating system.
EXEL has an A grade for Value and Quality. Out of 340 stocks in the same industry, it is ranked #3. Click here to access the other EXEL ratings for Growth, Momentum, Stability, and Sentiment.
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.
GILD shares were trading at $75.02 per share on Monday afternoon, down $1.75 (-2.28%). Year-to-date, GILD has declined -5.30%, versus a 10.23% rise in the benchmark S&P 500 index during the same period.
About the Author: Shweta Kumari
Shweta's profound interest in financial research and quantitative analysis led her to pursue a career as an investment analyst. She uses her knowledge to help retail investors make educated investment decisions.
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