The biotech industry flourishes with government support, driving economic growth through research investments and technological advancements. Moreover, the increased disease prevalence fuels demand for diagnostics and healthcare infrastructure, thereby propelling market expansion.
Therefore, investors could consider investing in top outsourcing stocks Gilead Sciences, Inc. (GILD), Incyte Corporation (INCY), Jazz Pharmaceuticals plc (JAZZ), and Exelixis, Inc. (EXEL) for 2024 gains.
Last year, President Biden signed an Executive Order launching a National Biotechnology and Biomanufacturing Initiative. This strategic move perfectly aligns with President Biden's goal of leveraging biotechnology to address global challenges and promote economic and societal success.
Moreover, the global pharmaceutical manufacturing sector is on the rise, driven by a shift toward single-use solutions, smart operations, and a focus on personalized medicine. This transformation in supply chains aligns with patient-centric healthcare models, contributing to the growth of the biotechnology market.
The global pharmaceutical manufacturing market size is expected to grow at a CAGR of 7.6% from 2023 to 2030.
In addition, the biotech industry is navigating trends like AI-driven drug development and compressed life cycles, fostering innovation in areas like oncology and rare diseases. Strategic partnerships at earlier stages and the use of AI analytics in clinical trials boost the sector's dynamic landscape. As a result, the global biotechnology market is estimated to expand at a CAGR of 15.5% to reach $1.35 trillion by 2030.
Furthermore, the global drug discovery market is experiencing robust growth driven by a surge in chronic diseases, heightened investments in biopharmaceuticals, and an escalating need for groundbreaking drugs.
This expansion underscores the industry's response to evolving healthcare challenges and underscores its pivotal role in advancing therapeutic solutions worldwide. As a result, the global sales of biotechnology drugs are expected to exceed $430 billion in 2023.
On top of it, the sector has garnered steady attention from investors, as indicated by iShares Biotechnology ETF’s (IBB) 12.1% return over the past month, higher than the S&P 500’s 4.1% return.
Considering these conducive trends, let’s examine the fundamentals of four Biotech stock picks, beginning with the fourth choice.
Stock #4: Gilead Sciences, Inc. (GILD)
GILD is a global biopharmaceutical firm that specializes in discovering, developing, and commercializing medicines across diverse areas, including HIV/AIDS, viral hepatitis, oncology, and pulmonary arterial hypertension. The company actively engages in collaborative agreements and partnerships within the biotech sector.
On December 19, GILD and Compugen Ltd. (CGEN) entered an exclusive license agreement for the pre-clinical antibody program COM503 targeting IL-18 binding protein in cancer immunotherapy.
The deal involves an upfront payment of $60 million, potential milestones totaling $758 million, and tiered royalties on global net sales, emphasizing the advancement of immune-oncology therapies.
GILD’s trailing-12-month gross profit margin of 78.81% is 38.7% higher than the industry average of 56.84%. Its 33.61% trailing-12-month EBIT margin is significantly higher than the 0.81% industry average.
In the third quarter ended September 30, 2023, GILD reported total revenues of $7.05 billion, up marginally from the previous-year quarter. The company generated non-GAAP net income attributable to GILD and EPS of $2.88 billion and $2.29, up 20.4% and 20.5% year-over-year, respectively. Moreover, its free cash flow amounted to $1.63 billion.
For the fiscal year 2023, the company expects total product sales between $26.7 billion and $26.9 billion, with a projected non-GAAP EPS in the range of $6.65 to $6.85.
Street expects GILD’s revenue and EPS to grow 3.4% and 37.8% year-over-year to $6.82 billion and $1.85, respectively, for the second quarter ending June 2024. The company surpassed the revenue estimates in each of the trailing four quarters, which is impressive.
GILD’s shares have gained 6.2% over the past three months and 5.2% over the past month to close the last trading session at $79.66.
GILD’s POWR Ratings reflect its positive prospects. The stock has an overall rating of A, equating to a Strong Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
GILD has an A grade for Value and Quality. Within the Biotech industry, it is ranked #5 among 341 stocks.
In addition to the POWR Ratings stated above, one can access GILD’s additional Growth, Momentum, Stability, and Sentiment ratings here.
Stock #3: Jazz Pharmaceuticals plc (JAZZ)
JAZZ is a global biopharmaceutical company specializing in neuroscience and oncology, with a focus on addressing unmet medical needs. The company collaborates with various partners to develop solutions in these therapeutic areas.
On November 7, JAZZ and MD Anderson Cancer Center announced a partnership for five years to evaluate zanidatamab, an investigational HER2-targeted bispecific antibody, in various HER2-expressing cancers, addressing unmet needs in solid tumors.
The collaboration, starting in late 2023 or early 2024, will explore zanidatamab's potential in early-stage breast cancer and other areas where current HER2-directed therapies face limitations.
JAZZ’s trailing-12-month gross profit margin of 91.92% is 61.7% higher than the industry average of 56.84%. Its 27.14% trailing-12-month EBIT margin is significantly higher than the 0.81% industry average.
In the third quarter ended September 30, 2023, JAZZ generated total revenues of $972.14 million, up 3.3% from the previous-year quarter. Its income from operations increased 596.2% year-over-year to $172.39 million. The company reported non-GAAP net income and EPS of $340.15 million and $4.84, respectively.
JAZZ’s revenue and EPS are expected to grow 6.3% and 9.4% year-over-year to $949.70 million and $4.32 for the first quarter ending March 2024, respectively.
JAZZ’s shares increased marginally intraday to close the last trading session at $121.25.
JAZZ’s POWR Ratings reflect this sound outlook. The stock has an overall rating of A, equating to a Strong Buy in our proprietary rating system.
The stock has an A grade for Value and a B for Growth and Quality. Within the same industry, it is ranked #4.
Click here for JAZZ’s additional Momentum, Stability, and Sentiment ratings.
Stock #2: Exelixis, Inc. (EXEL)
EXEL is a biotech company specializing in oncology and dedicated to discovering, developing, and commercializing cancer treatments. They focus on developing inhibitors targeting cancer-related factors and collaborate with pharmaceutical companies for research and development.
On December 4, EXEL and Arcus Biosciences, Inc. (RCUS) partnered for the STELLAR-009 trial, which will evaluate zanzalintinib and AB521 in advanced solid tumors, including renal cell carcinoma.
The collaboration aims to advance treatment options for kidney cancer, with RCUS co-funding the study and providing AB521. Patient enrollment is scheduled to commence by the end of 2023.
EXEL’s trailing-12-month gross profit margin of 96.24% is 69.3% higher than the industry average of 56.84%. Its 2.31% trailing-12-month EBIT margin is 184.9% higher than the 0.81% industry average.
For the third quarter ended September 30, 2023, EXEL’s total revenues increased 14.6% year-over-year to $471.92 million. The company generated non-GAAP net income and net income per share of $32.10 million and $0.10, respectively. For the nine months ended September 30, EXEL reported total revenues of $1.35 billion, up 13.8% year-over-year.
For the fiscal year 2023, the company is anticipating total revenues between $1.83 billion and $1.85 billion, with net product revenues estimated at $1.63 billion to $1.65 billion.
Analysts expect EXEL’s revenue and EPS to grow 19% and 72% year-over-year to $486.46 million and $0.21 for the first quarter ending March 2024, respectively.
The stock has gained 50.7% over the past year and 49.3% year-to-date to close the last trading session at $23.94.
EXEL’s robust fundamentals are reflected in its POWR Ratings. The stock has an overall rating of A, equating to a Strong Buy in our proprietary rating system.
It has an A grade for Value and Quality and a B for Growth. Within the same industry, it is ranked #3.
To see EXEL’s additional POWR Ratings for Momentum, Stability, and Sentiment, click here.
Stock #1: Incyte Corporation (INCY)
INCY is a company specializing in the development of therapies for hematology /oncology and inflammation. With a portfolio including clinical-stage products, the company engages in collaborative agreements to advance its research initiatives on a global scale.
INCY’s trailing-12-month EBIT margin of 15.09% is significantly higher than the industry average of 0.81%. Its 17.37% trailing-12-month EBITDA margin is 221.7% higher than the 5.40% industry average.
During the third quarter, which ended September 30, 2023, INCY’s total revenues grew 11.6% year-over-year to $919.03 million. The company’s income from operations increased 55.2% from the previous-year quarter.
It generated non-GAAP net income and net income per share of $248.72 million and $1.10, up 85.9% and 83.3% from the prior-year quarter, respectively.
For the fiscal year 2023, INCY projects Jakafi’s net product revenues to range from $2.59 to $2.62 billion and other Hematology/Oncology net product revenues are estimated at $215 to $225 million.
Analysts expect INCY’s revenue and EPS to grow 128.7% and 12% year-over-year to $905.32 million and $0.85 for the first quarter ending March 2024, respectively. The company surpassed the EPS estimates in three of the trailing four quarters.
The stock has gained 8.2% over the past three months and 17.7% over the past month to close the last trading session at $62.85.
INCY’s optimistic outlook is reflected in its POWR Ratings. The stock has an overall rating of A, equating to a Strong Buy in our proprietary rating system.
It has an A grade for Growth, Value, and Quality and a B for Sentiment. Within the same industry, it is ranked first.
To see INCY’s additional POWR Ratings for Momentum and Stability, click here.
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GILD shares were trading at $79.81 per share on Tuesday morning, up $0.15 (+0.19%). Year-to-date, GILD has declined -3.44%, versus a 26.08% rise in the benchmark S&P 500 index during the same period.
About the Author: Kritika Sarmah
Her interest in risky instruments and passion for writing made Kritika an analyst and financial journalist. She earned her bachelor's degree in commerce and is currently pursuing the CFA program. With her fundamental approach, she aims to help investors identify untapped investment opportunities.
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