The biotechnology sector, encompassing areas from pharmaceuticals to agriculture, has seen considerable expansion owing to significant strides in drug development, heightened merger and acquisition activities, and technology advancements.
Therefore, investors could consider adding fundamentally strong biotech stocks BioNTech SE (BNTX), Entrada Therapeutics, Inc. (TRDA), and Incyte Corporation (INCY) to the portfolio this week.
After an unstable 2023, the biotech sector currently boasts an optimistic landscape. Factors including new drug approvals, pipeline growth, an uptick in merger and acquisition activities, and technological progress have bolstered investor confidence throughout recent months.
Additionally, the rise of personalized medicine and the increased accessibility of orphan drug formulations are spurring growth in the biotech field. Last year, the FDA's CDER approved 55 groundbreaking molecular entities and therapeutic biological products, underscoring the industry's deep-rooted commitment to research and development.
Apart from that, a strategic shift towards innovation and growth is expected due to increased M&A activities, positive clinical outcomes, and advanced medical developments such as gene editing.
Advanced technologies such as blockchain, artificial intelligence, and big data are leveraging innovative biotech tools encompassing autonomous therapeutic systems, brain mapping, anti-aging cellular research, lab-generated organs, epigenetics, digital therapeutics, and advanced wearables. Each drives considerable development within the industry.
The global biotechnology market is projected to grow at a CAGR of 14% to reach $3.88 trillion by 2030.
In light of these encouraging trends, let's look at the fundamentals of the three Biotech stocks, beginning with number 3.
Stock #3: BioNTech SE (BNTX)
Headquartered in Mainz, Germany, BNTX is a biotechnology company that develops and commercializes immunotherapies for cancer and other infectious diseases.
On January 31, BNTX and Duality Biologics (Suzhou) Co., Ltd. announced that the U.S. Food and Drug Administration granted Fast Track designation for BNT325/DB-1305 for the treatment of patients with platinum-resistant ovarian epithelial cancer, fallopian tube cancer, or primary peritoneal cancer who have received one to three prior systemic treatment regimens.
BNT325/DB-1305 is a next-generation antibody-drug conjugate candidate targeting the trophoblast cell-surface antigen 2, a protein that is overexpressed on a range of tumor types. The candidate is currently being evaluated in an ongoing Phase 1/2 study in patients with TROP2-expressing advanced solid tumors.
BNTX’s trailing-12-month cash per share of $60.02 is significantly higher than the industry average of $1.26. Its trailing-12-month levered FCF and EBIT margins of 71.60% and 60.95% are significantly higher than the industry averages of 0.14% and 0.50%, respectively.
For the fiscal third quarter that ended September 30, 2023, BNTX’s total revenues and operating income stood at €895.30 million ($969.73 million) and €73.10 million ($79.18 million), respectively.
For the same quarter, its profit for the period and earnings for the period per share stood at €160.60 million ($173.95 million) and €0.67, respectively. Moreover, its cash and cash equivalents for the quarter increased marginally year-over-year to €13.50 billion ($14.62 billion).
Street expects BNTX’s revenue and EPS for the fiscal year of 2024 (ending December 2024) to be $3.44 billion and $1.07, respectively. The company surpassed consensus revenue and EPS estimates in three of the trailing four quarters, which is impressive.
The stock has gained marginally intraday to close the last trading session at $95.04. Over the past three months, it has gained 1.6%.
BNTX’s robust prospects are reflected in its POWR Ratings. 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 an A grade for Value and a B for Quality. It is ranked #31 out of 350 stocks within the Biotech industry.
Click here for the additional POWR Ratings for BNTX (Growth, Momentum, Stability, and Sentiment).
Stock #2: Entrada Therapeutics, Inc. (TRDA)
TRDA develops endosomal escape vehicle (EEV) therapeutics for the treatment of multiple neuromuscular diseases.
TRDA’s trailing-12-month cash per share of $1.56 is 23.1% higher than the industry average of $1.26, while its trailing-12-month levered FCF margin of 141.80% is significantly higher than the industry average of 0.14%.
For the fiscal third quarter that ended September 30, 2023, TRDA’s collaboration revenue stood at $43.74 million. Moreover, its income from operations came to $14.01 million, compared to a loss from operations of $25.94 million in the prior-year quarter.
For the same quarter, its net income came to $35.46 million, compared to a net loss of $25.14 million in the prior-year quarter. Also, its net income per share stood at $1.02, compared to a net loss per share of $0.80 in the year-ago quarter.
As of September 30, 2023, TRDA’s cash, cash equivalents and marketable securities stood at $353.58 million, compared to $188.71 million as of December 31, 2022.
Street expects TRDA’s revenue for the fiscal first quarter ending March 2024 to be $8.53 million. The company surpassed consensus EPS estimates in three of the trailing four quarters.
The stock has gained 24.4% over the past nine months to close the last trading session at $14.57. Over the past year, it has gained 19.9%.
TRDA’s solid fundamentals are reflected in its POWR Ratings. The stock has an overall rating of A, translating to a Strong Buy in our proprietary rating system.
TRDA has an A grade for Value and a B for Growth, Sentiment, and Quality. Within the same industry, it is ranked #7.
Beyond what we’ve stated above, we have also rated the stock for Momentum and Stability. Get all ratings of TRDA here.
Stock #1: Incyte Corporation (INCY)
INCY discovers, develops, and commercializes therapeutics for hematology/oncology, inflammation, and autoimmunity areas in the U.S., Europe, Japan, and internationally.
INCY’s trailing-12-month cash per share of $14.40 is significantly higher than the industry average of $1.26. Its trailing-12-month levered FCF and EBIT margins of 17.90% and 15.09% are significantly higher than the industry averages of 0.14% and 0.50%, respectively.
For the fiscal third quarter that ended September 30, 2023, INCY’s total revenues and total non-GAAP operating income increased 11.6% and 63.4% year-over-year to $919.03 million and $273.29 million, respectively.
For the same quarter, its non-GAAP net income and non-GAAP net income per share stood at $248.72 million and $1.10, up 85.9% and 83.3% from the prior year quarter, respectively.
Street expects INCY’s revenue and EPS for the fiscal first quarter ending March 2024 to increase 11.9% and 126% year-over-year to $904.75 million and $0.84, respectively. The company surpassed consensus EPS estimates in three of the trailing four quarters.
The stock has gained 9% over the past three months to close the last trading session at $58.77.
INCY’s POWR Ratings reflect its positive prospects. The stock has an overall A rating, equating to a Strong Buy in our proprietary rating system.
INCY has an A grade for Growth, Value, and Quality and a B for Sentiment. Within the same industry, it is ranked first.
To see additional POWR Ratings for Momentum and Stability for INCY, click here.
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.
BNTX shares were unchanged in premarket trading Thursday. Year-to-date, BNTX has declined -9.95%, versus a 1.59% rise in the benchmark S&P 500 index during the same period.
About the Author: Neha Panjwani
From her school days, Neha harbored a profound fascination for finance, a passion that steered her toward a career as an investment analyst following the completion of her bachelor's degree in commerce. Currently enrolled in the CFA program, Neha is dedicated to further enriching her comprehension of investment fundamentals. Neha's primary objective is to aid retail investors in discerning optimal investment opportunities by diligently evaluating crucial aspects of financial instruments, with a primary focus on stocks and ETFs. Her commitment lies in empowering individuals to make informed and strategic investment decisions in the dynamic world of finance.
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