The biotech sector is expanding due to innovations and robust demand. Furthermore, the biotech sector enjoys inelastic demand for its products and services and is relatively stable in the face of economic uncertainty.
So, quality biotech stocks Gilead Sciences, Inc. (GILD), Biogen Inc. (BIIB), and Alkermes plc (ALKS) could be worth buying.
Agritech, also known as agricultural biotechnology, refers to the use of scientific techniques and methods to improve plant output.
This has been gaining traction amid the increased use of biotechnology to improve or change the properties of living beings, including plants, creatures, and microbes, in terms of yield, diversity, or size. The global agricultural biotechnology market is expected to grow at a CAGR of 9.4% until 2028.
In addition, the biotechnology market is expected to reach $471.34 million by 2025, growing at a CAGR of 10.5%. Biotechnology in healthcare market is growing driven by declining genome sequencing prices, novel technologies, and government efforts.
Investors’ interest in biotech stocks is evident from the SPDR Series Trust SPDR S&P Biotech ETF (XBI) 14.1% returns over the past three months and 8.5% over the past six months.
Let’s delve deeper into the fundamentals of the stocks.
Gilead Sciences, Inc. (GILD)
GILD is a biopharmaceutical company that discovers, develops, and commercializes medicines in the areas of unmet medical need in the United States, Europe, and internationally.
On June 7, 2023, GILD and AbTherx, Inc., a privately held biotech company focused on accelerating the discovery and development of antibody therapeutics, announced a license agreement under which AbTherx will gain access to GILD's recently acquired novel transgenic mouse technologies, which were developed by three of AbTherx's founders.
GILD’s forward non-GAAP P/E multiple of 11.46 is 43.2% lower than the industry average of 20.17. Its forward EV/EBIT multiple of 10.17 is 39.8% lower than the industry average of 16.89.
GILD’s trailing-12-month EBITDA margin of 46.07% is significantly higher than the industry average of 3.24%. Its trailing-12-month gross profit margin of 79.17% is 41.9% higher than the industry average of 55.78%.
GILD’s operating income increased 765.5% year-over-year for the first quarter that ended on March 31, 2023, to $1.71 billion. The company’s attributable net income came in at $985 million, representing a significant increase year-over-year. Also, its EPS increased significantly from the year-ago value to $0.80.
The consensus revenue estimate of $27.29 billion for the year ending December 2024 represents a 2.2% increase year-over-year. Its EPS is expected to grow 6.4% year-over-year to $7.21 for the same period. It surpassed the EPS estimates in three of four trailing quarters.
GILD’s shares have gained 32.8% over the past year to close the last trading session at $77.71.
GILD’s POWR Ratings reflect this promising outlook. The stock has an overall rating of A, equating to a Strong Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
GILD has an A grade for Value and a B for Stability and Quality. Within the Biotech industry, it is ranked #3 out of 386 stocks. Click here for the additional POWR Ratings for Growth, Momentum, and Sentiment for GILD.
Biogen Inc. (BIIB)
BIIB discovers, develops, manufactures, and delivers therapies for treating neurological and neurodegenerative diseases. It offers TECFIDERA, AVONEX, PLEGRIDY, FAMPYRA, etc., for treating MS; SPINRAZA for SMA treatment; ADUHELM for treating Alzheimer’s; and FUMADERM for the treatment of severe plaque psoriasis.
BIIB’s forward non-GAAP P/E multiple of 19.01 is 5.8% lower than the industry average of 20.17. Its forward Price/CashFlow multiple of 12.73 is 17.8% lower than the industry average of 15.50.
BIIB’s trailing-12-month EBITDA margin of 33.43% is 930.8% higher than the industry average of 3.24%. Its trailing-12-month gross profit margin of 78.35% is 40.5% higher than the industry average of 55.78%.
In the first quarter that ended March 31, 2023, BIIB’s total cost and expenses declined 7.3% year-over-year to $2.02 billion. Also, its net income attributable to BIIB increased 27.7% from the year-ago value to $387.90 million, while its EPS came in at $2.67, representing a 29.6% year-over-year increase.
Analysts expect BIIB’s EPS to increase 6% year-over-year to $16.39 for the year ending December 2024. It surpassed the EPS estimates in all four trailing quarters. The stock has gained 45.6% over the past year to close the last trading session at $293.79.
BIIB’s POWR Ratings reflect its robust outlook. The stock has an overall rating of A, which translates to a Strong Buy in our proprietary rating system.
It is ranked #2 in the same industry. It has an A grade for Value and a B for Growth, Sentiment and Quality. To see additional BIIB’s ratings for Stability, and Momentum, click here.
Alkermes plc (ALKS)
Headquartered in Dublin, Ireland, ALKS is a biopharmaceutical company that researches, develops, and commercializes pharmaceutical products to address the unmet medical needs of patients in various therapeutic areas in the United States, Ireland, and internationally.
ALKS’ forward EV/Sales multiple of 3.70 is 5.5% lower than the industry average of 3.91. Its forward Price/Sales multiple of 3.85 is 11.1% lower than the industry average of 4.33.
ALKS’ trailing-12-month asset turnover ratio of 0.57x is 62.5% higher than the 0.35x industry average. Its trailing-12-month gross profit margin of 80.48% is 44.3% higher than the 55.78% industry average.
ALKS’ total revenues for the quarter ended March 31, 2023, came in at $287.60 million, up 3.2% year-over-year. Its product revenues increased 25.4% year-over-year to $214.73 million. Its non-GAAP net income was $2.42 million for the quarter, while its non-GAAP earnings per share was $0.01.
ALKS’ revenue is expected to increase 26% year-over-year to $1.40 billion for the year ending December 2023. The company’s EPS for the same period is expected to grow 120.6% to $0.75. It surpassed EPS estimates in three of the trailing four quarters. The stock has gained 39.4% over the past nine months to close the last trading session at $32.43.
ALKS has an overall A rating, equating to a Strong Buy in our POWR Ratings system. It has a B grade for Growth, Value, Sentiment and Quality. It is ranked first in the same industry.
Beyond what is stated above, we’ve also rated ALKS for Stability and Momentum. Get all ALKS ratings here.
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GILD shares were trading at $78.19 per share on Wednesday afternoon, up $0.48 (+0.62%). Year-to-date, GILD has declined -7.17%, versus a 14.67% rise in the benchmark S&P 500 index during the same period.
About the Author: Rashmi Kumari
Rashmi is passionate about capital markets, wealth management, and financial regulatory issues, which led her to pursue a career as an investment analyst. With a master's degree in commerce, she aspires to make complex financial matters understandable for individual investors and help them make appropriate investment decisions.
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