Top 3 Biotech Stocks Leading the Way This October

The biotech industry is thriving, driven by innovation and stable demand, positioning it for sustained growth. Despite macroeconomic challenges, this positive outlook is supported by an aging population and the demand for quality treatments for both rare and common diseases.

Therefore, it could be wise to invest in fundamentally strong biotech stocks Jazz Pharmaceuticals plc (JAZZ), Amgen Inc. (AMGN), and Gilead Sciences, Inc. (GILD) this month.

Before diving deeper into their fundamentals, let’s discuss why the biotech industry is well-positioned for growth.

Biotechnology has numerous profitable applications, particularly in healthcare. It is expected to drive groundbreaking advances in precision medicine, gene therapies, and regenerative medicines, ensuring sustained growth in the sector.

The biotech industry initially surged during the pandemic with COVID-19 vaccines but slowed down recently as investor interest waned. However, it holds substantial long-term growth potential through ongoing research and clinical trials for new treatments and personalized medicines.

The industry shows promise with robust drug pipelines. The global biotechnology market is projected to grow at a CAGR of 14.2%, reaching $2.77 trillion by 2030.

Furthermore, the cancer drugs market is set for strong growth driven by aging demographics, increased cancer cases, and personalized treatment demand. Government policies and healthcare spending will play a crucial role. Projections suggest that the oncology drugs market will reach $188.20 billion in 2023, with a 13.9% CAGR, reaching $361.60 billion by 2028.

Investor interest in biotech stocks is evident from the VanEck Vectors Biotech ETF's (BBH) 12% returns over the past year.

Considering these conducive trends, let’s analyze the fundamental aspects of the three Biotech picks, beginning with the third choice.

Stock #3: Jazz Pharmaceuticals plc (JAZZ)

JAZZ identifies, develops, and commercializes pharmaceutical products for unmet medical needs in the United States, Europe, and internationally. The company has a portfolio of products and product candidates focusing on neuroscience, including sleep medicine and movement disorders, and oncology, such as hematologic and solid tumors.

On September 21, 2023, JAZZ announced that the European Commission had granted marketing authorization for Enrylaze (JZP458) to treat acute lymphoblastic leukemia (ALL) and lymphoblastic lymphoma (LBL) in patients with hypersensitivity or silent inactivation to E. coli-derived asparaginase. This approval applies to European Union Member States, Iceland, Norway, and Liechtenstein.

On August 2, 2023, JAZZ announced that it had entered into a Letter of Intent (LOI) with the Pan-Canadian Pharmaceutical Alliance (pCPA) for Rylaze in Canada, enabling access for eligible patients.

Rylaze is vital for acute lymphoblastic leukemia and lymphoblastic lymphoma treatment when E. coli-derived asparaginase hypersensitivity occurs. This addresses incomplete treatments and offers a sustainable solution backed by Rylaze's Phase 2/3 efficacy and safety results.

In terms of the trailing-12-month EBITDA margin, JAZZ’s 43.03% is 717.3% higher than the 5.26% industry average. Likewise, its 92.09% trailing-12-month gross profit margin is 65.4% higher than the 55.67% industry average. Likewise, its 26.80% trailing-12-month EBIT margin is significantly higher than the 0.53% industry average.

For the fiscal second quarter that ended June 30, 2023, JAZZ’s total revenues increased 2.6% year-over-year to $957.32 million. Its non-GAAP net income rose 6.4% from the prior-year period to $325.13 million.

The company’s income from operations rose 84.3% year-over-year to $157.64 million. Moreover, its adjusted earnings per share increased 4.9% from the year-ago value to $4.51.

Analysts expect JAZZ’s EPS for the quarter ending March 2024 to increase 14.4% year-over-year to $4.52. Its revenue for the quarter ended September 2023 is expected to increase 3% year-over-year to $968.56 million. Over the past three months, the stock has gained 3% to close the last trading session at $127.73.

JAZZ’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 #5 out of 356 stocks in the Biotech industry. It has an A grade for Value and a B for Growth and Quality. Click here to see JAZZ’s Momentum, Stability, and Sentiment ratings.

Stock #2: Amgen Inc. (AMGN)

AMGN discovers, develops, manufactures, and delivers human therapeutics worldwide. It focuses on inflammation, oncology/haematology, bone health, cardiovascular disease, nephrology, and neuroscience areas. Its product portfolio includes Enbrel, Neulasta, Prolia, and Xgeva.

On September 20, 2023, AMGN launched Amgen Partners of Choice, a global network that collaborates with eight research centers worldwide, including Dana-Farber Cancer Institute, to advance treatment options for patients with unmet needs in oncology. The network aims to expedite the development of new programs in areas like thoracic, gastrointestinal, and genitourinary cancers.

Jean-Charles, Senior VP, Research and Development at AMGN, said, "We have a big goal – to make profound differences in changing the standard of cancer care – and we are committed to doing that through collaboration. Through Amgen Partners of Choice, we hope to foster earlier, deeper and more frequent academic collaboration to fuel quicker progress for patients facing complex, difficult-to-treat cancers."

On June 4, 2023, AMGN announced new data from the CodeBreaK clinical trial program, emphasizing the effectiveness of LUMAKRAS/LUMYKRAS (sotorasib) in advanced non-small cell lung cancer (NSCLC) and metastatic colorectal cancer (mCRC).

Additionally, the company presented data from the SCARLET study, demonstrating the safety and efficacy of sotorasib in combination with platinum-based chemotherapy for frontline treatment of advanced NSCLC with a KRAS G12C mutation.

In terms of the trailing-12-month EBITDA margin, AMGN’s 51.78% is 883.5% higher than the 5.26% industry average. Likewise, its 74.29% trailing-12-month gross profit margin is 33.5% higher than the 55.67% industry average. Its 38.44% trailing-12-month EBIT margin is significantly higher than the 0.53% industry average.

AMGN’s total revenues for the fiscal second quarter that ended June 30, 2023, increased 5.9% year-over-year to $6.99 billion. Its non-GAAP operating income increased 5.4% from the same period last year to $3.52 billion.

The company's non-GAAP net income increased 7.5% year-over-year to $2.68 billion. Also, its non-GAAP EPS came in at $5, representing an increase of 7.5% from the prior-year quarter.

Street expects AMGN’s EPS for the quarter ending December 2023 to increase 15.4% year-over-year to $4.72. Its revenue for the quarter that ended September 2023 is expected to increase 4% year-over-year to $6.92 billion. It surpassed the consensus EPS estimates in each of the three trailing quarters. Over the past three months, the stock has gained 20% to close the last trading session at $266.31.

It’s no surprise that AMGN has an overall rating of A, which translates to a Strong Buy in our proprietary rating system.

It has an A grade for Quality and a B for Stability and Sentiment. Within the same industry, it is ranked #3. Beyond what we stated above, we also have given AMGN grades for Growth, Value, and Momentum. Get all AMGN ratings 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.

On September 10, 2023, GILD announced promising early data from the Phase 2 EVOKE-02 study results, indicating the efficacy of Trodelvy combined with Merck's KEYTRUDA in treating non-small cell lung cancer (NSCLC) without genomic alterations. The study displayed promising response rates and safety profiles in two cohorts.

The use of Trodelvy and its combination with KEYTRUDA are still investigational and await regulatory approval.

On August 24, 2023, GILD announced that the FDA approved Veklury without dose adjustments for COVID-19 treatment in individuals with mild to severe hepatic impairment, reaffirming its safety across all stages of liver disease. This approval extends Veklury's reach as the sole antiviral COVID-19 treatment usable throughout liver disease stages.

Frank Duff, MD, Senior Vice President, Virology Therapeutic Area Head at GILD, said, “With the recent increase in levels of COVID-19 circulating in the U.S., the risk to vulnerable individuals persists, including for those with hepatic impairment. This approval demonstrates Gilead’s ongoing commitment to COVID-19, including our focus on vulnerable populations.”

In terms of the trailing-12-month EBIT margin, GILD’s 37.75% is significantly higher than the 0.53% industry average. Likewise, its 35.14% trailing-12-month levered FCF margin is significantly higher than the 0.25% industry average. Additionally, its 0.44x trailing-12-month asset turnover ratio is 15.8% higher than the 0.38x industry average.

GILD’s revenues for the fiscal second quarter (ended June 30, 2023) rose 5.4% year-over-year to $6.60 billion. The company’s non-GAAP operating income came in at $2.28 billion. Its non-GAAP net income attributable to GILD came in at $1.69 billion.

Also, its net cash provided by operating activities increased 29.7% year-over-year to $2.34 billion. Additionally, its non-GAAP EPS came in at $1.34.

For the quarter ended September 2023, GILD’s EPS is expected to increase 0.5% year-over-year to $1.91. Its revenue for the quarter ending March 2024 is expected to increase 1.8% year-over-year to $6.47 billion. Over the past year, the stock has gained 25.2% to close the last trading session at $78.21.

GILD’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 for Growth, Stability, and Quality. It is ranked first in the Biotech industry. To see GILD’s ratings for Momentum and Sentiment, click here.

What To Do Next?

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AMGN shares were trading at $261.23 per share on Tuesday afternoon, down $5.08 (-1.91%). Year-to-date, AMGN has gained 2.11%, versus a 11.63% rise in the benchmark S&P 500 index during the same period.

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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