Thanks to the global COVID-19 vaccination drive and inelastic demand for healthcare, biotechnology stocks have been outperforming the broader markets so far this year. Because this trend will likely continue, we think investing in popular biotech stocks Regeneron Pharmaceuticals (REGN), Exelixis (EXEL), Jazz Pharmaceuticals (JAZZ), Alkermes (ALKS), and Incyte Corp. (INCY) could be wise. Let’s discuss.
The COVID-19 pandemic has created massive opportunities for biotechnology companies to develop treatments and vaccines. Governments worldwide have made large investments to mitigate the public health crisis through mass vaccinations. The substantial private and public sector investments coupled with rapid tech integration have allowed major biotech companies to expand their product portfolios tremendously over the past year.
Advancements in biotechnology have delivered new ways of treating and preventing major life-threatening diseases. And given the inelastic demand for healthcare products and medicines, the biotech industry is expected to perform well in the near term, despite the potential recession. According to Precedence Research, the biotechnology market’s size is expected to surpass $1.68 trillion by 2030, growing at an 8.7% CAGR.
Despite surging market volatility, fundamentally strong biotech stocks Regeneron Pharmaceuticals, Inc. (REGN), Exelixis, Inc. (EXEL), Jazz Pharmaceuticals plc (JAZZ) Alkermes plc (ALKS), and Incyte Corporation (INCY) have been gaining momentum of late.
Click here to checkout our Healthcare Sector Report for 2022
Regeneron Pharmaceuticals, Inc. (REGN)
REGN in Westchester County, NY, discovers, invents, develops, manufactures, and commercializes medicines for treating various diseases. Its product portfolio includes EYLEA, Dupixent, Libtayo, Praluent, REGEN-COV, Kevzara solution, and ARCALYST, among other injections.
On April 19, REGN agreed to acquire Checkmate Pharmaceuticals, Inc. (CMPI). The acquisition should strengthen its portfolio and help it accentuate its cancer treatment research.
On April 14, the European Commission approved the use of Dupixent for children aged 6 to 11 years with severe asthma and type 2 inflammation in Europe. The approval was based on Phase 3 trials, which significantly reduced severe asthma attacks and improved lung function among the children.
In November, the company’s new phase 3 analyzes showed that a single dose of REGEN-COV provides long-term protection against COVID-19. It reduced the risk of COVID-19 by 81.6% during the pre-specified follow-up period (months 2-8), maintaining the 81.4% risk reduction during the first month.
In its fiscal fourth quarter (ended Dec. 31, 2021), REGN’s net revenues increased 104% year-over-year to $4.95 billion. Its non-GAAP net income increased 151% from its year-over-year value to $2.71 billion, while its income from operations grew 126.2% year-over-year to $2.64 billion. The company’s non-GAAP EPS came in at $23.72, representing a 149% year-over-year improvement.
The $9.91 consensus EPS estimate for its fiscal first quarter (ended March 31, 2022) represents a 0.2% improvement year-over-year. The $2.71 billion consensus revenue estimate for the about-to-be-reported quarter represents a 7% increase from the same period last year. The company has an excellent earnings surprise history; it surpassed the consensus EPS estimates in each of the trailing four quarters. REGN stock has gained 13.4% in price year-to-date.
REGN’s POWR Ratings reflect this promising outlook. The company has an overall B rating, which translates to Buy in our proprietary rating system. The POWR Ratings assesses stocks by 118 distinct factors, each with its own weighting.
REGN has a B grade for Value and Quality. Within the Biotech industry, it is ranked #26 of 402 stocks.
To see additional POWR Ratings for Growth, Stability, Sentiment, and Momentum for REGN, click here.
Exelixis, Inc. (EXEL)
EXEL is an oncology-focused biotech company engaged in discovering, developing, and marketing new medicines for cancer treatment. Its products include CABOMETYX tablets for advanced renal cell carcinoma, COMETRIQ capsules for thyroid cancer, COTELLIC for advanced melanoma, and MINNEBRO for hypertension. EXEL is headquartered in San Francisco.
On March 25, based on results from COSMIC-311, the phase 3 pivotal trial EXEL’s partner, Ipsen, received a positive opinion from CHMP for CABOMETYX (cabozantinib) for patients with previously treated radioactive iodine-refractory differentiated thyroid cancer. This positive recommendation could lead to the availability of a standard treatment option in Europe.
EXEL’s net revenues increased 67.1% year-over-year to $451.14 million in the fourth quarter, ended Dec. 31, 2021. The company’s non-GAAP net income increased 161.6% from the year-ago value to $113.32 million, while its income from operations grew 380.1% year-over-year to $116.64 million. EXEL’s non-GAAP EPS rose 150% from the prior-year quarter to $0.35.
Analysts expect EXEL’s EPS and revenue to increase 18.1% and 11.5%, respectively, year-over-year to $0.85 and $1.60 billion in the current year ending Dec. 31, 2022. EXEL stock has gained 24.5% in price year-to-date to close yesterday’s trading session at $22.76.
EXEL has an overall A rating, which translates to Strong Buy in our proprietary rating system. It is no surprise that EXEL has an A grade for Value and Quality and a B grade for Growth and Sentiment. In the Biotech industryit is ranked #4 of 402 stocks.
Beyond what we have stated above, we have also given EXEL grades for Momentum and Stability. Get all the EXEL ratings here.
Jazz Pharmaceuticals plc (JAZZ)
JAZZ is a biopharmaceutical company that is focused on developing and commercializing products that address various unmet medical needs. Its leading products include Xyrem for cataplexy and excessive daytime sleepiness; Sunosi for EDS and obstructive sleep apnea; Erwinaze for acute lymphoblastic leukemia; Defitelio for hepatic veno-occlusive disease; and Zepzelca for small cell lung cancer. JAZZ is headquartered in Dublin, Ireland.
On April 7, JAZZ and Werewolf Therapeutics, Inc. (HOWL) entered a global license and collaboration agreement to develop WTX-613. This collaboration should expand JAZZ’s robust oncology pipeline and the company’s immuno-oncology opportunities.
On March 25, the company, with its subsidiary GW Pharmaceuticals, announced the construction of its new, state-of-the-art manufacturing facility at Kent Science Park. This expansion should support the UK’s manufacture of regulatory-approved cannabis-based medicines.
During its fiscal year 2021 fourth quarter (ended Dec. 31, 2021), JAZZ’s net revenues increased 34.7% year-over-year to $896.73 million. Its non-GAAP adjusted net income rose 14.6% from its year-ago value to $262.01 million, while its non-GAAP adjusted EPS came in at $4.21, representing a 5.3% year-over-year increase.
For its fiscal second quarter (ending June 30, 2022), JAZZ’s EPS and revenue are expected to increase 13.8% and 20.9%, respectively, year-over-year to $4.44 and $909.02 million It surpassed the consensus EPS estimates in each of the trailing four quarters, which is impressive. The stock has gained 30.7% in price year-to-date to close the last trading session at $166.54.
JAZZ has a B grade for Growth and Value. The stock is ranked #33 of 402 stocks in the Biotech industry.
Click here to see the other ratings of JAZZ for Momentum, Stability Sentiment, and Quality.
Alkermes plc (ALKS)
Dublin, Ireland-based ALKS researches, develops, and commercializes pharmaceutical products to address patients’ medical needs in therapeutic areas. The company’s marketed products include ALKERMES, ARISTADA, ARISTADA INITIO, LinkeRx, LYBALVI, NanoCrystal, and VIVITROL.
On February 8, ALKS announced positive results from ENLIGHTEN-Early, a phase 3b study of LYBALVI in patients early in the illness. LYBALVI resulted in less weight gain compared to olanzapine in patients with schizophrenia, schizophreniform disorder, or bipolar I disorder. Such positive results reinforce the potential of LYBALVI as a new treatment option for patients.
ALKS’ total revenue increased 15.9% year-over-year to $324.46 million in its fiscal fourth quarter (ended Dec. 31, 2021). Its non-GAAP net income grew 133.1% from the year-ago value to $38.55 million, while its operating income improved 107.8% year-over-year to $2.38 million over the period. The company’s non-GAAP EPS increased 130% from the year-ago value to $0.23.
Analysts expect ALKS’s revenues to increase 3.4% year-over-year to $259.88 million in its fiscal first quarter (ended March 31, 2022). The company has surpassed the consensus EPS estimates in three of the trailing four quarters. The stock has gained 22.4% in price year-to-date, to close yesterday’s trading session at $28.48.
ALKS’ strong fundamentals are reflected in its POWR Ratings. The stock has an overall A rating, which equates to a Strong Buy in our POWR Ratings system. ALKS also has an A grade for Growth and a B grade for Value, Sentiment, and Quality. The stock is ranked #6 of 402 stocks in the Biotech industry.
Click here to see the other ratings of ALKS for Stability and Momentum.
Incyte Corporation (INCY)
INCY specializes in the development and commercialization of therapeutics in the United States. The Wilmington, Del., company operates in two therapeutic areas: Hematology/Oncology; and Inflammation and Autoimmunity. It offers JAKAFI (ruxolitinib), MONJUVI (tafasitamab-cxix)/MINJUVI (tafasitamab), PEMAZYRE (pemigatinib), ICLUSIG (ponatinib), OPZELURA (ruxolitinib) cream and other clinical development programs.
On March 26, INCY announced that nearly 40% of adults with severe alopecia area taking OLUMIANT 4-mg saw at least 80% scalp hair coverage at 52 weeks in Eli Lilly and Company’s (LLY) pivotal phase 3 studies. Such positive results could make OLUMIANT the first-ever medicine for the treatment of alopecia areata.
On March 25, the company announced CHMP’s recommendation approval of ruxolitinib for treating acute or chronic GVHD patients aged 12 and older. With this positive opinion, ruxolitinib could become the first JAK1/2 inhibitor in Europe.
During its fiscal year 2021 (ended December 31), INCY’s net revenues increased 12% year-over-year to $2.99 billion. The company’s non-GAAP net income improved 776.1% year-over-year to $611.98 million, while its non-GAAP EPS grew 757.1% from the prior-year quarter to $2.76.
Analysts expect INCY’s revenues to increase 24.3% year-over-year to $751.49 million in its fiscal first quarter (ended March 31, 2022). Its EPS is expected to increase 2.8% to $0.69 in the about-to-be-reported quarter. INCY also has an impressive surprise earnings history; it surpassed the consensus EPS estimates in three of the trailing four quarters. Shares of INCY have gained 8.3% in price year-to-date.
INCY’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall A rating, which equals Strong Buy in our proprietary rating system. INCY also has an A grade for Sentiment and a B grade for Value and Quality. The stock is ranked #2 among 402 stocks in the Biotech industry.
In addition to the POWR Ratings I have just highlighted, click here to see the INCY ratings for Growth, Momentum, and Stability.
Click here to checkout our Healthcare Sector Report for 2022
REGN shares were trading at $719.42 per share on Wednesday afternoon, up $3.20 (+0.45%). Year-to-date, REGN has gained 13.92%, versus a -5.99% 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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