Analyzing 3 Biotech Stocks for 2024 Gain Potential

The momentum of the global biotechnology market is driven by government support, advancements in drug development, and the success of COVID-19 vaccines. Further, expansion into agricultural applications, clinical solutions for chronic diseases, fermentation technology improvements, and exploration of T-cell therapies continue to boost the sector.

Therefore, investors could consider investing in top biotech stocks Amgen Inc. (AMGN), Alkermes plc (ALKS), and Vertex Pharmaceuticals Incorporated (VRTX) for potential profits in 2024.

This year, AI continues to drive drug discovery, and trends like RNA tech, bioprinting, and targeted protein degradation shape biotech innovation, influencing healthcare and therapies. The global AI in the drug discovery market is poised to grow at a CAGR of 40.2% and reach $4.90 billion by 2028.

Besides, global medicine spending is projected to reach $1.90 trillion by 2027, growing at 3% to 6% annually. The biotech sector is expected to represent 35% of global spending in 2027, while oncology spending is forecasted to nearly double to $370 billion by 2027, according to IQVIA. In 2026, the United States is projected to spend between $685 billion and $715 billion on medicine.

Furthermore, in January 2024, pharmaceutical companies increased prices on 910 branded drugs, with a median rise of 4.7%. This comes amid federal efforts to control drug prices, potentially influenced by the Inflation Reduction Act and the American Rescue Plan Act, leading to smaller median price hikes.

On top of it, biotechnological methods such as stem cell technology, DNA fingerprinting, and genetic engineering have garnered substantial attention in recent years. As a result, the global biotechnology market is projected to grow at a CAGR of 14% from 2024 to 2030.

Considering these conducive trends, let’s examine the fundamentals of three Biotech stock picks, beginning with the third choice.

Stock #3: Amgen Inc. (AMGN)

AMGN is a global biotech company discovering and delivering therapeutics across various medical areas. Its product portfolio includes Enbrel, Neulasta, Prolia, and others, addressing conditions like psoriasis, cancer, osteoporosis, and cardiovascular diseases.

AMGN’s trailing-12-month EBITDA margin of 49.57% is 866.3% higher than the industry average of 5.13%. Its trailing-12-month cash per share of $64.92 is significantly higher than the $1.28 industry average.

On December 12, 2023, AMGN declared a $2.25 per share dividend for the first quarter of 2024, payable on March 7, 2024. The company pays $9 annually, which translates to a yield of 2.78% on the prevailing price level.

During the third quarter, which ended September 30, 2023, AMGN’s total revenues rose 3.8% year-over-year to $6.90 billion. The company's non-GAAP net income and operating income increased 5.4% and 3.8% from the prior-year quarter to $2.67 billion and $3.40 billion, respectively. Moreover, its non-GAAP EPS grew 5.5% from the previous-year quarter to $4.96.

The company expects its total revenues to be in the range of $28 billion to $28.40 billion for the fiscal year 2023. Also, its non-GAAP EPS for the same fiscal year is projected to be in the range of $18.20 to $18.80.

AMGN’s revenue and EPS are expected to grow 18.5% and 12.3% year-over-year to $8.11 billion and $4.59, respectively, for the fiscal fourth quarter ended December 2023. The company surpassed the EPS estimates in three of the trailing four quarters, which is notable.

Its shares have gained 40.3% over the past six months to close the last trading session at $323.19.

AMGN’s POWR Ratings reflect its sound 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.

AMGN has an A grade for Quality and a B for Stability. Within the Biotech industry, it is ranked #12 among 349 stocks.

To see AMGN’s additional POWR Ratings for Growth, Value, Momentum, and Sentiment, click here.

Stock #2: Alkermes plc (ALKS)

Based in Dublin, Ireland, ALKS is a global biopharmaceutical company specializing in neuroscience and oncology. Its portfolio includes products for schizophrenia, alcohol and opioid dependence and a pipeline of candidates for neurological disorders and cancer, with collaborations primarily involving Janssen Pharmaceutica.

ALKS’ trailing-12-month EBITDA margin of 18.67% is 264% higher than the industry average of 5.13%. Its trailing-12-month cash per share of $3.89 is 203.7% higher than the $1.28 industry average.

On December 14, 2023, ALKS announced its agreement to sell its Athlone facility to Novo Nordisk A/S (NVO) for $92.50 million, aligning with a pure-play neuroscience focus for operational efficiency and profitability, expected to close mid-2024.

In the fiscal third quarter, which ended September 30, 2023, ALKS’ total revenues increased 51% year-over-year to $380.94 million. Its non-GAAP net income increased significantly from the previous-year quarter to $109.54 million. Also, its non-GAAP EPS rose significantly from the prior-year quarter to $0.64.

As of September 30, 2023, its total assets amounted to $ 2.28 billion, compared to its total assets of $1.96 billion as of December 31, 2022.

For the fiscal year 2023, the company projects its total revenue ranging between $1.55 billion and $1.68 billion. In addition, its non-GAAP net income and EPS are expected to be in the range of $230 million to $270 million and $1.34 to $1.57, respectively.

Street expects ALKS’ revenue to grow 26.1% year-over-year to $362.78 million for the fiscal first quarter ending March 2024. Its EPS for the same quarter is expected to increase significantly from a year-ago quarter to $0.63. The company surpassed the revenue estimates in each of the trailing four quarters.

The stock has gained 8.9% over the past three months to close the last trading session at $26.74.

ALKS’ POWR Ratings reflect its robust prospects. The stock has an overall rating of A, equating to a Strong Buy in our proprietary rating system.

ALKS has an A grade for Growth, Value, and Quality. Within the same industry, it is ranked #10.

In addition to the POWR Ratings stated above, one can access ALKS’ additional Momentum, Stability, and Sentiment ratings here.

Stock #1: Vertex Pharmaceuticals Incorporated (VRTX)

VRTX specializes in developing and marketing cystic fibrosis therapies such as TRIKAFTA/KAFTRIO and KALYDECO. Its pipeline includes treatments for pain, sickle cell disease, AAT deficiency, and various cancer types. The company sells products to specialty pharmacies, distributors, and healthcare institutions.

VRTX’s trailing-12-month EBITDA margin of 47.34% is 822.8% higher than the industry average of 5.13%. Its trailing-12-month cash per share of $43.09 is significantly higher than the $1.28 industry average.

During the third quarter, which ended September 30, 2023, VRTX’s net product revenues increased 6.4% from the prior-year quarter to $2.48 billion. Its non-GAAP net income and net income per diluted common share amounted to $1.06 billion and $4.08, up 2.3% and 1.7% year-over-year, respectively.

As of September 30, 2023, its total assets amounted to $21.73 billion, compared to the total assets of $18.15 billion as of December 31, 2022.

The company anticipates its product revenue to be approximately $9.85 billion for the fiscal year 2023.

Analysts expect VRTX’s revenue and EPS to grow 7.2% and 34.3% year-over-year to $2.55 billion and $4.10, respectively, for the first quarter ending March 2024. The company surpassed the EPS estimates in each of the trailing four quarters.

VRTX’s shares increased 39.8% over the past year and 22.7% over the past nine months to close the last trading session at $424.68.

VRTX’s optimistic 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.

VRTX has an A grade for Quality and a B for Value and Sentiment. Within the same industry, it is ranked #6.

Click here for VRTX’s additional Growth, Momentum, and Stability ratings.

What To Do Next?

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AMGN shares were trading at $319.74 per share on Monday morning, down $3.45 (-1.07%). Year-to-date, AMGN has gained 11.01%, versus a 3.29% rise in the benchmark S&P 500 index during the same period.

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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