The growing demand for efficient and viable drugs, vaccines, and treatments for curing chronic diseases and newly emerging coronavirus variants should accelerate the biotech industry’s growth over the long term. Thus, it might be wise to invest in undervalued biotech stocks Regeneron (REGN), Biogen (BIIB), United Therapeutics (UTHR), and Exelixis (EXEL) with immense potential.
shutterstock.com – StockNews The biotechnology industry is currently focused on developing viable drugs, therapies, and devices with the integration of advanced technology to identify and treat chronic, life-threatening diseases. Also, the emergence of new coronavirus variants is incentivizing companies having a COVID-19 related product pipeline to conduct better research and develop new vaccines with high efficacy.
Moreover, regulatory approvals from FDA and EUA and growing investment and policy support from governments worldwide forecast a bright outlook for the biotech industry in the long run. Investor optimism in this space is evident from the First Trust NYSE Arca Biotechnology Index ETF’s (FBT) 2.9% gains over the past month versus the SPDR S&P 500 Trust ETF’s (SPY) negative returns. The global biotechnology market is expected to grow at 7.7% CAGR and reach $741.7 billion by 2026.
It might be wise to bet on fundamentally sound and undervalued biotech stocks Regeneron Pharmaceuticals, Inc. (REGN), Biogen Inc. (BIIB), United Therapeutics Corporation (UTHR), and Exelixis, Inc. (EXEL) now. The growing investments, advanced R&D, and impressive breakthroughs in the industry should enable these companies to profit substantially next year.
Regeneron Pharmaceuticals, Inc. (REGN)
REGN is a biopharmaceutical company that develops, manufactures, and commercializes medicines to treat severe medical conditions. The company’s marketed products include EYLEA injection, Praluent injection, ARCALYST injection for subcutaneous use, and ZALTRAP injection for intravenous infusion, among others.
REGN has developed REGEN-COV, a single-dose antibody cocktail that has reduced the risk of contracting COVID-19 by 81.6% in a late-stage trial and has stayed effective for up to eight months following the drug’s administration. REGEN-COV is currently FDA-approved for post-exposure prophylaxis (PEP) and is being considered for pre-exposure prophylaxis (PrEP).
On December 8, 2021, the New England Journal of Medicine published positive results from a pivotal Dupixent clinical trial in children aged 6 to 11 years with uncontrolled moderate-to-severe asthma. Developed by REGN and Sanofi S.A. (SNY), Dupixent significantly reduced severe asthma attacks and, within two weeks, rapidly improved lung function in populations with an eosinophilic phenotype. Besides getting the FDA approval, the publication of its clinical trial is likely to help it gain wider recognition across the industry.
REGN’s total revenues for its fiscal third quarter, ended September 30, 2021, increased 50.5% year-over-year to $3.45 billion. The company’s income from operations came in at $1.85 billion, up 75.4% from its year-ago period. While its non-GAAP net income increased 84.4% year-over-year to $1.77 billion, its non-GAAP EPS increased 83.9% to $15.37. As of September 30, 2021, the company had $3.43 billion in cash and cash equivalents.
Analysts expect the stock’s EPS to increase 572.1% year-over-year to $70.75 in the current year. The consensus revenue estimate of $15.44 billion for the current year represents an 81.7% rise from the prior-year period. In addition, it surpassed Street EPS estimates in three of the trailing four quarters. REGN’s EPS is expected to grow at a rate of 13% per annum over the next five years.
The stock has gained 24.9% year-to-date and closed yesterday’s trading session at $603.14. REGN’s 3.63x forward EV/Sales is 37.5% lower than the 5.80x industry average. In terms of forward Price/Sales, REGN is currently trading at 4.19x, 41.1% lower than the industry average of 7.12x.
REGN’s POWR Ratings reflect this promising outlook. The stock has an overall B rating, which equates 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 Sentiment, and a B grade for Growth and Quality. Click here to see the additional ratings for REGN’s Momentum and Stability. REGN is ranked #6 of 469 stocks in the Biotech industry.
Biogen Inc. (BIIB)
BIIB is a biopharmaceutical company that discovers, develops, manufactures, and delivers therapies to people living with serious neurological, rare, and autoimmune diseases. The company products address diseases such as multiple sclerosis, non-Hodgkin’s lymphoma, rheumatoid arthritis, Crohn’s disease, and plaque psoriasis.
On December 14, 2021, BIIB and TheraPanacea, an innovative IT company that leverages AI-based solutions to drive innovation in healthcare, collaborated to focus on multiple therapeutic areas in neuroscience and help improve patient care, accelerate drug development, and understand underlying pathologies of neurological diseases. BIIB is looking forward to benefiting from TheraPanacea’s oncology expertise and nurturing a long-term partnership.
The company had $1.54 billion in cash and equivalents as of September 30, 2021. BIIB surpassed the consensus EPS estimates in three of the trailing four quarters. The stock has lost 3.2% year-to-date and ended yesterday’s trading session at $236.96.
In terms of forward EV/Sales, BIIB is currently trading at 3.59x, 38.2% lower than the 5.80x industry average. In terms of forward Price/Sales, BIIB is currently trading at 3.21x, 55% lower than the industry average of 7.12x.
It is no surprise that BIIB has an overall B rating, which equates to Buy in our POWR Ratings system. The stock has an A grade for Value and a B grade for Quality and Growth. Click here to see the additional ratings for BIIB (Stability, Momentum, and Sentiment). The stock is ranked #7 in the same industry.
United Therapeutics Corporation (UTHR)
UTHR is a biotechnology company that engages in the development and commercialization of products to address the unmet medical needs of patients with chronic and life-threatening diseases internationally. The company is also engaged in early-stage research and development of several organ transplantation-related technologies, including regenerative medicine, xenotransplantation, and ex-vivo lung perfusion.
On October 27, 2021, 3D Systems (DDD) expanded its joint development program with UTHR to combine DDD’s 3D printing expertise with UTHR’s regenerative medicine and organ manufacturing expertise to develop bioprinting of lung scaffolds. This will help the companies influence cell behavior and reproduction for application across multiple human organs. This approach avoids the need for immunosuppression and thus could help the huge unmet medical need for organ transplantation.
UTHR’s total revenues for its fiscal third quarter, ended September 30, 2021, increased 17% year-over-year to $444.70 million. The company’s operating profit came in at $228.70 million, up 3.4% from the prior-year period. UTHR’s non-GAAP net earnings came in at $198 million for the quarter, representing a 14.5% year-over-year improvement. Its non-GAAP EPS increased 7.2% year-over-year to $4.16. The company had $908.50 million in cash and cash equivalents as of September 30, 2021.
Analysts expect the stock’s EPS to grow 3.5% year-over-year to $11.94 in the current year. The consensus revenue estimate of $1.70 billion for the current year represents a 14.3% rise from the prior-year period. Analysts expect the company’s EPS to grow at a rate of 1.5% per annum over the next five years.
The stock has gained 33.2% year-to-date and closed yesterday’s trading session at $202.22. UTHR’s 3.61x forward EV/Sales is 37.8% lower than the 5.80x industry average. In terms of forward Price/Sales, UTHR is currently trading at 5.21x, 26.8% lower than the industry average of 7.12x.
UTHR’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall rating of B, which equates to Buy in our proprietary rating system. UTHR has an A grade for Value, and a B grade for Quality. Click here to see the additional ratings for UTHR (Stability, Growth, Momentum, and Sentiment). UTHR is ranked #12 in the same industry.
Exelixis, Inc. (EXEL)
EXEL is an oncology-focused biotechnology company that focuses on discovering, developing, and commercializing new medicines to treat cancers. The company’s platform also provides therapies to cancer patients with additional treatment options.
On October 14, 2021, EXEL and STORM Therapeutics, an English biopharmaceutical company that discovers a new class of medicines targeting RNA modifying enzymes, entered into an exclusive collaboration and license agreement under which they will discover and advance novel drug leads intended for the treatment of cancer. They will focus initially on ADAR1, advancing STORM’s early work by applying its proprietary RNA epigenetic platform and expanding EXEL’s portfolio of differentiated small molecule therapies in the field of oncology and delivering a first-in-class ADAR1 inhibitor.
EXEL’s total revenues for its fiscal third quarter, ended September 30, 2021, increased 42.1% year-over-year to $328.42 million. The company’s income from operations came in at $51.62 million for the quarter, compared to a loss of $42.58 million in the prior-year period. While its non-GAAP net income increased 475.8% year-over-year to $64.54 million, its non-GAAP EPS increased 400% to $0.20. The company had $567.33 million in cash and cash equivalents as of September 30, 2021.
Analysts expect EXEL’s EPS to rise 42.9% year-over-year to $0.50 in the current year. The consensus revenue estimate of $1.33 billion for the current year represents a 34.9% rise from the prior-year period. EXEL’s EPS is expected to grow at a rate of 46% per annum over the next five years.
The stock has lost 6.9% year-to-date and ended yesterday’s trading session at $18.68. In terms of forward EV/Sales, EXEL is currently trading at 3.30x, 43.1% lower than the 5.80x industry average. In terms of forward Price/Sales, EXEL is currently trading at 4.31x, 39.4% lower than the industry average of 7.12x.
EXEL’s POWR Ratings reflect its solid prospects. The stock has an overall B rating, which equates to Buy in our proprietary rating system. EXEL has an A grade for Value, and a B grade for Quality. In addition to the POWR Ratings grades we have just highlighted, one can see the ratings for EXEL’s Growth, Momentum, Sentiment, and Stability here. EXEL is ranked #15 in the same industry.
REGN shares were unchanged in after-hours trading Tuesday. Year-to-date, REGN has gained 25.60%, versus a 25.06% rise in the benchmark S&P 500 index during the same period.
About the Author: Sweta Vijayan
Sweta is an investment analyst and journalist with a special interest in finding market inefficiencies. She’s passionate about educating investors, so that they may find success in the stock market.
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