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Investment
September 1, 2023 at 10:32 pm
After a strong performance in the first half of 2023, the outlook for the second half of 2023 looks upbeat for the biotech industry as the world navigates a cautiously uncertain macroeconomic environment. Most of the companies in this sector performed better than expected in the second quarter. Furthermore, the outlook provided by the companies indicates bright prospects now due to new drug approvals and positive pipeline updates. With the pandemic left behind, biotech companies are looking to strengthen their product portfolio and pipeline through collaborations and buyouts. Hence, M&A is again in limelight. Given the continuing need for innovative medical treatments regardless of the state of the economy, the biotech industry could be a haven despite the inherent volatility and uncertain macroeconomic environment.
biotech companies like Exelixis, Inc. excel, dynavax DVAX, Arcelux, Inc. aclx, ANI Pharmaceuticals, Inc., ANIP and Wanda Pharmaceuticals, Inc., VNDA is poised to outperform volatile territory.
industry details
The Jax Biomedical and Genetics industry is comprised of biopharmaceutical and biotechnology companies that develop high-profile medicines using leading-edge technology. These biologically processed drugs, which address virology, neurology, metabolism and rare diseases, are manufactured using living organisms. As technology becomes paramount to improving global health, the main goal of biotech companies is to create successful treatments using innovative technology. Many companies in this field are developing vaccines as well using modern technology. Given the dynamic and evolving nature of technology, this sector is considered riskier than the more stable large-cap pharma or pharmaceutical industry.
4 trends shaping the future of the biotech industry
Innovation, execution is the key: Since only a few companies in this industry have approved drugs in their portfolio, the focus is primarily on the performance of high-profile drugs and pipeline development. Most companies spend hundreds of millions of rupees to make drugs with cutting edge technology, which leads to significant research and development expenditure. Therefore, it takes many years for a biotech company to become profitable. Additionally, successful commercialization is key to high drug consumption, as smaller biotechs typically lack the funding and expertise to reach target populations. This, in turn, has prompted collaboration deals with pharma or biotech giants, wherein sales are shared or royalties are received. Furthermore, it can take years for any newly-approved drug to make a significant contribution to its company’s top line.
M&A in the limelight: Consolidation has always been central to the biotech industry. This is because major pharma/biotech companies seek to diversify their revenue base despite declining sales of high-profile drugs. While the scale and pace of M&A activity has slowed down over the past few years, pharma and pharma/biotech giants are looking to strengthen their portfolios. Cash flow from big pharma further propels the biotech sector. Novartis recently acquired Chinook Therapeutics. Biogen recently announced that it will acquire Rita Pharmaceuticals, Inc. for $7.3 billion. will acquire While oncology and immuno-oncology are major focus areas, there is also potential in obesity treatment, rare diseases and gene-editing companies, making them attractive investment areas. An attractive pipeline candidate is the main attraction for these companies. Cost synergies in research and development are additional benefits, as some smaller biotech companies are using innovative technologies to develop drugs and therapies.
Approval of new drug increased the possibilities: With the pandemic wreaking havoc and the past few years primarily focused on coronavirus treatments, the industry saw a slowdown in new drug approvals for other diseases. Nevertheless, with increasing R&D spending and a desire by most companies to diversify, new drug approvals are likely to accelerate.
Pipeline Failures and Harm to CompetitionPipeline failures are major stumbling blocks for biotech companies, given the exorbitant cost of developing drugs using expensive technology. Most drugs/treatments take years to get regulatory approval. An adverse result from a pivotal trial on a promising candidate is a major blow, especially for smaller biotechs, which are mostly one-trick ponies. The leading biotech is facing other headwinds, including declining sales of high-profile drugs due to increased competition.
Zacks Industry Rank indicates good outlook
The Zacks Industry Rank of a group is basically the average of the Zacks Ranks of all member stocks.
The Zacks Biomedical & Genetics industry currently ranks at Zacks Industry Rank #93, placing it in the top 37% of over 252 Zacks industries. This rank reflects a bright outlook for the sector, perhaps due to the continued demand for better medical drugs/treatments. Our research shows that the top 50% of Jack-ranked industries outperform the bottom 50% by a factor of 2 to 1.
Before we present some biotech stocks that are well positioned to beat the industry based on a strong portfolio/pipeline, let’s take a look at the stock market performance and current valuations of the industry.
Industry vs. S&P 500 and Sector
Jax Biomedical & Genetics Industries is a 481-stock conglomerate within the broader Jax Medical sector. It has so far underperformed the S&P 500 Composite and the Zacks Medical sector.
Shares in this industry declined 11.8%, compared to a 3.7% decline in the Zacks Medical sector and an 18.6% gain in the S&P 500 Composite.
current assessment of the industry
Since most companies in the biotech sector do not have approved drugs, valuing these companies becomes a complicated process. Based on the trailing 12-month price-to-sales ratio (P/S TTM), which is commonly used to evaluate biotech companies with an approved portfolio of drugs, the industry currently trades at 2.37 compared to the S&P 500’s 3.85. Doing business at X. And 2.79 of Jax Medical Sector.
Over the past five years, the industry has traded at a high of 3.46X, a low of 1.82X and an average of 2.64X.
5 biotech stocks worth buying
vandaThe commercial portfolio includes two products – Hetlioz for the treatment of non-24-hour sleep-wake disorders and nocturnal sleep disorders in Smith-Magenis syndrome and Fanapt for the treatment of schizophrenia. While the Hetlioz franchise faces the risk of generic launches, the company is working on expanding the label of approved drugs to address these challenges. Furthermore, it has a deep and promising pipeline and successful growth will propel the company.
Wanda currently plays Jax Ranked #1 (Strong Buy). The Zacks consensus estimate for a per-share loss for 2023 has declined to 44 cents and 78 cents for 2024 over the past 60 days.
ANI Pharmaceuticals is a diversified biopharmaceutical company that develops, manufactures and markets high quality branded and generic prescription pharmaceutical products. The established and general segments continue to perform well. The launch of Purified Cortrophin Gel has been strong with a record number of new patient starts and new case launches. The company is looking to increase the scope and scale of its rare disease portfolio through M&A and in-licensing. Along with second-quarter earnings, the company also raised its annual guidance.
ANIP shares have gained 60.1% so far this year. Earnings estimates for 2023 have risen 34 cents over the last 30 days to $3.73 and for 2024 have risen 23 cents to $4.35. ANIP currently holds the Zacks Rank #2 (Buy).
dynavaxA commercial scale biopharmaceutical company developing and commercializing innovative vaccines against infectious diseases. It has two commercial products, the HEPLISAV-B vaccine (hepatitis B vaccine). [Recombinant]adjuvant), which is approved in the United States and the European Union for the prevention of infection caused by all known subtypes of hepatitis B virus in adults 18 years of age and older, and CPG 1018 adjuvant, currently in several adjuvant Used in COVID- 19 Vaccine.
HEPLISAV-B has maintained a strong market share and the company is also working to expand its label.
Dynavax is also advancing CPG 1018 adjuvant as a lead vaccine adjuvant through global research collaborations and partnerships for COVID-19, seasonal influenza, universal influenza, plague, shingles and Tdap. Focuses on vaccines.
Loss estimates for 2023 are down from 51 cents for 2023 to 24 cents, while earnings estimates for 2024 currently stand at 2 cents per share. The company currently holds a Zacks Rank #2.
ExelixisThe oncology-focused company continues to maintain momentum on the back of its lead drug, Cabometex (cabozantinib). Cabozantinib tablets are approved under the brand name Cabometax in the United States for the treatment of patients with advanced renal cell carcinoma (RCC) and hepatocellular carcinoma who have previously been treated with sorafenib as first-line therapy in combination As with Opdivo for patients with advanced RCC. Driven by its use in combination with Opdivo in the first-line setting, cabometex maintained its position as the leading tyrosine kinase inhibitor for the treatment of RCC. Exelixis is also striving to develop the drug for additional indications as well as develop additional drugs.
EXEL shares have gained 39.6% year to date. The earnings estimate for 2023 has increased 9 cents over the past 60 days to 98 cents. The company is currently at Zacks Rank #2.
arceluxA clinical-stage biotechnology company engineering innovative immunotherapies for patients with cancer and other incurable diseases. These treatments have potential given their novelty. Its lead product candidate, CART-ddBCMA, is being developed for the treatment of relapsed or refractory multiple myeloma (RRMM). Arcelux is also advancing its doseable and controllable CAR-T therapy, ARC-SparX, through two clinical-stage programs – the Phase I study of ACLX-001 for RRMM, initiated in the second quarter of 2022, and ACLX-002 in relapsed or refractory acute myeloid leukemia and high-risk myelodysplastic syndrome. The company has also entered into a partnership agreement with Gilead company Kite for CART-ddBCMA.
Arcelux is ranked #2 by Jacques. The company’s shares have gained 15.7% so far this year.
Exelixis, Inc. (EXEL): Free Stock Analysis Reports
Dynavax Technologies Corporation (DVAX): Free Stock Analysis Report
Wanda Pharmaceuticals Inc. (VNDA): Free Stock Analysis Report
ANI Pharmaceuticals, Inc. (ANIP): Free Stock Analysis Report
Arcelux, Inc. (ACLX): Free Stock Analysis Reports
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Jax Investment Research
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