The biotech sector is primed for growth, fueled by a surge in FDA approvals, anticipated M&A deals, and the integration of AI in drug discovery. So, fundamentally sound biotech stocks Theratechnologies (THTX), Harmony Biosciences (HRMY), and Shionogi & Co. (SGIOY) might be solid buys in this month. Keep reading.
The biotech industry is thriving, driven by the burgeoning market for innovative therapies and advancements in biotechnological research. Hence, investors could consider investing in quality biotech stocks Theratechnologies Inc. (THTX), Harmony Biosciences Holdings, Inc. (HRMY), and Shionogi & Co., Ltd. (SGIOY) this month.
The U.S. Food and Drug Administration approved nearly 50% more novel drugs in 2023 compared to 2022, returning to historical approval rates. Analysts and investors anticipate this improvement could spur increased investment in biotech firms. Moreover, this year, the biotech industry expects significant growth in targeted protein degradation research and anticipates M&A deals to reach $225 billion to $275 billion.
As a result, the global biotech industry is expected to reach $465.90 billion this year. Looking ahead, the global biotechnology market is expected to reach $5.01 trillion by 2032 at a CAGR of 13.8%.
Furthermore, AI remains pivotal in driving advancements in drug discovery and treatment repurposing, facilitating a more targeted application of AI within biotechnology. Projections indicate that the global AI in drug discovery market will grow at a CAGR of 40.2%, reaching $4.90 billion by 2028.
Here’s a closer look at three promising Biotech stocks poised to thrive in the current market environment, beginning with the third choice:
Stock #3: Theratechnologies Inc. (THTX)
Headquartered in Montreal, Canada, THTX is a biopharmaceutical company focused on developing and commercializing various therapies addressing unmet medical needs. The company commercializes two medicines in Human Immunodeficiency Viruses (HIV) and has research programs in Non-Alcoholic Steatohepatitis (NASH), Oncology, and HIV.
On April 8, 2024, THTX presented preclinical data at the AACR annual meeting, showcasing the versatility of their SORT1+ Technology™ platform. The study revealed promising results for investigational camptothecin-peptide conjugates in treating colorectal cancer and triple-negative breast cancer xenograft models.
These conjugates demonstrated significant tumor regression and good tolerability, indicating potential as novel cancer therapies.
On March 22, THTX announced that it was scaling back its preclinical oncology research to focus on its Phase 1 clinical trial of sudocetaxel zendusortide for advanced ovarian cancer.
In the fiscal first quarter that ended February 29, 2024, THTX generated $16.25 million worth of consolidated revenues. Its general and administrative expenses fell 15.6% year-over-year to $3.76 million.
As of February 29, 2024, the company’s cash amounted to $32.24 million, and bonds and money market funds amounted to $6.21 million.
For the fiscal year 2024, the company expects its revenue to fall between $87 million and $90 million, reflecting a growth rate of 6.4% to 10% compared to 2023. Additionally, adjusted EBITDA is projected to be between $13 million and $15 million.
Street expects THTX’s revenue to rise 23.5% year-over-year to $21.80 million in the fiscal second quarter in the fiscal second quarter ending May 2024. Its EPS is likely to grow 91.6% year-over-year in the same quarter.
The stock has soared 4.8% over the past month to close the last trading session at $1.34.
THTX’s POWR Ratings reflect its promising outlook. The stock has an overall rating of B, which translates to a Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
The stock has an A grade for Growth and a B for Value and Sentiment. It is ranked #24 in the 393-stock Biotech industry.
Beyond what is stated above, we’ve also rated THTX for Quality, Momentum, and Stability. Get all THTX ratings here.
Stock #2: Harmony Biosciences Holdings, Inc. (HRMY)
HRMY is a commercial-stage pharmaceutical company that focuses on developing and commercializing therapies for patients in the United States with rare and other neurological diseases. It offers WAKIX (pitolisant), a molecule with a novel mechanism of action for treating excessive daytime sleepiness in adult patients with narcolepsy.
On April 11, HRMY entered into an exclusive licensing agreement with Bioprojet to develop, manufacture, and commercialize TPM-1116, an oral orexin-2 receptor agonist for narcolepsy and other sleep/wake disorders. TPM-1116 is a highly potent and selective agonist representing a new chemical series with the potential for a best-in-class clinical profile.
This agreement addresses the significant unmet medical need in narcolepsy and hypersomnolence disorders, further solidifying HRMY’s leadership in the sleep/wake space and commitment to innovative treatments for patients.
On April 3, HRMY initiated its global Phase 3 registrational trial, the TEMPO study, to evaluate the safety and efficacy of pitolisant as a treatment for excessive daytime sleepiness (EDS) and behavioral symptoms in patients aged six years and older with Prader-Willi syndrome (PWS).
HRMY’s net product revenue for the fourth quarter, which ended December 31, 2023, grew 31.3% year-over-year to $168.41 million. Its gross profit increased 23.5% from the year-ago value to $125.26 million. Also, the company’s non-GAAP net income and EPS were $42.83 million and $0.73, respectively.
The company’s revenue and EPS are expected to increase 29.8% and 28.3% year-over-year to $154.68 million and $0.62 in the fiscal first quarter ended March 2024, respectively. The company has exceeded its consensus revenue estimates in three of the trailing four quarters, which is notable.
HRMY shares have soared 26.3% over the past six months to close the last trading session at $29.19.
HRMY’s POWR Ratings reflect this bright outlook. The stock has an overall rating of B, equating to a Buy in our proprietary rating system.
HRMY has an A grade for Value and Quality. Within the same industry, it is ranked #22.
To see HRMY’s additional ratings for Growth, Momentum, Stability, and Sentiment, click here.
Stock #1: Shionogi & Co., Ltd. (SGIOY)
Headquartered in Osaka, Japan, SGIOY researches, develops, manufactures, and distributes pharmaceuticals, diagnostic reagents, and medical devices in Japan.
On April 15, SGIOY announced that its subsidiary, Taiwan Shionogi, had received approval for Xofluza® (baloxavir marboxil) to treat and prevent influenza in children aged 5 to <12 years in Taiwan. Xofluza was previously available for adults and children ≥12 years old.
This expansion offers a new option for managing influenza in younger children, aligning with Shionogi’s commitment to combat infectious diseases.
On April 11, SGIOY’s European arm, Shionogi B.V., announced that the European Commission had designated zatolmilast (BPN14770) as an Orphan Medicinal Product for Fragile X syndrome (FXS). FXS is a leading cause of inherited intellectual disability and autism, affecting a significant number of individuals in Europe.
This designation is reserved for treatments addressing life-threatening or debilitating conditions with a prevalence of fewer than 5 in 10,000 individuals.
Its annualized dividend rate of $0.26 per share translates to a dividend yield of 2.26% on the current share price. Its four-year average yield is 1.85%.
During the nine months that ended December 31, 2023, SGIOY’s revenue stood at ¥336.82 billion ($2.18 billion). Its gross profit increased marginally year-over-year to ¥294.42 billion ($1.91 billion). Moreover, its EBITDA stood at ¥160.16 billion ($1.04 billion), up 2% from the prior-year period.
For the same period, its profit attributable to owners of parent and earnings per share stood at ¥127.22 billion ($823.25 million) and ¥435.74, respectively.
Analysts expect SGIOY’s revenue for the fiscal year that ended March 2024 to increase 4.7% year-over-year to $2.88 billion. Its EPS is expected to be $0.89 for the same period. The company surpassed consensus revenue estimates in each of the trailing four quarters.
The stock has gained 9.5% over the past nine months, closing the last trading session at $11.46.
SGIOY’s robust prospects are reflected in its POWR Ratings. The stock has an overall B rating, equating to Buy in our proprietary rating system.
SGIOY has a B grade for Value and Quality. It is ranked #21 in the same industry.
Click here for SGIOY’s additional POWR Ratings (Growth, Momentum, Stability, and Sentiment).
What To Do Next?
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SGIOY shares were unchanged in premarket trading Thursday. Year-to-date, SGIOY has declined -4.28%, versus a 5.64% rise in the benchmark S&P 500 index during the same period.
About the Author: Kritika Sarmah
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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