The biotechnology market is rapidly growing due to increasing global healthcare expenditures, significant breakthroughs in fields like genomics, gene editing, and bioinformatics, growing demand for personalized medicines, and strategic collaborations and investments.
Amid this backdrop, investors could consider buying fundamentally sound biotech stocks Illumina, Inc. (ILMN), Shionogi & Co., Ltd. (SGIOY), and Regeneron Pharmaceuticals, Inc. (REGN) to capitalize on potential gains.
IQVIA reports global spending on medicines is set to reach $2.30 trillion by 2028, growing at a CAGR of 5% to 8%, with oncology and obesity driving growth while immunology spending slows due to biosimilars. Biotech will represent 39% of spending, exceeding $892 billion by 2028, with cell and gene therapies showing high growth rates.
Besides, the global biotech industry saw substantial growth in 2023 and totaled $412.20 billion, driven by innovations like CRISPR gene therapy. This year, the industry is projected to reach $465.90 billion with anticipated launches of 21 cell therapies and 31 gene therapies, propelled by AI advancements and personalized medicine trends.
In addition, the U.S. biotechnology market is expanding rapidly, supported by strong research efforts, rising healthcare investments, and increased drug approvals. Improved healthcare infrastructure and government initiatives, along with international collaborations, are further boosting growth, with a projected growth rate surpassing 12.7%.
The U.S. biotechnology market is anticipated to grow at a CAGR of 11.9% during the forecast period (2024-2033).
Further, the biopharma industry is growing rapidly due to the rising prevalence of chronic diseases and strategic collaborations, which are supported by increasing research & development (R&D) investments and expanding healthcare infrastructure. The global biopharma market is expected to grow at a CAGR of 12.5% to hit around $856.10 billion by 2030.
Considering these favorable market trends, let’s discuss the fundamentals of three Biotech stocks, starting with the third choice.
Stock #3: Illumina, Inc. (ILMN)
ILMN is a leading provider of genetic and genomic analysis solutions globally, offering sequencing and array-based technologies for research and clinical purposes. Its innovative products cater to diverse customers, from academic institutions to pharmaceutical companies, enabling advancements in genomics and personalized medicine.
On January 15, 2024, ILMN partnered with Concentric by Ginkgo Bioworks Holdings, Inc. (DNA) to deploy biosurveillance technologies worldwide, leveraging ILMN's sequencing solutions to enhance pathogen monitoring networks and empower countries in detecting and responding to biological threats.
This partnership aims to strengthen global health objectives through advanced genomic surveillance capabilities.
On January 5, ILMN and Janssen Research & Development, LLC collaborated to develop a sensitive molecular residual disease (MRD) assay, a whole-genome sequencing (WGS) multi-cancer research solution that aims to advance oncology research and treatment decisions. Illumina intends to partner with other leaders in pharma to help further expand the utility of its WGS MRD assay.
In the fourth quarter that ended December 31, 2023, ILMN's total revenue increased 3.6% from a year-ago value to $1.12 billion. Its non-GAAP gross profit grew marginally year-over-year to $722 million. Its non-GAAP operating profit surged 64.5% year-over-year to $51 million, with non-GAAP R&D expenses decreasing by 2.9% to $329 million compared to the prior year’s quarter.
Analysts project ILMN's revenue to grow 10.4% year-over-year to $4.99 billion, with its EPS expected to increase 167.8% year-over-year to $2.58 for the fiscal year ending December 2025. Moreover, the company surpassed consensus revenue estimates in each of the trailing four quarters, which is notable.
ILMN’s shares have dropped 2.6% over the past three months to close the last trading session at $128.10.
ILMN’s POWR Ratings reflect this strong outlook. The stock has an overall rating of B, equating to a Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, each weighted optimally.
The stock has an A grade for Growth and a B for Quality. In the Biotech industry, ILMN is ranked #29 among 363 stocks.
To explore more ratings for ILMN’s Value, Momentum, Stability, and Sentiment, click here.
Stock #2: Shionogi & Co., Ltd. (SGIOY)
Based in Osaka, Japan, SGIOY is a leading pharmaceutical company specializing in the research, development, and distribution of pharmaceuticals, diagnostic reagents, and medical devices. It offers a diverse portfolio including treatments for infectious diseases, HIV, influenza, COVID-19, and other conditions, alongside ongoing research efforts across multiple therapeutic areas.
On March 4, 2024, SGIOY entered an option agreement with FunPep for exclusive worldwide rights to develop and commercialize the allergy vaccine FPP004X for seasonal allergic rhinitis, paying a one-time fee of ¥300 million ($2.03 million) and potential milestones totaling up to ¥17.8 billion ($120.27 million), along with royalties.
FPP004X targets IgE antibody production to alleviate pollen allergies, aiming for sustained effects and convenient treatment administration before pollen dispersal.
On February 14, SGIOY and FRONTEO partnered to develop AI models for dementia and depression diagnosis, utilizing FRONTEO’s advanced AI technology. Shionogi will lead clinical development, while FRONTEO will develop AI models and devices, with SGIOY gaining exclusive selling rights in Japan and providing upfront fees, milestone payments, and royalties.
SGIOY reported revenues of ¥311.81 billion ($2.11 billion) in the nine months ended December 31, 2023. Its gross profit grew marginally from a year-ago period to ¥294.42 billion ($1.99 billion). In addition, the company reported an EPS of ¥435.74 for the first nine months.
As of December 31, 2023, the company’s total liabilities amounted to ¥145.52 billion ($983.25 million), compared to total liabilities of ¥189.92 billion ($1.28 billion) as of March 31, 2023.
For the year ending March 31, 2024, SGIOY anticipates revenue of ¥450 billion ($3.04 billion) and operating profit of ¥150 billion ($1.01 billion).
Street expects SGIOY’s revenue to increase 11.4% year-over-year to $732.67 million for the fiscal fourth quarter ending March 2024. Also, the company surpassed consensus revenue estimates in each of the trailing four quarters.
SGIOY’s stock has surged 19.7% over the past nine months and 16.2% over the past six months to close the last trading session at $13.09.
SGIOY’s POWR Ratings reflect its robust prospects. The stock has an overall B rating, translating to a Buy in our proprietary rating system.
The stock has a B grade for Value and Quality. SGIOY is ranked #26 out of 363 stocks within the Biotech industry.
Click here to see SGIOY’s ratings for Growth, Momentum, Stability, and Sentiment.
Stock #1: Regeneron Pharmaceuticals, Inc. (REGN)
REGN develops and commercializes medicines for various global diseases, including treatments for macular degeneration, diabetic retinopathy, atopic dermatitis, and cancer. The company is dedicated to advancing healthcare through ongoing research and development efforts in diverse therapeutic areas.
On January 30, 2024, REGN established Regeneron Cell Medicines by acquiring 2seventy bio, obtaining full rights to its immune cell therapies. The deal involves an upfront payment of $5 million and future milestone payments, aiming to explore novel combinations in oncology and immunology.
On January 8, REGN partnered with Medison Pharma to exclusively commercialize Libtayo® (cemiplimab) in select European markets and globally, leveraging Medison's multi-regional platform for enhanced patient access. Libtayo, a PD-1 inhibitor, holds approvals in over two dozen countries and is a standard of care for advanced non-melanoma skin cancers.
In the fourth quarter that ended December 31, 2023, REGN’s revenues grew marginally from a year-ago quarter to $3.43 billion. The company posted a non-GAAP net income of $1.37 billion, or $11.86 per share, respectively. As of December 31, 2023, its total assets were $33.08 billion, compared to total assets of $29.21 billion as of December 31, 2022.
The consensus revenue estimate of $13.89 billion for the fiscal year ending December 2024 indicates a 5.9% year-over-year rise. The consensus EPS of $44.74 for the current year suggests a 2.2% year-over-year improvement. Moreover, REGN topped consensus revenue and EPS estimates in each of the trailing four quarters, which is remarkable.
The stock has gained 24.4% over the past nine months and 25.1% over the past year to close the last trading session at $959.04.
REGN’s sound 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.
The stock has a B grade for Value and Quality. Within the same industry, REGN is ranked #16.
In addition to the POWR Ratings stated above, access REGN’s Growth, Momentum, Stability, and Sentiment ratings here.
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REGN shares were unchanged in premarket trading Friday. Year-to-date, REGN has gained 9.19%, versus a 8.12% 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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