Increasing investments in innovation and scientific research has propelled the biotech industry’s growth. However, biotech stocks Exelixis, Inc. (EXEL), MacroGenics, Inc. (MGNX), and Puma Biotechnology, Inc. (PBYI) have been losing momentum lately. Given the industry’s long-term growth prospects, investors could still consider investing in these biotech names.
Before discussing why these stocks have the potential to deliver solid returns in the long run, let’s discuss what’s happening in the biotech space.
The biotech industry witnessed substantial investments during the height of the pandemic, but investments in the industry slowed down last year. In addition, many companies had to undertake job cuts last year to survive the rising interest rate environment.
However, the industry looks set to thrive in the years ahead, driven by favorable drug launches, easing of regulatory challenges, and an aging population. Moreover, the Biden administration signed an executive order to advance biotechnology and biomanufacturing innovation in the country to help rebuild supply chains, strengthen the domestic bio-economy, and support the nation’s innovation ecosystem.
Investors’ interest in the biotech industry is evident from the VanEck Vectors Biotech ETF’s (BBH) 10.1% return over the past six months. Moreover, the global biotechnology market is expected to grow at a CAGR of 8.7% to reach $1.68 trillion by 2030.
Therefore, it could be wise to invest in fundamentally sound biotech stocks EXEL, MGNX, and PBYI despite their lost momentum.
Let’s delve deeper into the fundamentals of these stocks to see what makes them the best investments now.
Exelixis, Inc. (EXEL)
EXEL is an oncology-focused biotechnology company focusing on discovering, developing, and commercializing new medicines to treat cancers. The company offers CABOMETYX tablets for treating advanced renal cell carcinoma patients who received prior anti-angiogenic therapy; and COMETRIQ capsules for treating progressive and metastatic medullary thyroid cancer.
On March 20, 2023, EXEL announced that the company’s board of directors authorized the repurchase of up to $550 million before the end of 2023. This will help create shareholder value.
In terms of forward EV/Sales, EXEL's 2.73x is 25.9% lower than the 3.68x industry average. Its forward Price/Sales of 3.33x is 17.6% lower than the 4.04x industry average. Also, the stock's 2.18x trailing-12-month Price/Book is 14.3% lower than the 2.54x industry average.
For the fiscal year ended December 31, 2022, EXEL’s total revenues increased 12.3% year-over-year to $1.61 billion. The company’s net product revenues rose 30.1% over the prior-year period to $1.40 billion. Its non-GAAP net income and non-GAAP EPS came in at $265.45 million and $0.82, respectively.
Analysts expect EXEL’s revenue for the quarter ending March 31, 2023, to increase 20.2% year-over-year to $427.82 million. Its EPS for fiscal 2023 is expected to increase 15% year-over-year to $0.64. It surpassed Street EPS estimates in each of the trailing four quarters. Over the past three months, the stock has gained 21.8% to close the last trading session at $18.77.
EXEL’s POWR Ratings reflect its solid prospects. The stock has an overall rating of B, equating to a Buy in our proprietary rating system. The POWR ratings assess stocks by 118 different factors, each with its own weighting.
It has a B grade for Value, Sentiment, and Quality. However, it has a D grade for Momentum. Within the Biotech industry, it is ranked #27 out of 380 stocks. Click here to see the other ratings of EXEL for Growth and Stability.
MacroGenics, Inc. (MGNX)
MGNX is a clinical-stage biopharmaceutical company focused on developing and commercializing antibody-based therapeutics for cancer treatment. It is developing product candidates that target various tumor-associated antigens and immune checkpoint molecules.
On March 22, 2023, MGNX reported that following the FDA’s approval of Incyte Corporation’s (INCY) Biologics License Application (BLA) for ZYNYZ, it would receive a $15 million milestone payment from Incyte.
Apart from the milestone payment of $15 million, MGNX is eligible to receive up to a total of $320 million in potential remaining development and regulatory milestones and up to $330 million in potential commercial milestones from INCY.
On March 8, 2023, MGNX announced that it had entered into an agreement with the subsidiary of DRI Healthcare Trust to sell its royalty interest on future global net sales of TZIELD (teplizumab-mzwv) for up to $200 million. MGNX will receive a $100 million upfront payment for the sale of its single-digit royalty on global net sales of TZIELD.
Also, MGNX will have the right to receive a 50% share of the royalty on global net sales above a certain annual threshold. The company is also eligible to receive up to $50 million on the occurrence of pre-specified events related to the advancement of TZIELD, and it may also receive an additional $50 million in case TZIELD achieves a certain level of net sales.
In terms of forward EV/Sales, MGNX's 1.65x is 55.2% lower than the 3.68x industry average. Its forward Price/Sales of 2.33x is 42.4% lower than the 4.04x industry average.
For the fiscal year ended December 31, 2022, MGNX’s total revenues increased 96.2% year-over-year to $151.94 million. Its net product sales rose 35.5% year-over-year to $16.73 million. The company’s net loss narrowed 40.7% over the prior-year period to $119.76 million. In addition, its loss per share narrowed 42.1% year-over-year to $1.95.
For the quarter ending March 31, 2023, MGNX’s revenue is expected to increase 839.8% year-over-year to $104.33 million. Over the past nine months, the stock has gained 120.9% to close the last trading session at $6.65. It is trading 1.5% below its 10-day moving average of $6.75.
MGNX’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall rating of B, which translates to a Buy in our proprietary rating system.
It has an A grade for Growth and a B for Value, Sentiment, and Quality. However, it has a D grade for Momentum. It is ranked #14 in the same industry. To see the MGNX’s rating for Stability, click here.
Puma Biotechnology, Inc. (PBYI)
PBYI is a biopharmaceutical company focused on developing and commercializing products to enhance cancer care. Its lead product is NERLYNX. Its other products include PB272, PB357, and certain related compounds.
In terms of forward non-GAAP P/E, PBYI's 4.82x is 74.7% lower than the 19.08x industry average. Its forward EV/Sales of 0.63x is 82.8% lower than the 3.68x industry average. Also, the stock's 0.49x trailing-12-month Price/Sales is 87.9% lower than the 4.04x industry average.
PBYI’s net product revenue for the fiscal year ended December 31, 2022, increased 5.8% year-over-year to $200 million. Its income from operations rose significantly to $23.70 million. The company’s non-GAAP net income increased 237.1% year-over-year to $11.80 million. In addition, its non-GAAP EPS came in at $0.26, representing an increase of 225% year-over-year.
Analysts expect PBYI’s revenue for the quarter ending March 31, 2023, to increase 8.6% year-over-year to $49.63 million. Its EPS is expected to increase 232.5% per annum over the next five years. Over the past six months, the stock has gained 3.8% to close the last trading session at $2.46.
It is trading 33.1% and 26.4% below its 50-day and 200-day moving averages of $3.68 and $3.34, respectively.
PBYI’s POWR Ratings reflect this positive outlook. It has an overall rating of B, which translates to a Buy in our proprietary rating system.
It has an A grade for Value and a B for Growth. However, it has a D grade for Momentum. Within the Biotech industry, it is ranked #23. Click here to see the additional ratings of PBYI for Stability, Sentiment, and Quality.
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EXEL shares were trading at $18.96 per share on Wednesday morning, up $0.19 (+1.01%). Year-to-date, EXEL has gained 18.20%, versus a 4.96% rise in the benchmark S&P 500 index during the same period.
About the Author: Dipanjan Banchur
Since he was in grade school, Dipanjan was interested in the stock market. This led to him obtaining a master’s degree in Finance and Accounting. Currently, as an investment analyst and financial journalist, Dipanjan has a strong interest in reading and analyzing emerging trends in financial markets.
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