Over the last couple of decades, the biotech industry has diversified and thrived, especially during the pandemic, owing to the persistent demand and advanced innovations. Evidently, the bioscience industry's impact on the U.S. economy amounted to $2.9 trillion in 2021.
In addition, lucrative government initiatives, such as President Biden’s National Biotechnology and Biomanufacturing Initiative, could bolster the industry’s growth in the near future. The global biotechnology market is projected to grow at a CAGR of 14.3% to reach $644.24 billion by 2027.
Moreover, given its non-cyclical nature, the biotechnology industry is anticipated to remain unaffected by macroeconomic headwinds and recessionary fears. Furthermore, over the past three months, the SPDR S&P Biotech ETF (XBI) has gained 7.1%, outpacing the S&P 500’s gains of only 3.2%, substantiating investors’ interest in biotech stocks.
Against this backdrop, fundamentally strong biotech stocks Amgen Inc. (AMGN), Gilead Sciences, Inc. (GILD), and United Therapeutics Corporation (UTHR) might be wise portfolio additions in 2023 to buy and hold for the long term.
Amgen Inc. (AMGN)
AMGN discovers, develops, manufactures, and delivers human therapeutics globally. The company primarily focuses on inflammation, oncology/hematology, bone health, cardiovascular disease, nephrology, and neuroscience.
On February 2, 2023, AMGN and AstraZeneca PLC (AZN) announced that the U.S. Food and Drug Administration (FDA) had approved TEZSPIRE® (tezepelumab-ekko) for self-administration in a pre-filled, single-use pen for patients aged 12 years and older with severe asthma. TEZSPIRE is the only biologic approved for severe asthma. This should bolster the company’s growth potential.
On December 12, 2022, AMGN signed an agreement to acquire the complete issued and to-be-issued ordinary share capital of Horizon Therapeutics (HZNP) for an enterprise value of nearly $28.30 billion. The takeover is anticipated to boost AMGN’s innovative therapeutics portfolio.
On the same day, AMGN’s board of directors declared a $2.13 per share dividend for the first quarter of 2023, payable to all stockholders on March 8, 2023. This represents a 10% increase from the dividends paid in each of the previous four quarters. Furthermore, it reflects the company’s shareholder return ability.
Its annual dividend of $8.52 yields 3.54% on prevailing prices. The company’s dividend payouts have increased at a 10.1% CAGR over the past three years and 10.8% CAGR over the five years. Its four-year average dividend yield is 2.88%. AMGN has increased its dividend in each of the past 11 years.
AMGN’s trailing-12-month gross profit margin of 75.66% is 36.4% higher than the 55.48% industry average. Its trailing-12-month EBITDA margin of 51.23% is significantly higher than the 3.73% industry average.
For the fourth quarter of 2022, AMGN’s non-GAAP operating income rose marginally year-over-year to $3.01 billion. Its non-GAAP net income and non-GAAP EPS stood at $2.20 billion and $4.09. AMGN’s total current assets came in at $22.19 billion as of December 31, 2022, compared to $19.39 billion as of December 31, 2021.
Street expects AMGN’s revenue and EPS for the fiscal year ending December 2023 to come at $26.71 billion and $17.84, up 1.5% and marginally, respectively. Additionally, it surpassed revenue estimates in all four trailing quarters, which is impressive.
The stock gained 2.7% intraday to close the last trading session at $240.53. Over the past year, the stock has gained 9%.
AMGN’s POWR Ratings reflect this promising outlook. The company has an overall rating of B, which translates to Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
AMGN has an A grade for Quality and B for Value and Stability. Within the 409-stock Biotech industry, it is ranked #15.
Beyond what is stated above, one can see the additional AMGN grades for Growth, Sentiment, and Momentum here.
Gilead Sciences, Inc. (GILD)
Biopharmaceutical company GILD discovers, develops, and commercializes medicines in the areas of unmet medical need in the United States, Europe, and internationally.
On February 3, GILD announced the U.S. Food and Drug Administration (FDA) had approved Trodelvy for the treatment of breast cancer in adult patients who have received endocrine-based therapy and at least two additional systemic therapies in the metastatic setting.
On January 3, GILD announced that the European Medicines Agency (EMA) had approved the Marketing Authorization Application (MAA) for Trodelvy to treat adult patients with previously-treated HR+/HER2-metastatic breast cancer. This is anticipated to help expand patient access to Trodelvy throughout the EU.
On the same day, GILD and EVOQ Therapeutics, Inc. announced a collaboration and licensing agreement to advance EVOQ’s proprietary technology for treating rheumatoid arthritis (RA) and lupus. Under the agreement, GILD would receive the rights to exclusively license EVOQ’s NanoDisc technology to develop and commercialize immunotherapy products clinically.
On February 2, GILD announced that its board of directors had declared an increase of 2.7% in its quarterly cash dividend, beginning in the first quarter of 2023. The increased quarterly dividend of $0.75 per share of common stock is payable to stockholders on March 30, 2023. This reflects its cash generation abilities.
Its annual dividend of $3 yields 3.54% on prevailing prices. The company’s dividend payouts have increased at a 5% CAGR over the past three years and a 7% CAGR over the five years. GILD’s four-year average dividend yield is 4%. It has increased its dividend in each of the past seven years.
GILD’s trailing-12-month gross profit margin of 79.26% is 42.9% higher than the 55.48% industry average. Its trailing-12-month EBITDA margin of 47.89% is significantly higher than the 3.73% industry average.
GILD’s total revenues stood at $7.39 billion for the fourth quarter that ended December 31, 2022, up 2% year-over-year. Non-GAAP net income attributable to GILD and non-GAAP EPS came in at $2.11 billion and $1.67, up 143.2% and 142%, respectively. Cash and cash equivalents at the end of the period stood at $5.41 billion compared to $5.34 billion in the year-ago quarter.
For the second quarter ending June 2023, Street expects GILD’s EPS and revenue to increase 8.8% and 3.6% year-over-year to $1.72 and $6.49 billion, respectively. It surpassed consensus EPS and revenue estimates in each of the four trailing quarters.
The stock gained 1.6% intraday to close the last trading session at $84.76. It has gained 29.7% over the past six months.
This promising outlook is reflected in GILD’s POWR Ratings. The stock’s overall A rating equates to a Strong Buy in our proprietary rating system.
GILD has an A grade for Value and Growth and a B for Quality and Sentiment. Within the Biotech industry, it is ranked #2.
Click here for the additional POWR Ratings for Stability and Momentum for GILD.
United Therapeutics Corporation (UTHR)
UTHR, a biotechnology company, engages in developing and commercializing products to address the unmet medical needs of patients with chronic and life-threatening diseases in the United States and internationally.
On October 31, 2022, UTHR announced top-line data from the EXPEDITE study of Remodulin induction prior to Orenitram. A short induction of Remodulin injection allowed 79% of patients to reach double the typical doses of Orenitram extended-release tablets than patients who did not have a Remodulin induction.
Meredith Broderick, Pharm.D., J.D., Senior Director of Global Medical Affairs at UTHR, said, “We’re delighted with the preliminary results from the EXPEDITE study, which provided patients a way to reach efficacious doses in a shorter period of time without having to commit to long-term pump therapy.”
Moreover, UTHR’s trailing-12-month gross profit margin of 93.15% is 67.9% higher than the 55.48% industry average. Its trailing-12-month EBITDA margin of 55.4% is significantly higher than the 3.73% industry average.
UTHR’s revenues increased 16% year-over-year to $516 million in the fiscal third quarter that ended September 30, 2022. Its operating income grew 37.4% year-over-year to $314.30 million over the period, while its net income and net income per share increased 47.1% and 43.6% from its year-ago values to $239.30 million and $4.91, respectively.
The consensus EPS estimate of $5.39 for the fiscal first quarter (ending March 2023) represents a 14.4% improvement year-over-year. The consensus revenue estimate of $540.88 million for the same quarter represents a 17.1% growth year-over-year. It surpassed the consensus revenues estimates in three of the trailing four quarters.
The stock has gained 14% over the past six months to close the last trading session at $255.76. It has gained 1.7% intraday.
It is no surprise that UTHR has an overall rating of A, equating to a Strong Buy in our POWR Ratings system.
UTHR has a B grade for Growth, Value, and Quality. It is ranked first within the same industry.
In addition to the POWR Ratings I’ve just highlighted, you can see UTHR’s Momentum, Stability, and Sentiment ratings here.
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AMGN shares fell $1.08 (-0.45%) in premarket trading Tuesday. Year-to-date, AMGN has declined -7.74%, versus a 5.59% rise in the benchmark S&P 500 index during the same period.
About the Author: Sristi Suman Jayaswal
The stock market dynamics sparked Sristi's interest during her school days, which led her to become a financial journalist. Investing in undervalued stocks with solid long-term growth prospects is her preferred strategy. Having earned a master's degree in Accounting and Finance, Sristi hopes to deepen her investment research experience and better guide investors.
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