As March comes to an end, biotech stocks Exelixis (EXEL), MacroGenics (MGNX), and Puma Biotechnology (PBYI) are losing momentum. However, given the long-term prospects of the biotechnology industry and the administration’s push to promote domestic biomanufacturing, these biotech stocks may prove to be solid long-term investments. Read more.
Increasing investment in innovation and scientific research has fueled the growth of the biotech industry. However, biotech stock Exelixis, Inc. (EXEL), MacroGenics, Inc. (MGNX), and Puma Biotechnology, Inc. (PBYI) have been losing momentum lately. Given the long-term growth prospects of the industry, investors may still want to consider investing in these biotech names.
Before discussing why these stocks have the potential to deliver solid returns over the long run, let’s discuss what’s happening in the biotech space.
The biotech industry saw substantial investment during the height of the pandemic, but investment in the industry slowed in the last year. In addition, many companies had to cut jobs last year to survive the rising interest rate environment.
However, the industry is set to flourish in the coming years, driven by favorable drug launches, reduction in regulatory challenges, and an aging population. In addition, 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 country’s innovation ecosystem. Signed.
Investor interest in the biotech industry is evident in the 10.1% return of the VanEck Vectors Biotech ETF (BBH) over the past six months. Furthermore, the global biotechnology market is expected to grow at a CAGR of 8.7% to reach $1.68 trillion by 2030.
Therefore, it may be wise to invest in fundamentally strong biotech stocks EXEL, MGNX, and PBYI despite their lost momentum.
Let’s take a deeper look at the fundamentals of these stocks to see what makes them the best investments now.
Exelixis, Inc. ,Excel,
EXEL is an oncology-focused biotechnology company focused on the discovery, development and commercialization of new drugs to treat cancer. The Company offers CABOMETYX Tablets for the treatment of advanced renal cell carcinoma patients who have previously received anti-angiogenic therapy; and COMETRIQ Capsules for the treatment of progressive and metastatic medullary thyroid cancer.
On March 20, 2023, EXEL announced that the company’s board of directors has authorized repurchases of up to $550 million before the end of 2023. This will help in creating shareholder value.
In forward EV/sales terms, EXEL’s multiple of 2.73x is 25.9% lower than the industry average of 3.68x. Its forward price/sales of 3.33x is 17.6% below the industry average of 4.04x. Plus, the stock’s 2.18 times trailing-12-month price/book is 14.3% below the 2.54x industry average.
For the fiscal year ending December 31, 2022, EXEL’s total revenue grew 12.3% year-over-year to $1.61 billion. The company’s net product revenue 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 to rise 20.2% year-over-year to $427.82 million for the quarter ending March 31, 2023. Its EPS is expected to grow 15% year-over-year to $0.64 for fiscal 2023. It beat Street EPS estimates in each of the last four quarters. In the past three months, the stock is up 21.8% to close at $18.77 in the last trading session.
EXEL’s POWR rating reflects its solid potential. The stock has an overall rating of B, which equates to a Buy in our proprietary rating system. POWR Ratings assesses a stock by 118 different factors, each with its own weighting.
It has B grade for Value, Sentiment and Quality. However, it has a D grade for Momentum. Within the biotech industry, it ranks 27th out of 380 stocks. Click here to see EXEL’s other ratings for growth and sustainability.
Macrogenix, Inc. ,mgnx,
MGNX is a clinical-stage biopharmaceutical company focused on the development and commercialization of antibody-based therapeutics for the treatment of cancer. It is developing product candidates that target various tumor-associated antigens and immune checkpoint molecules.
On March 22, 2023, MGNX reported that following FDA approval of Incyte Corporation’s (INCY) Biologics License Application (BLA) for ZYNYZ, it would receive a $15 million milestone payment from Incyte.
In addition to the $15 million milestone payment, 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 has entered into an agreement with a 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 an upfront payment of $100 million for the sale of its single-digit royalties on global net sales of TZIELD.
In addition, MGNX will be entitled to receive a 50% share of royalties on global net sales above a certain annual threshold. The company is also eligible to receive up to $50 million upon the occurrence of pre-specified events related to the growth of TZIELD, and an additional $50 million if TZIELD achieves a certain level of net sales.
In terms of forward EV/sales, MGNX’s multiple of 1.65 times is 55.2% lower than the industry average of 3.68 times. Its forward price/sales of 2.33x is 42.4% below the 4.04x industry average.
For the fiscal year ending December 31, 2022, MGNX’s total revenue grew 96.2% year-over-year to $151.94 million. Its net product sales increased 35.5% year-over-year to $16.73 million. The company’s net loss decreased 40.7% from the prior-year period to $119.76 million. Furthermore, 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 grow 839.8% year-over-year to $104.33 million. In the last nine months, the stock is up 120.9% to close the last trading session at $6.65. It is trading down 1.5% from its 10-day moving average of $6.75.
MGNX’s strong fundamentals are reflected in its POWR rating. The stock has an overall rating of B, which translates to Buy in our proprietary rating system.
It has an A grade for growth and a B grade for value, sentiment and quality. However, it has a D grade for Momentum. It ranked #14 in the same industry. Click here to view MGNX’s rating for stability.
Puma Biotechnology, Inc. ,pbyi,
PBYI is a biopharmaceutical company focused on the development and commercialization of products to enhance cancer care. Its flagship product is NERLYNX. Its other products include PB272, PB357 and some related compounds.
In terms of forward non-GAAP P/E, PBYI’s 4.82x is 74.7% below the industry average of 19.08x. Its forward EV/Sales of 0.63x is 82.8% below the 3.68x industry average. Plus, the stock’s 0.49x trailing-12-month price/sales is 87.9% below the industry average of 4.04x.
PBYI’s net product revenue grew 5.8% year-over-year to $200 million for the fiscal year ending December 31, 2022. Its income from operations increased significantly to $23.70 million. The company’s non-GAAP net income grew 237.1% year-over-year to $11.80 million. Furthermore, its non-GAAP EPS came in at $0.26, representing 225% year-over-year growth.
Analysts expect PBYI’s revenue to rise 8.6% year-over-year to $49.63 million for the quarter ending March 31, 2023. Its EPS is expected to grow by 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 down 33.1% and 26.4% from its 50-day and 200-day moving averages at $3.68 and $3.34, respectively.
PBYI’s POWR rating reflects this positive outlook. It has an overall rating of B, which translates to a Buy in our proprietary rating system.
It has A grade for value and B grade for growth. However, it has a D grade for Momentum. Within the biotech industry, it is ranked #23. Click here to view additional PBYI ratings for stability, sentiment and quality.
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EXEL shares were trading up $0.19 (+1.01%) on Wednesday morning at $18.96 per share. Year-to-date, EXEL has gained 18.20%, compared to a 4.96% gain in the benchmark S&P 500 Index during the same period.
About the Author: Dipanjan Banchoor
Since he was in grade school, Dipanjan’s interest was in the stock market. This led him to obtain a master’s degree in finance and accounting. Currently, as an investment analyst and financial journalist, Deepanjan has a keen interest in reading and analyzing emerging trends in the financial markets.
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