For Immediate Release
Chicago, IL – May 24, 2021 – Today, Zacks Equity Research discusses Biotech, including Moderna, Inc.
MRNA
, Amgen Inc.
AMGN
, BioNTech SE
BNTX
, Repligen Corporation
RGEN
and Ovid Therapeutics Inc.
OVID
.
The biotech companies’ performance in the first quarter was pretty ho-hum as most of them experienced softness in sales due to the ongoing pandemic. Nevertheless, these companies continue to grab the spotlight, as the development of coronavirus vaccines and treatments becomes the prime focus worldwide. While quite a few biotech companies are developing vaccines and antibodies, companies like
Moderna
are pioneering the race.
Apart from these, leading majors like
Amgen
, Vertex and Incyte maintain momentum on the back of a solid portfolio and strong pipeline progress. While the coronavirus treatments will continue gaining importance for the rest of the year as well, other regulatory and pipeline developments are slowly getting back on track after the standstill induced by the pandemic.
Key drug approvals and pipeline progress are back in focus. Notably, companies using innovative technologies like gene-editing are gaining a lot of attention.
Industry Description
The Zacks
Biomedical and Genetics
industry includes biopharmaceutical and biotechnology companies that develop high-profile drugs using pathbreaking technology. These biologically processed drugs, which address virology, neuroscience, metabolism and rare diseases, are manufactured using live organisms.
The main goal of biotech companies is to use innovative technology to create breakthrough treatments. Quite a few companies in this space work on vaccines as well. Given the dynamic and evolving nature of technology, the sector is perceived to be riskier than the more stable large-cap pharma or drug industry.
3 Trends Shaping the Future of Biotech Industry
Innovation, Execution Hold the Key
: As only a few companies in this space have approved drugs in their portfolio, the focus is primarily on the performance of these high-profile drugs and product pipelines. It takes quite some time before a biotech company turns profitable.
Most companies spend millions and billions to create a drug with path-breaking technology, which leads to significant Research & Development expenditure. Additionally, successful commercialization holds the key to drugs’ higher uptake as smaller biotechs generally lack funds and expertise to execute the same.
This, in turn, prompts collaboration deals with either pharma or biotech bigwigs, wherein sales are shared or royalties are received. Moreover, it might take quite a few years for any newly-approved drug to contribute significantly to its company’s top line.
Consolidation to Fight Slowdown
: Consolidation has always taken the center stage in the biotech industry and this has been an important trend, as leading pharma/biotech companies look to diversify their revenue base in the face of dwindling sales of high-profile drugs. However, the scale and pace of M&A activity slowed down significantly in 2020 due to the pandemic. The focus in 2021 is mainly on forging alliances for COVID-19 drugs and vaccines.
Quite a few smaller biotech companies are using innovative technologies to develop either antibodies or vaccines to combat this contagion and cure the infected at the earliest. Most of these companies have entered collaboration deals with larger biotech or pharma players to ramp up the development of vaccines and antibodies.
Simultaneously, most biggies in the industry are developing treatments or vaccines for this deadly disease and investing a significant chunk of their R&D spends on the same. Given the alarming levels of the COVID-19 spread and severity, some approved drugs are being tested or repurposed to see their effectiveness in treating the infected patients.
Pipeline Setbacks & Competition
: Pipeline setbacks are a key deterrent for biotech companies, given the exorbitant cost of developing a drug using expensive technology. Most drugs/therapies take years to gain a regulatory nod. An unfavorable outcome from a crucial trial on a promising candidate is a huge setback. The leading biotechs also face other headwinds like a decline in the sales of high-profile drugs due to intensifying competition.
Zacks Industry Rank Indicates Bleak Prospects
The group’s
Zacks Industry Rank
is basically the average of the Zacks Rank of all the member stocks.
The Zacks Biomedical and Genetics industry currently carries a Zacks Industry Rank #203, which places it among the bottom 19% of more than 251 Zacks industries, mirroring a low-key outlook for the space, probably due to the volatility. Our research shows that the top 50% of the Zacks-ranked industries outperform the bottom 50% by a factor of more than 2 to 1.
Before we present a few biotech stocks that are well positioned to beat the industry, based on a strong portfolio/pipeline, let’s take a look at the industry’s stock-market performance and current valuation.
Industry Lags S&P 500 & Sector
The Zacks Biomedical and Genetics industry, which is a 444-stock group within the broader Zacks
Medical
Sector, has underperformed the sector and the S&P 500 Index in the year so far.
While the stocks in this industry have lost 5.4%, the Zacks Medical sector has lost 1.6% and the S&P 500 composite gained 10.4% during this time frame.
Industry’s Current Valuation
Since most companies in the biotech sector do not have approved drugs, valuing these companies becomes a complex process. On the basis of the forward 12-month price-to-sales ratio (P/S F12M), which is commonly used for valuing biotech companies with approved portfolios of drugs, the industry is currently trading at 2.11 compared with the S&P 500’s 4.64 and the Zacks Medical sector’s 2.63.
Over the last five years, the industry has traded as high as 3.01X, as low as 1.83X and at a median of 2.32X.
3 Biotech Stocks to Watch for 2021
Shares of
BioNTech
, sporting a Zacks Rank #1 (Strong Buy), have skyrocketed 144.2% in the year so far on strong progress with the COVID-19 vaccine. Earnings estimates for 2021 have climbed to $29.44 from $10.91 in the past 60 days. You can see
the complete list of today’s Zacks #1 Rank stocks here
.
The company has had a tremendous run in the year so far on the success of its COVID-19 vaccine, which has been developed in partnership with Pfizer and the demand is expected to be strong in the upcoming quarters.
Repligen Corp.
, which too sports a Zacks Rank #1, is a global life sciences company that develops and commercializes highly innovative bioprocessing technologies and systems that increase efficiencies in the process of manufacturing biological drugs. The company has experienced a surge in demand, driven by strong COVID-induced tailwinds. The recent acquisitions too should boost performance.
Earnings estimates for 2021 have increased to $2.21 from $1.91 in the past 60 days.
Ovid Therapeutics
, which carries a Zacks Rank #2 (Buy), is a biopharma company that develops drugs that transform the lives of patients with rare neurological disorders. The company’s emerging pipeline programs include OV329, a small molecule GABA aminotransferase inhibitor for seizures associated with Tuberous Sclerosis Complex and Infantile Spasms; OV882, a short hairpin RNA therapy approach for Angelman syndrome; OV815, a genetic therapy approach for KIF1A associated neurological disorder; and other non-disclosed research targets.
The company’s stock price has soared 65.3% in the year so far. The consensus mark for 2021 earnings has increased to $1.53 from 75 cents over the past 60 days.
Breakout Biotech Stocks with Triple-Digit Profit Potential
The biotech sector is projected to surge beyond $775 billion by 2024 as scientists develop treatments for thousands of diseases. They’re also finding ways to edit the human genome to literally erase our vulnerability to these diseases.
Zacks has just released Century of Biology: 7 Biotech Stocks to Buy Right Now to help investors profit from 7 stocks poised for outperformance. Our recent biotech recommendations have produced gains of +50%, +83% and +164% in as little as 2 months. The stocks in this report could perform even better.
See these 7 breakthrough stocks now>>
Join us on Facebook:
https://www.facebook.com/home.php#/pages/Zacks-Investment-Research/57553657748?ref=ts
Zacks Investment Research is under common control with affiliated entities (including a broker-dealer and an investment adviser), which may engage in transactions involving the foregoing securities for the clients of such affiliates.
Media Contact
Zacks Investment Research
800-767-3771 ext. 9339
Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit
https://www.zacks.com/performance
for information about the performance numbers displayed in this press release.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days.
Click to get this free report
