The biotech sector is experiencing strong growth due to continuous innovation and a focus on unmet healthcare needs. Rising global demand for quality care, personalized treatments, and advanced technology fuels this expansion. Notably, biotech firms specializing in precision oncology and AI-driven drug development offer promising investment opportunities.
Amid this favorable backdrop, investors might consider adding promising biotech stocks like Innoviva, Inc. (INVA) and Entrada Therapeutics, Inc. (TRDA) to their watchlist this month.
This year, investment in immunology and inflammation is surging due to scientific advances and a growing global patient population. New drugs are targeting previously unreachable pathways, providing broad treatment potential and high revenue prospects. Consequently, the global biotechnology market is projected to reach $3.88 trillion by 2030, with a 14% CAGR.
Despite fewer drug approvals this year compared to last, the biotech sector is expanding rapidly. This growth is driven by increased R&D investments, particularly in AI and advanced platforms for drug development. The focus on treating rare diseases and creating innovative vaccines and therapies makes the sector promising and poised for future success.
On top of it, advances in AI and machine learning are transforming biotech by speeding up drug discovery and development, supporting personalized medicine, and improving synthetic biology and diagnostics. These technologies make drug development faster and more affordable. Hence, the global AI market for pharma and biotech is expected to reach $4.20 billion by 2027, growing at a 30.5% CAGR.
Considering these conducive trends, let’s analyze the fundamental aspects of the two Biotech picks, beginning with the second choice.
Stock #2: Innoviva, Inc. (INVA)
INVA engages in developing and commercializing pharmaceutical products in the United States and internationally. The company's products include RELVAR/BREO ELLIPTA, ANORO ELLIPTA, and TRELEGY ELLIPTA.
On May 20, 2024, INVA’s Specialty Therapeutics and Zai Lab received NMPA approval in China for XACDURO (sulbactam-durlobactam). This drug treats hospital-acquired and ventilator-associated pneumonia caused by resistant Acinetobacter strains. The approval, based on strong clinical data, is a key step in combating antibiotic resistance in the region.
On May 4, 2024, INVA secured a $35 million credit deal with Armata Pharmaceuticals. The funds will support clinical trials for phage-based therapies targeting Pseudomonas aeruginosa and Staphylococcus aureus infections. This collaboration aims to develop new treatments for antibiotic-resistant infections and enhance the value of INVA’s partnership with Armata.
In terms of the trailing-12-month gross profit margin, INVA’s 86.74% is 52.7% higher than the 56.82% industry average. Likewise, its 43.95% trailing-12-month EBIT margin is significantly higher than the 1.88% industry average. Additionally, its 41.61% trailing-12-month levered FCF margin is substantially higher than the 1.09% industry average.
INVA’s total revenue for the first quarter ended March 31, 2024, rose 1.5% to $77.50 million. The company’s net product sales increased 65.7% over the prior-year quarter to $19.08 million. In addition, its net income and comprehensive income, and net income per share, came in at $36.53 million and $0.46, respectively, up 4.8% and 9.5% year-over-year.
Analysts expect INVA’s EPS for the quarter ended June 30, 2024, to increase considerably year-over-year to $0.24. Its revenue for the quarter ending September 30, 2024, is expected to grow 5.5% year-over-year to $70.94 million. Over the past nine months, INVA’s stock has gained 52.9% to close the last trading session at $18.99.
INVA’s POWR Ratings reflect strong prospects. It has an overall rating of B, translating to a Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its weighting.
It has an A grade for Value and a B for Quality. It is ranked #10 out of 343 stocks in the Biotech industry. Beyond what we stated above, we also have given INVA grades for Growth, Momentum, Stability, and Sentiment. Get all the INVA’s ratings here.
Stock #1: Entrada Therapeutics, Inc. (TRDA)
TRDA develops endosomal escape vehicle (EEV) therapeutics for the treatment of multiple neuromuscular diseases. Its endosomal escape vehicle platform develops a portfolio of oligonucleotide, antibody, and enzyme-based programs.
In terms of the trailing-12-month EBIT margin, TRDA’s 14.57% is 675.5% higher than the 1.88% industry average. Similarly, its 16.56% trailing-12-month EBITDA margin is 174.6% higher than the 6.03% industry average.
TRDA's collaboration revenues for the fiscal first quarter ended March 31, 2024, grew 134% from the year-ago value to $59.12 million. The company's net income was $23.50 million, significantly higher than the net loss of $6.67 million in the prior-year quarter. Additionally, its net income per share was $0.68, compared to a net loss per share of $0.21 in the year-ago quarter.
For the quarter ended June 30, 2024, TRDA’s revenue is expected to increase 153.6% year-over-year to $46.08 million. Over the past three months, the stock has gained 42.6% to close the last trading session at $16.90.
TRDA’s POWR Ratings reflect its bright outlook. It has an overall rating of A, which translates to a Strong Buy in our proprietary rating system.
It has a B grade for Value, Sentiment, and Quality. It is ranked #5 in the Biotech industry. To access the additional ratings of TRDA for Growth, Momentum, and Stability, click here.
What To Do Next?
43 year investment veteran, Steve Reitmeister, has just released his 2024 market outlook along with trading plan and top 11 picks for the year ahead.
INVA shares were trading at $18.94 per share on Wednesday afternoon, down $0.05 (-0.26%). Year-to-date, INVA has gained 18.08%, versus a 16.93% rise in the benchmark S&P 500 index during the same period.
About the Author: Abhishek Bhuyan
Abhishek embarked on his professional journey as a financial journalist due to his keen interest in discerning the fundamental factors that influence the future performance of financial instruments.
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