The pandemic had drawn the spotlight on the biotech industry as companies focused on the development of vaccines & diagnostic tools for combating the disease. Moreover, over the past few years, lucrative federal policies and rapid technological advancements have fostered the industry’s growth.
According to Grand View Research, the global biotechnology market is expected to grow at a CAGR of 13.9% until 2030.
Furthermore, the growing market for personalized medicines and firms investigating breakthrough developments with innovative technologies are opening new avenues for the industry. Investors’ interest in the biotech industry is evident from the SPDR S&P Biotech ETF’s (XBI) 15% returns over the past month versus SPDR S&P 500 Trust ETF’s (SPY) 6.4% decline.
Thus, fundamentally sound biotech stocks Eli Lilly and Company (LLY) and Jazz Pharmaceuticals plc (JAZZ), which have been outperforming the broader market, could be ideal additions to one’s portfolio.
Eli Lilly and Company (LLY)
LLY discovers, develops, and markets human pharmaceuticals worldwide. LLY has pioneered life-changing discoveries for nearly 150 years, and today its medicines help more than 47 million people across the globe.
On June 29, 2022, LLY announced a changed purchase agreement with the U.S. government to supply 150,000 doses of bebtelovimab for around $275 million. This should add to the company’s revenues. Bebtelovimab has helped effectively neutralize the omicron covid variant and remains a reliable cure for other covid variants.
Furthermore, on June 13, 2022, the U.S. Food and Drug Administration approved LLY and Incyte Corporation’s (INCY) collaborative pill OLUMIANT® (baricitinib) first-in-disease systemic treatment for adults with severe alopecia areata. This has been another milestone achievement for the company, among many others.
LLY’s revenue increased 14.8% year-over-year to $7.81 billion for the first quarter that ended March 31, 2022. The company’s non-GAAP net income came in at $2.37 billion, up 61.9% year-over-year, while its non-GAAP EPS came in at $2.62, up 62.7% year-over-year.
Analysts expect LLY’s revenue to increase 11.3% year-over-year to $28.54 billion in 2022. Its EPS is expected to grow 10.8% per annum for the next five years. The stock has gained 18.7% year-to-date to close the last trading session at $327.95.
LLY’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall A rating, which indicates a Strong Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
LLY has a B grade for Growth, Stability, Sentiment, and Quality. Within the Medical - Pharmaceuticals industry, it is ranked #10 out of 170 stocks. Click here to see the additional POWR Rating for Value and Momentum for LLY.
Jazz Pharmaceuticals plc (JAZZ)
Headquartered in Dublin, Ireland, a biopharmaceutical company, JAZZ identifies, develops, and commercializes pharmaceutical products for various unmet medical needs in the United States, Europe, and internationally.
On May 4, 2022, JAZZ and Sumitomo Pharma Co., Ltd. announced their exclusive agreement. JAZZ acquired development and commercialization rights in the United States, Europe, and other territories for Sumitomo Pharma’s investigational DSP-0187- for the treatment of narcolepsy, idiopathic hypersomnia, and other sleep disorders. The company is expected to benefit from this agreement.
For the first quarter that ended March 31, 2022, JAZZ’s total revenues increased 33.9% year-over-year to $813.72 million. Its net product sales came in at $809.84 million, up 34.2% year-over-year. Moreover, its non-GAAP adjusted net income came in at $261.93 million, up 14.5% year-over-year.
JAZZ’s revenue is expected to come at $3.60 billion in 2022, representing a 16.5% year-over-year rise. The company’s EPS is expected to grow 7.4% per annum for the next five years. In addition, it surpassed Street EPS estimates in three of the trailing four quarters. The stock has gained 24.3% year-to-date to close the last trading session at $158.30.
It’s no surprise that JAZZ has an overall B rating, which equates to a Buy in our proprietary rating system. In addition, it has a B grade for Growth, Value, and Sentiment.
JAZZ is ranked #27 out of 400 stocks in the Biotech industry. Click here for the additional POWR Ratings for JAZZ (Momentum, Stability, and Quality).
LLY shares were trading at $330.48 per share on Friday afternoon, up $2.53 (+0.77%). Year-to-date, LLY has gained 20.55%, versus a -17.53% rise in the benchmark S&P 500 index during the same period.
About the Author: Riddhima Chakraborty
Riddhima is a financial journalist with a passion for analyzing financial instruments. With a master's degree in economics, she helps investors make informed investment decisions through her insightful commentaries.
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