For the past two years, biotech stocks have faced unfavorable conditions. These stocks have been on a downward spiral after reaching their pick at the beginning of 2021. The gradual loss of interest in the COVID-19 topic has led to a decline in the excitement around biotech stocks. However, November and December last year showed how the SPDR S&P Biotech (XBI) could grow almost 1.5 times.
Eli Lilly (LLY)
Breakthroughs in genetic research and advanced therapies have led to a surge in biotechnology growth. Eli Lilly (NYSE:LLY) is taking advantage of the latest medical changes to expand its operations strategically. The company is diversifying its portfolio to stay ahead of its competitors and meet new challenges in the healthcare sector.
Eli Lilly works on innovative therapies for common diseases and rare genetic disorders. In oncology, it is a pioneer of new treatment methods. Alliances with more than 70 institutions and biotech startups have helped bring diverse perspectives and expertise together and strengthened the company’s research capabilities. Eli Lilly has adapted to current innovations in genomics, CRISPR technology, and personalized medicine. This has helped biotech develop its potential and make more than 100 discoveries and molecule deals over the past 10 years.
Strategic initiatives are reflected in market performance. In the last trading session, LLY gained $7.2 to $642. At the same time, the company’s stock price shows stability in the medium and long term. Eli Lilly withstands market fluctuations with a one-year low of $309 and a one-year high of $644. At the same time, the fifty-day moving average of the biotech stock price was $594, and the 200-day moving average was $551. Investors continue to show interest, as evidenced by the trading volume of over 2 million stocks.
The company’s financial strength also serves to support the price level. The debt-to-equity ratio is 1.59, which indicates Eli Lilly’s ability to meet short-term and long-term obligations. The price-earnings ratio of 116.36 and market capitalization of $610.3 billion contribute to an attractive picture for investors.
Vertex Pharmaceuticals (VRTX)
Vertex Pharmaceuticals‘ (NASDAQ:VRTX) latest Form 13F is already filed with the Securities and Exchange Commission (SEC). It shows many investors who have increased their positions. Bogart Wealth LLC, Cooper Financial Group, Paradigm Financial Partners LLC, Grandfield & Dodd LLC, West Family Investments Inc. and FRG Family Wealth Advisors recognize the company’s potential and are increasing the reserves of these biotech stocks.
Investor commitment can be attributed to a robust mid- and late-stage clinical program pipeline. The development of Trikafta and the clinical results for VX-548 are encouraging, as they are contributing to the company’s revenue.
Vertex’s financial performance in the third quarter of 2023 increased 6% compared to the same period in 2022 and crossed the $2.48 billion mark. The figure improved due to several factors. These included double-digit sales growth of Trikafta (up 13%) and the European Commission’s approval of the combination treatment KAFTRIO®-Ivacaftor.
Over the past five years, Vertex stocks have risen 105%, outperforming the S&P 500 by 72%. At the same time, the company’s EV/EBIT ratio is 17.5 times, while the sector median is 21 times. That is why VRTX can be considered an undervalued stock expected to be profitable in the coming years.
The probability of launching new successful products is estimated to be high, as Vertex Pharmaceuticals uses advanced technologies such as CRISPR. With a cash position of $13.6 billion in cash and marketable securities, the company has the margin of safety to continue producing advanced medicines despite unfavorable market conditions.
Gilead Sciences (GILD)
Despite a drop in sales of Veklury, a drug to treat COVID-19, Gilead Sciences (NASDAQ:GILD) has shown resilience. And the latest quarterly earnings report can be attributed to a thoughtful shift in focus to oncology and HIV medicines. Risk management through development diversification has led to stabilizing the company’s position.
A decline in earnings in 2023 was expected, but analysts tend to expect GILD’s earnings to recover and exceed 2022 levels this year. The company’s stocks are not high-risk; the TradeSmith volatility ratio is 16.51%. As a result, investors can add biotech stocks with a great reward-to-risk ratio to their portfolios.
The overall sales growth of 33% YOY was driven by the growth of two of the company’s drugs: Yescarta and Tecartus (up 23% and 18%). Thanks to this, Gilead Sciences was able to show $7 billion in profit in the third quarter. Oncology drugs also contributed to the company’s overall profit expansion. Thanks to sales of these drugs, Gilead received $769 million.
It is worth considering Gilead Sciences’ comprehensive and forward-thinking approach when making an investment decision. An example of this is the company’s use of CAR T therapies. The limited availability of these treatments led to a decline in 2023. Gilead has adopted a strategic expansion plan, adding more treatment hospitals in major population centers. While CAR T therapies are not key to Gilead’s current performance, they represent a future growth channel that could significantly impact the company’s trajectory.
On the date of publication, Julia Magas did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.