A wide range of applications across several sectors, supportive government initiatives, rapid technological advancements, and shifting market dynamics position the biotechnology industry for robust long-term growth. Given the industry’s bright outlook, biotech stocks MannKind (MNKD), Illumina (ILMN), and TG Therapeutics (TGTX) could be ideal watchlist additions for potential growth. Read on….
From healthcare and industrial processing to food and agriculture, biotechnology has touched every aspect of life, thereby improving human and animal health and the environment. Furthermore, the biotech industry’s expansion is fueled by favorable government policies and emerging technological developments.
Given the industry’s strong foothold, it could be wise to watch biotech stocks MannKind Corporation (MNKD), Illumina, Inc. (ILMN), and TG Therapeutics, Inc. (TGTX) for future growth.
Biotechnology has a wide range of applications in various sectors, particularly in medicine, agriculture, and industrial processing. Favorable government funding and policies would primarily propel the industry’s growth. In the past few years, there has been a rise in the prevalence of chronic diseases, mainly due to rapid urbanization and an increasingly sedentary lifestyle.
The biopharmaceuticals market is projected to reach $761.80 billion by 2029, growing at a CAGR of 8.1%. The rise in the need for personalized medicine and the growing portfolio of orphan drug formulations contribute to the market’s expansion. In 2023, the FDA’s Center for Drug Evaluation and Research (CDER) approved 55 new molecular entities and therapeutic biological products.
Moreover, the surging demand for biotechnology tools in agricultural applications such as tissue culturing, molecular breeding, and micro-propagation would create several opportunities for the industry players. Besides, the rising popularity of genetically modified crops, seeds, and herbicide-tolerant crops would further contribute to the sector’s expansion.
The biotechnology industry stands at a pivotal point, driven by numerous technological advancements and evolving market dynamics. Key market trends include the progression of AI in drug discovery, RNA technology sophistication, the development of CRISPR technology, and significant advancements in stem cell technology and targeted protein degradation.
This year, bioprinting and tissue engineering are expected to be significant trends shaping the bioengineering industry. These technologies would offer promising prospects for medical applications. The tissue engineering market is estimated to reach $8.90 billion by 2028, growing at a CAGR of 15.3%.
According to a report by Grand View Research, the global biotechnology market is predicted to total $3.88 trillion by 2030, expanding at a robust CAGR of 14% during the forecast period (2024-2030).
Further, investors’ interest in biotech stocks is evident from SPDR S&P Biotech ETF’s (XBI) 31.6% returns over the past three months.
Considering these favorable trends, let’s look at the fundamentals of the three Biotech stocks, beginning with the third choice.
Stock #3: MannKind Corporation (MNKD)
MNKD is a biopharmaceutical company that focuses on developing and commercializing inhaled therapeutic products for endocrine and orphan lung diseases. The company provides Afrezza, an inhaled insulin to treat diabetes, and the V-Go wearable insulin delivery device. Its product pipeline also includes Tyvaso DP Treprostinil and MNKD-101.
On January 2, 2024, MNKD and Sagard Healthcare entered an agreement under which MannKind sold a 1% royalty in net sales of Tyvaso DPI® (treprostinil) inhalation powder to Sagard in exchange for up to $200 million, including the purchase price of $150 million and an additional potential milestone payment of up to $50 million.
United Therapeutics Corporation licensed Tyvaso DPI from MNKD in 2018. It began marketing it in June 2022 after FDA approval for treating pulmonary arterial hypertension and pulmonary hypertension associated with interstitial lung disease. Pursuant to a license agreement with United Therapeutics, MannKind is entitled to a 10% royalty on net sales of Tyvaso DPI.
On October 30, 2023, MNKD announced a new patent (No. 11,793,808) issued by the United States Patent and Trademark Office covering clofazimine inhalation suspension (MNKD-101), which is under development for the potential treatment of nontuberculous mycobacterial (NTM) lung disease. The patent is expected to expire on June 8, 2039.
This patent represents important protection for MNKD’s lead pipeline asset, MNKD-101, which could potentially enhance therapy for a lung disease that is on the rise globally.
MNKD’s trailing-12-month gross profit margin of 65.55% is 15.2% higher than the industry average of 56.91. However, the stock’s trailing-12-month EBITDA and net income margin of negative 1.5% and negative 17.7% compared to the respective industry averages of 5.09% and 0.19%.
Over the past three years, MNKD’s revenue has grown at a CAGR of 41.2%. The company’s total assets have improved at a CAGR of 49.6% over the same period.
In the third quarter that ended September 30, 2023, MNKD’s revenues increased 56.1% year-over-year to $51.25 million. Its net revenue from Afrezza grew 24%, but net revenue from V-Go declined 18%. Its non-GAAP income from operations came in at $7.63 million, compared to a loss from operations of $7.79 million in the prior year’s quarter.
In addition, the company’s non-GAAP net income amounted to $4.26 million, or $0.01 per share, compared to a net loss of $12.61 million, or $0.06 per share, in the same quarter of 2022, respectively.
Street expects MNKD’s revenue for the fiscal year (ended December 2023) to increase 94.1% year-over-year to $193.64 million. However, analysts estimate that the company will report a loss per share of $0.05 for the same period.
Shares of MNKD have gained 1.8% over the past five days to close the last trading session at $3.41.
MNKD’s mixed prospects are apparent in its POWR Ratings. The stock has an overall rating of C, which translates to a Neutral in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, each weighted to an optimal degree.
MNKD has an A grade for Growth and a B for Value. It also has a C grade for Sentiment and Quality. It has ranked #40 out of 349 stocks in the Biotech industry.
Click here to see the other ratings of MNKD for Momentum and Stability.
Stock #2: Illumina, Inc. (ILMN)
ILMN engages in the development, manufacturing, and marketing of life science tools and integrated systems for large-scale analysis of genetic variation and function. It operates through Core Illumina and GRAIL segments. It provides sequencing and array-based instruments and consumables, whole-genome sequencing, genotyping, NIPT, and product support services.
On January 15, 2024, ILMN and Concentric by Ginkgo, the biosecurity and public health unit of Ginkgo Bioworks Holdings, Inc. (DNA), which is developing the leading platform for cell programming and biosecurity, partnered to expand biosecurity capabilities around the globe.
Under the agreement, the partners would demonstrate the use of Illumina products with Concentric’s bio radar to accelerate the expansion of the pathogen monitoring network in a way that empowers nations and increases the scale and scope of pathogen genomic surveillance worldwide.
On January 5, ILMN signed an agreement with Janssen Research & Development, LLC to advance molecular residual disease cancer tests. This partnership would be the first relating to the development of Illumina’s novel molecular residual disease (MRD) assay, a whole-genome sequencing (WGS) multi-cancer research solution.
“This collaboration reflects the value of our unique MRD technology and the promise of Illumina’s whole-genome approach in oncology,” said Joydeep Goswami, chief strategy and corporate development officer and chief financial officer of Illumina.
As per preliminary financial results for the fourth quarter of 2023, ILMN’s revenue increased 3% year-over-year to $1.12 billion. Core Illumina revenue came in at $1.09 billion, up 2% from the prior year’s period. The company reported a non-GAAP operating margin of nearly 3.8% for the quarter.
ILMN’s trailing-12-month gross profit margin and EBITDA margin of 65.78% and 7.10% are higher than the industry averages of 57.13% and 5.24%, respectively. But the stock’s trailing-12-month EBIT margin of negative 2.51% compared to the industry average of 0.06%.
ILMN’s revenue has increased at a CAGR of 11.3% over the past three years. Also, the company’s total assets have grown at a CAGR of 11% over the same period.
In the third quarter that ended October 1, 2023, ILMN’s total revenue grew marginally year-over-year to $1.12 billion, and its service and other revenue came in at $178 million, an increase of 17.1% year-over-year. However, the company’s non-GAAP net income and EPS were $52 million and $0.33, down 3.7% and 2.9% from the previous year’s quarter, respectively.
Analysts expect ILMN’s revenue to grow 2.5% year-over-year to $1.11 billion for the fourth quarter that ended December 2023. However, the consensus EPS estimate of $0.01 for the same period indicates a decline of 92.7% year-over-year. The company also surpassed consensus revenue and EPS estimates in three of the trailing four quarters.
ILMN’s stock has surged 5.4% over the past month to close the last trading session at $145.74. However, it has plunged 23% over the past six months.
ILMN’s POWR Ratings reflect this mixed outlook. The stock has an overall rating of C, which translates to a Neutral in our proprietary rating system.
The stock has a B grade for Growth and Sentiment. It also has a C grade for Value and Stability. ILMN is ranked #35 out of 349 stocks in the Biotech industry.
In addition to the POWR Ratings I’ve just highlighted, you can see ILMN’s ratings for Momentum and Stability here.
Stock #1: TG Therapeutics, Inc. (TGTX)
TGTX is a commercial-stage biopharmaceutical company that focuses on the acquisition, development, and commercialization of novel treatments for B-cell diseases. It offers BRIUMVI, an anti-CD20 monoclonal antibody for treating adult patients with relapsing forms of multiple sclerosis (RMS). Its development pipelines include Umbralisib, TG-1701, and TG-1801.
On January 9, TGTX entered an agreement with Precision BioSciences, Inc. (DTIL) to acquire a global license to Precision’s Azercabtagene Zapreleucel (azer-cel), an allogeneic CD19 CAR T cell therapy program for autoimmune diseases and other non-oncology indications.
The partnership with Precision on this CAR T program is expected to expand its autoimmune portfolio and leverage our robust drug development and commercialization expertise.
TGTX’s trailing-12-month gross profit margin of 96.69% is 69.2% higher than the industry average of 57.13%. But its trailing-12-month EBITDA margin of negative 9.85% compared to the industry average of 5.24%.
Over the past three years, HNI’s revenue has grown at a CAGR of 976.8%. Likewise, the company’s total assets have increased at a CAGR of 6.5% over the same timeframe.
According to preliminary fourth-quarter and full-year 2023 results, TGTX’s BRIUMVI U.S. net product revenue is expected to be approximately $40 million and $89 million for the fourth quarter and year, respectively. The company expects a 2023 year-end cash position of nearly $215 million.
As per 2024 target guidance, the company’s BRIUMVI U.S. net product revenue is expected to be $41-$46 million and $220-$260 million for the first quarter and full year, respectively.
During the third quarter that ended September 30, 2023, TGTX reported a total revenue of $165.82 million, compared to just $94 thousand in the same period of 2022. Its operating income was $114.78 million versus an operating loss of $34.96 million in the prior year’s period.
Furthermore, the company’s net income came in at $113.93 million, or $90.73 per common share, compared to a net loss of $35.82 million, or $0.26 per common share, respectively.
Analysts expect TGTX’s revenue for the fourth quarter (ended December 2023) to significantly increase year-over-year to $40.31 million. However, the company is expected to report a loss per share of $0.11 for the same quarter.
TGTX’s shares have climbed 60.9% over the past six months to close the last trading session at $16.88.
TGTX’s mixed fundamentals are reflected in its POWR Ratings. The stock has an overall rating of C, equating to a Neutral in our proprietary rating system.
TGTX has an A grade for Growth. The stock has a C grade for Value, Momentum, and Sentiment. It is ranked #33 in the same industry.
To access additional ratings of TGTX for Quality and Stability, click here.
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ILMN shares were unchanged in premarket trading Friday. Year-to-date, ILMN has gained 4.67%, versus a 2.92% rise in the benchmark S&P 500 index during the same period.
About the Author: Mangeet Kaur Bouns
Mangeet’s keen interest in the stock market led her to become an investment researcher and financial journalist. Using her fundamental approach to analyzing stocks, Mangeet’s looks to help retail investors understand the underlying factors before making investment decisions.
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