3 Biotech Stocks to Buy Before the Breakout
During this Q3 of 2023, there have been many changes to U.S. healthcare at different levels. At the state level, there were changes to gender-affirming care. At the national level, the FDA has approved over-the-counter birth control pills and considered aspartame to be a carcinogen. The user count of telemedicine services continues to increase, and technological advancements in drug-making have led to the clinically testing a drug created by Artificial Intelligence in Hong Kong.
These developments are strong on their own, but couple impressively with the continual rise of biotech. Two critical examples in 2023 include the USDA approving food made with cell-grown meats and the FDA approving Krystal’s (NASDAQ:KRYS) skin disorder gene therapy. The industry is expected to grow to $3.2 trillion by 2030 at a 12.8% CAGR.
The combination brings ample room for growth that investors can capitalize upon. Here are three biotech stocks that demonstrate this high growth potential for the remainder of 2023.
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Bio-Techne Corporation (TECH)
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Bio-Techne Corporation (NASDAQ:TECH) is a leading developer, researcher, and seller of purified proteins and reagent solutions, or substances used to drive chemical reactions. Unlike other biotech companies, Bio-Techne is a conglomerate of eleven brands with each providing a unique product and service. Not only does this business model allow it to enter various markets and appeal to several consumer audiences, but it is also inherently safer in the long run. If one brand fails, ten more brands keep the corporation afloat.
TECH stock is up 6.52% YTD. Its latest quarter’s earnings displayed a solid performance with its revenue of $294.15 million seeing 1.3% YoY growth. Its diluted EPS of $0.43 grew 16.22% YoY. Earnings aside, this positive trend carried through to many other metrics, including net income of $70.22 million representing a 15.61% YoY growth. The stock has net profit margin of 23.87% seeing 14.1% YoY growth.
Given that the biotech industry has a CAGR of 17.83% and scientific advancements are propelling such growth each day, Bio-Techne recognizes that it must continue to enact catalysts in order to stay relevant in its competitive market. Thus, management has devised a three-year plan designed to get its revenue to $2 billion by fiscal year 2026. This strategy, nicknamed “The Path to $2B,” involves releasing a string of new, innovative products over the next few years. If executed correctly, the company forecasts having around a 50% CAGR by FY26, in comparison to its current 7%.
Accordingly, Yahoo Finance analysts see the value Bio-Techne holds for future growth, with six out of nine labeling it as either a “Buy” or “Strong Buy.” Moreover, the average analyst target price is $100.99. Given TECH stock’s current actual price is $86.20, many feel it is undervalued.
Ultimately, Bio-Techne has positioned itself excellently for a bright future, as part of an industry that commends fresh, innovative merchandise.
Vertex Pharmaceuticals (VRTX)
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Vertex Pharmaceuticals (NASDAQ:VRTX) is a heavyweight in cystic fibrosis (CF) medication, providing treatments to the majority of CF patients in Australia, Europe, and North America. Alongside stable conditions in the CF market, the company’s continued research and development provide a promising pipeline for the foreseeable future.
The CF market has continued to provide stable yields with revenue and EPS exceeding expectations. Operating expenses were high this quarter, mainly due to research and development of the new treatments. However, this is not an issue as the company still has more than $11 billion in cash and investments paired with a strong cash flow and balance sheet. Since these developments are expected to achieve large payoffs, this is a worthy investment.
With so much left to discover about biotechnology, the global market is projected to grow at a 13.96% CAGR from 2023 to 2030. Currently working on multiple new treatments, Vertex is poised to take advantage of this growth. Its exa-cel gene therapy for sickle cell disease and beta-thalassemia is approaching market approval with the FDA promising review by December 8th. The therapy is expected to reach a total of 32,000 patients.
VX-548 for acute pain and VX-147 for APOL1-Mediated Kidney Disease have both reached clinical trial phase 3 with great revenue potential. VX-548 is in a field with few major innovations, so management sees this opioid alternative for acute pain as a multibillion-dollar opportunity.
Yahoo Finance reported 22 of 27 analysts rated Vertex as a “buy” with a mean 1-year price target of $377.04. Vertex is currently very stable and profitable, and its constant pursuit of new technologies leaves the company in an excellent position for growth.
Arcturus Therapeutics (ARCT)
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Arcturus Therapeutics (NASDAQ:ARCT) is an RNA medicines biotechnology company focused on discovering, developing, and commercializing therapeutics for rare and infectious diseases by utilizing advanced platforms like LUNAR lipid-mediated delivery and STARR mRNA.
ARCT stock is up 102.63% over the past year with analysts giving a 12-month median to high price forecast of $48 to $140, or a 42% to 314% upside.
The pharmaceutical industry is already robust with a 2022 market value of $527.0 billion and the industry is further projected to grow at a 13.7% CAGR, hitting $703.1 billion by 2030. As the rising prevalence of diseases, the aging population, and escalating healthcare expenditures continue, these major factors converge to create a robust and expanding landscape of innovation and advancements in medical treatments.
Arcturus has been extremely successful over the past five years with a 5-year revenue growth rate of 73.78% and a 2023 YoY revenue growth of 1,715.97% significantly beating out the sector average of 7.38%. In 2022, Vertex’s revenue soared to approximately $205 million, representing an exponential increase compared to its 2021 revenue of $12 million. The promising start to a billion-dollar market cap is evident, with a net income margin of 39.59% and a strong TTM EPS of 4.38 that is only looking to grow. If this trend persists, ARCT is poised for a bright and prosperous future.
Arcturus’ first platform, LUNAR, is a versatile proprietary lipid-mediated nucleic acid delivery system with over 250 proprietary lipids, allowing for customized formulations tailored to specific indications and target cell types. The addition of the STARR Technology, which combines self-replicating RNA with LUNAR, enhances the potential to generate protective immune responses or therapeutic protein expression, thus driving innovative disease prevention and treatment strategies. This powerful combination of the LUNAR platform and the STARR Technology not only enables the development of a diverse range of therapeutics and vaccines, but also offers the advantages of lower dose requirements, simplified production, and a competitive edge in the biotechnology industry, paving the way for Arcturus’ sustained growth and continued success.
ARCT is rated as a “buy” for investors because of its strong financial performance outperforming competitors as well as its proprietary STARR and LUNAR technologies.
On the date of publication, Michael Que did not have (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.
The researchers contributing to this article did not hold (either directly or indirectly) any positions in the securities mentioned in this article.
Michael Que is a financial writer with extensive experience in the technology industry, with his work featured on Seeking Alpha, Benzinga, and MSN Money. He is the owner of Que Capital, a research firm that combines fundamental analysis with ESG factors to pick the best sustainable long-term investments
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