The biotechnology industry is expanding steadily due to rapid growth of drug development, technological innovations, and strong governmental support. Considering this and the rising need to cater to an aging population, it could be wise to keep an eye on biotech stocks Surrozen, Inc. (SRZN), Harmony Biosciences Holdings, Inc. (HRMY), and Cidara Therapeutics, Inc. (CDTX) for potential gains.
Before delving deeper into the fundamentals of these stocks, let’s see what’s shaping the industry’s prospects.
The biotech industry is thriving owing to the development of innovative drugs. Year-to-date, the FDA's Center for Drug Evaluation and Research (CDER) has greenlit 35 new molecular entities and therapeutic biological products, reflecting the industry's robust research and development momentum.
The growing prevalence of personalized medicine and the rising availability of orphan drug formulations fuel new horizons within the industry. Precision medicine is not only enhancing patient care but also fostering novel biotechnological applications, thus benefiting the sector significantly.
Technological progress, notably Artificial Intelligence and Big Data analytics, also propels the sector forward. AI is enhancing medical devices, while Big Data analysis is unraveling intricate biological questions and identifying patterns within complex datasets like DNA, proteins, and clinical records, driving innovation and growth in the industry.
Substantial government backing further bolsters the industry’s growth, with initiatives focused on the modernization of regulatory framework, streamlined approval processes, increased healthcare spending, and standardized clinical research.
The 2023 Budget allocates $5 billion to the Advanced Research Projects Agency for Health (ARPA-H), aiming to catalyze biomedical innovations spanning molecular to societal levels, offering transformative solutions for patients.
The global biotechnology market is projected to grow at a CAGR of 14.2% to reach $2.78 trillion by 2030, per Vantage Market Research's report.
Considering these conducive trends, let's take a look at the fundamentals of the three Biotech stocks, starting with number 3.
Stock #3: Surrozen, Inc. (SRZN)
SRZN is a clinical-stage biotechnology company that pioneers drug candidates for precise modulation of the pivotal Wnt pathway. The company's forefront products entail multispecific, antibody-based therapeutics emulating the functions of natural Wnt and R-spondin proteins, vital for Wnt pathway activation and enhancement.
On June 5, SRZN, Stanford Medicine, and Columbia University scientists disclosed a pivotal breakthrough. They administered a highly optimized Fzd4-selective surrogate, demonstrating systemic pharmacologic efficacy and restoring blood-brain-barrier function in disease models, notably ischemic stroke.
With the demonstrated efficacy in disease models, including ischemic stroke, SRZN's market potential and investment appeal soar, paving the way for lucrative opportunities and potential partnerships to capitalize on this groundbreaking research.
For the six months that ended June 30, 2023, SRZN’s interest income increased 973.4% year-over-year to $1.17 million. Its cash inflow from investing activities rose 154.9% from the year-ago value to $34.58 million.
Moreover, its cash inflow from financing activities came in at $148 thousand, compared to a cash outflow of $3 thousand in the prior-year period. As of June 30, 2023, the company’s cash and cash equivalents came in at $36.50 million, compared to $24.69 million as of December 31, 2022.
Analysts expect SRZN’s EPS to grow 29.90% annually over the next five years. SRZN’s shares gained 1.6% intraday to close the last trading session at $0.52.
SRZN’s fundamentals are apparent in its POWR Ratings. SRZN has a B grade for Value and Sentiment. It has ranked #34 out of 379 stocks in the Biotech industry. The POWR Ratings are calculated by considering 118 different factors, each weighted to an optimal degree.
In addition to the POWR Ratings I’ve just highlighted, you can see SRZN’s ratings for Growth, Stability, Quality, and Momentum here.
Stock #2: Harmony Biosciences Holdings, Inc. (HRMY)
HRMY is a commercial-stage pharmaceutical company that develops and markets treatments for individuals afflicted by rare neurological disorders. The company also caters to patients grappling with other neurological ailments, addressing unmet medical requirements within this sphere.
On August 14, HRMY announced a definitive agreement to acquire Zynerba Pharmaceuticals, Inc. (ZYNE), a pioneering company renowned for its groundbreaking transdermal cannabinoid therapies targeting orphan neuropsychiatric disorders, notably Fragile X syndrome (FXS).
This move would enable HRMY to enhance its portfolio with innovative assets to address unmet medical needs. The acquisition would also empower HRMY to spearhead the development and delivery of transformative treatments for FXS and other rare neuropsychiatric disorders.
During the second quarter that ended June 30, 2023, HRMY’s net product revenues increased 25.4% year-over-year to $134.22 million. Its gross profit grew 23.9% from the year-ago value to $109.21 million.
Additionally, the company’s adjusted net income rose 32.2% from the prior year’s period to $45.87 million, while its adjusted net income per share stood at $0.76, a 33.3% year-over-year improvement.
For the fiscal year ending December 2024, analysts expect HRMY’s revenue to come in at $693.92 million, a 21.9% year-over-year improvement. Likewise, the company’s EPS for the same period is expected to grow 28% from the prior year to $3.22. Moreover, the company surpassed the consensus revenue and EPS estimates in three of four trailing quarters.
The stock has gained 14.3% over the past month, closing the last trading session at $38.10.
HRMY’s prospects are reflected in its POWR Ratings. HRMY has a B grade for Quality and Value. It is ranked #32 in the 374-stock Biotech industry.
Click here to access the additional HRMY ratings (Growth, Stability, Sentiment, and Momentum).
Stock #1: Cidara Therapeutics, Inc. (CDTX)
CDTX discovers, develops, and markets therapeutics for patients grappling with severe diseases. Its primary product candidate is rezafungin acetate, an intravenous echinocandin formulation. The company emphasizes the Cloudbreak platform to pioneer drug-Fc conjugates (DFCs) for preventing and treating severe diseases.
On July 31, CDTX achieved a significant milestone with the U.S. commercial launch of REZZAYO. This launch is critical for patients battling life-threatening fungal infections, paving the way for extending rezafungin's global availability, starting with Europe pending the EMA decision and exploring commercial partnerships in Japan.
Furthermore, CDTX anticipates substantial financial benefits through milestone payments and royalties from existing rezafungin partnerships. These resources will further bolster the company's Cloudbreak® drug-Fc conjugate (DFC) programs.
For the six months that ended June 30, 2023, CDTX’s total revenues increased 152.2% year-over-year to $33.60 million. Its cash inflow from financing activities came in at $25.98 million, compared to a cash outflow of $1.72 million in the prior year’s period.
Furthermore, as of June 30, 2023, the company’s cash and cash equivalents stood at $50.43 million, compared to $32.73 million as of December 31, 2022. Its total current assets amounted to $62.24 million, up from 45.09 million as of December 31, 2022.
The company’s revenue for the fiscal fourth quarter ending December 2023 is expected to increase 18.3% year-over-year to $12.09 million. Moreover, analysts expect CDTX’s EPS for the next five years to grow at 61.20% per annum. Over the past year, the stock has gained 44.4%, closing the last trading session at $0.99.
CDTX’s outlook is apparent in its POWR Ratings. CDTX has an A grade for Value and a B for Quality. It is ranked #28 out of 374 stocks within the same industry.
Click here to access additional CDTX ratings for Growth, Momentum, Stability, and Sentiment.
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HRMY shares were unchanged in premarket trading Monday. Year-to-date, HRMY has declined -30.85%, versus a 18.01% rise in the benchmark S&P 500 index during the same period.
About the Author: Aanchal Sugandh
Aanchal's passion for financial markets drives her work as an investment analyst and journalist. She earned her bachelor's degree in finance and is pursuing the CFA program. She is proficient at assessing the long-term prospects of stocks with her fundamental analysis skills. Her goal is to help investors build portfolios with sustainable returns.
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