The biotech industry plays a crucial role in advancing healthcare through innovative therapies, genetic research, and drug development. The sector is driven by the demand for therapeutic treatments and genetic disorders cures, which is gaining momentum in the market.
Amid this, it could be wise to invest in fundamentally sound small-cap biotech stocks, Esperion Therapeutics, Inc. (ESPR), Innoviva, Inc. (INVA), and SIGA Technologies, Inc. (SIGA), with game-changing potential.
The biotech sector is witnessing heightened activity with firms working on breakthrough technologies. For instance, the broader biopharma sector had a strong second quarter, raising $22.94 billion, and its half-year 2024 results were almost equal to the full-year 2023 results of $70 million.
Further, factors like increased funding and M&A activities in Q2 are also the reason for such a favorable outlook for this sector. This year, there were 28 merger and acquisition deals where large pharma companies are investing in the research and development of small-cap companies.
According to Precedence research, the global biotechnology market is anticipated to reach a value of $4.61 trillion by 2034, exhibiting a CAGR of 11.5%. This growth promises growth and explosive returns, driving market buzz and investment interest.
With that in mind, let’s evaluate the fundamentals of the featured Biotech industry stocks, starting with number three:
Stock #3: Esperion Therapeutics, Inc. (ESPR)
ESPR, a pharmaceutical company, has a market cap of $415.99 million, and it develops and commercializes medicines for the treatment of patients with elevated low-density lipoprotein cholesterol (LDL-C). Its marketed products include NEXLETOL and NEXLIZET tablets for treating primary hyperlipidemia in adults who require additional LDL-C lowering.
On September 3, ESPR announced additional commercial and medicare coverage for NEXLETOL® (bempedoic acid) and NEXLIZET® (bempedoic acid and ezetimibe). This addition provides access to more than 65% of medicare lives and more than 92% of commercially insured lives, allowing the healthcare providers to easily prescribe it to primary and secondary prevention patients.
On May 22, ESPR and Daiichi Sankyo Europe GmbH jointly announced the approval from the European Commission (EC) for the label update of both NILEMDO and NUSTENDI. The treatment is to be used for hypercholesterolemia and to reduce the risk of adverse cardiovascular events.
For the six-month period that ended on June 30, 2024, ESPR’s total revenues increased 322.2% year-over-year to $211.57 million, while the company reported net revenue of $53.06 million, indicating a 42.2% growth from the prior-year period.
Street expects ESPR’s revenue for the fiscal third quarter (ended September 2024) to increase 55.7% year-over-year to $52.88 million. In addition, it surpassed the revenue estimates in each of the trailing four quarters, which is promising.
ESPR’s stock has surged 153.6% over the past year to close the last trading session at $2.12.
ESPR’s POWR Ratings reflect this robust outlook. The stock has an overall rating of B, which equates to Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
ESPR has a B grade for Growth, Value, and Quality. It is ranked #35 out of 330 stocks in the Biotech industry. Click here to see the additional ratings for ESPR (Momentum, Stability, and Sentiment).
Stock #2: Innoviva, Inc. (INVA)
With a market cap of $1.26 billion, INVA develops and commercializes pharmaceutical products internationally. It has a portfolio of royalties and other healthcare assets. The company’s products include RELVAR/BREO ELLIPTA, ANORO ELLIPTA, and TRELEGY ELLIPTA.
On May 20, INVA and Zai Lab Limited (ZLAB) received approval from China’s National Medical Products Administration (NMPA) for XACDURO. It shall be used to treat hospital-acquired and ventilator-associated pneumonia caused by resistant Acinetobacter strains. This approval is a significant step toward combating antibiotic resistance.
In the six-month period that ended on June 30, 2024, INVA’s total revenue increased 12.7% year-over-year to $177.40 million. The company’s net income came in at $1.85 million or $0.03 per share for the period. INVA’s cash and cash equivalents at the end of the period were $217 million, indicating 25.4% growth from the prior-year period.
Analysts expect INVA’s revenue for the third quarter (ended September 2024) to increase 14.4% year-over-year to $76.91 million, while its EPS for the same period is expected to grow 47.2% from the prior year’s period to $0.27. The company surpassed consensus revenue in three of the trailing four quarters, which is promising.
Over the past year, the stock has surged 50.7%, closing the last trading session at $20.21.
It’s no surprise that INVA has an overall rating of B, equating to a Buy in our POWR Ratings system. It has an A grade for Value and a B for Quality. Out of 330 stocks in the same industry, INVA is ranked #31.
Beyond what is stated above, we’ve also rated INVA for Growth, Momentum, Stability, and Sentiment. Get all INVA ratings here.
Stock #1: SIGA Technologies, Inc. (SIGA)
With a market capitalization of $485.31 million, SIGA is a commercial-stage pharmaceutical firm focused on the health security market. Its main offering is TPOXX, an oral antiviral drug intended to treat variola virus-induced smallpox in humans.
On October 8, SIGA announced an agreement to supply TPOXX (tecovirimat) in Morocco, collaborating with the Ministry of Health in Morocco. This agreement will help SIGA establish its global presence and mark its first commercial sale on the continent.
On August 21, SIGA announced that the U.S. Department of Defense (DOD) had procured approximately $9 million of TPOXX. This contract represents the third award from the DOD in the past three years.
SIGA, for the second quarter (ended June 30, 2024), reported total revenues of $21.81 million, indicating a 271% growth from the prior-year quarter, and its product sales and supportive services revenue increased significantly year-over-year to $20.68 million.
In addition, the company’s net and comprehensive income stood at $1.83 million compared to the prior-year quarter’s loss of $2.88 million, while its income per share came in at $0.03 versus a loss of $0.04 per share last year.
The consensus revenue estimate of $160.46 million for the fiscal year (ending December 2024) represents a 14.7% increase year-over-year. The consensus EPS estimate of $1 for the same quarter indicates a 5.1% improvement year-over-year.
The stock has gained 30.3% over the past nine months and 25% over the past year to close the last trading session at $6.80.
SIGA’s bright prospects are reflected in its POWR Ratings. The stock has an overall rating of B, which translates to a Buy in our proprietary rating system.
It also has an A grade for Value and Quality and a B for Growth. Within the Biotech industry, it is ranked #16. Click here to see SIGA’s ratings for Momentum, Stability, and Sentiment.
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INVA shares were trading at $20.19 per share on Thursday afternoon, down $0.02 (-0.10%). Year-to-date, INVA has gained 25.87%, versus a 24.06% rise in the benchmark S&P 500 index during the same period.
About the Author: Anushka Dutta
Anushka is an analyst whose interest in understanding the impact of broader economic changes on financial markets motivated her to pursue a career in investment research.
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