Every investment category must answer the big question, why? For undervalued biotech stocks, it comes down to advantaging a supremely relevant sector without paying full price.
Of course, the broader healthcare ecosystem offers a compelling narrative for market participants. As the Covid-19 pandemic demonstrated, no matter how advanced we become as a society, a microscopic virus can impose devastation. In order to protect individuals and communities at large, enterprises need a way to address diseases: infectious, chronic, whatever the case may be.
Further, undervalued biotech stocks enjoy a massive canvas for value expansion. According to Grand View Research, the global biotech arena could be worth $3.88 trillion by 2030. If so, that would imply a compound annual growth rate (CAGR) of 13.96% from 2023.
Plus, let’s consider the unfortunate rise of cancer and other serious diseases. It wouldn’t be surprising in the least if the aforementioned projection was conservative. With that in mind, below are undervalued biotech stocks to consider.
Procaps (PROC)
Based in Luxembourg, Procaps (NASDAQ:PROC) develops, produces and markets pharmaceutical solutions. It formulates and manufactures branded prescription drugs in multiple therapeutic areas, such as feminine care, pain relief, skin care and digestive health, among other needs. It should be noted that since the start of the year, PROC lost more than 41% of its equity value.
Still, for those who want to speculate on undervalued biotech stocks, PROC could be a high-risk, high-reward idea. Right now, shares trade hands at 0.65X trailing-year sales. For the drug manufacturing sector, the median value stands at 2.08X. More importantly, the market has already demonstrated that it will accept a higher valuation for the business.
Over the last four quarters, PROC stock traded at an average sales multiple of around 0.94X. Theoretically, then, the biotech room can potentially grow into its prior valuation. Over the longer term, that’s what Wall Street experts are anticipating.
For fiscal 2024, sales could rise 3.5% to reach $424.15 million. In the following year, the top line could bump up to $460.35 million.
MiMedx (MDXG)
Headquartered in Marietta, Georgia, MiMedx (NASDAQ:MDXG) develops and distributes placental tissue allografts for various sectors of the healthcare ecosystem. Specifically, MiMedx processes human placental tissues through its proprietary process to produce allografts. This methodology carries the advantage of retaining the tissue’s inherent biological properties and regulatory proteins.
MDXG stock is a speculative entity, losing about 12% of market value since the start of the year. Nevertheless, the red ink may be creating a discounted opportunity. Presently, MDXG trades at 3.21X trailing-year revenue. However, during the first quarter of this year, the multiple did pop up to 3.5X. On the surface, that might not seem like much of a discount.
Still, it’s important to consider what experts are anticipating moving forward. For fiscal 2024, they’re targeting revenue of $361.49 million. If so, that would represent a 12.4% lift from last year’s print of $321.48 million. And fiscal 2025 could see the top line move up to $406.17 million, another 12.4% leap.
To be sure, MiMedx represents a higher-risk idea. Still, it qualifies as one of the undervalued biotech stocks to consider.
MEI Pharma (MEIP)
Operating out of San Diego, California, MEI Pharma (NASDAQ:MEIP) is a small outfit, featuring only 46 full-time employees. It’s a clinical-stage pharmaceutical firm, focusing on the development and commercialization of various therapies for the treatment of cancer. The company has developed a therapeutic called Zandelisib, which addresses relapsed and refractory follicular lymphoma.
Another high-risk entity, MEIP stock dropped almost 52% of equity value since the start of the year. However, it also appears that the volatility has slowed down. In the trailing month, shares only slipped about 0.3%. Further, the sales multiple seems attractive at only 0.29X. In the past year (Q1 2023 to Q1 2024), the multiple averaged about 0.59X.
It’s also worth pointing out that MEIP trades at a trailing-year earnings multiple of 0.74X. Moving forward to the end of the year, analysts anticipate earnings per share to reach $3.62. On the top line, sales may enjoy a 33.8% lift to $65.3 million. Assuming these projections hold true, MEIP could easily grow into its valuation on earnings and sales. Thus, it’s one of the undervalued biotech stocks to consider.
Incyte (INCY)
Based in Wilmington, Delaware, Incyte (NASDAQ:INCY) is a biopharmaceutical firm engaged in the discovery, development and commercialization of therapeutics for hematology and oncology. It also specializes in conditions revolving around inflammation and autoimmunity. It’s a sizable player compared to the speculative plays among undervalued biotech stocks, with more than 2,500 full-time employees.
Financially, Incyte is a solid entity. During the trailing 12 months (TTM), Incyte posted net income of $745.44 million or earnings of $3.30 per share. Revenue reached $3.77 billion. Still, INCY stock trades at 3.64X trailing-year sales. Over the past year, this stat averaged 3.98X.
On the bottom line, the market prices INCY at 13.16X forward earnings. In the past year, the average multiple clocked in at 14.61X. But here’s the kicker: analysts anticipate sizable expansion of the top and bottom lines.
Fiscal 2024 could see EPS at $4.30, up 22.16% over the prior year. Revenue could jump 10.6% to reach $4.09 billion. Therefore, it’s one of the undervalued biotech stocks to put on your radar.
United Therapeutics (UTHR)
Headquartered in Silver Spring, Maryland, United Therapeutics (NASDAQ:UTHR) engages in the development and commercialization of products to address unmet medical needs, particularly for patients suffering from chronic and life-threatening diseases. It offers multiple products, including Tyvaso DPI, which is an inhaled dry powder for the treatment of pulmonary arterial hypertension (PAH).
Financially, United represents another solid idea among undervalued biotech stocks. Net income during the TTM period landed at $1.05 billion or $21.13 per share. Revenue in the cycle reached $2.5 billion. Currently, the market prices UTHR stock at 6.34X trailing-year sales, which admittedly is at a premium.
However, analysts believe that in fiscal 2024, sales could hit $2.74 billion, up 17.8% from the prior year’s tally of $2.33 billion. Assuming a shares outstanding count of $44.37 million, UTHR would trade at a projected sales multiple of around 5.16X.
Now, the average multiple over the past year came in at 5.24X. So, ever so slightly, UTHR ranks among the undervalued biotech stocks. Plus, the benefit here is that you’re dealing with a profitable and growing enterprise.
Harmony Biosciences (HRMY)
Operating out of Plymouth Meeting, Pennsylvania, Harmony Biosciences (NASDAQ:HRMY) is a commercial-stage pharmaceutical firm focusing on the development and commercialization of therapies for patients with rare and neurological diseases. Its main product is WAKIX, a molecule with a novel mechanism for the treatment of excessive daytime sleepiness in adults with narcolepsy.
For a relatively small enterprise, Harmony offers robust financials. During the TTM period, the company posted net income of $137.7 million or earnings of $2.32 per share. On the top line, sales in the period reached $617.51 million. In the most recent quarter, HRMY’s quarterly sales growth rate (year-over-year0 landed at 29.8%.
Right now, HRMY stock trades at 2.91X trailing-year sales. In the past one-year period, the average multiple stood at 4.05X. Even better, covering experts see Harmony’s revenue rising by 22% to $710.15 million. Further, the high-side target runs up to $718.4 million.
For fiscal 2025, the consensus view calls for $836.82 million, up 17.8%. As a bonus, EPS in fiscal 2025 may also soar nearly 75% to $3.90. It’s one of the undervalued biotech stocks to consider.
ScyNexis (SCYX)
Based in Jersey City, New Jersey, ScyNexis (NASDAQ:SCYX) falls under the drug manufacturing ecosystem. Per its public profile, ScyNexis develops medicines to overcome and prevent difficult-to-treat and drug-resistant infections. One of its main products is Brexafemme for the treatment of patients with certain feminine conditions. It also offers other treatments for important but sensitive conditions.
SCYX stock is a difficult entity to bet on. Since the start of the year, it lost about 10% of market value. Over the past 52 weeks, it’s down about 34%. At the same time, it also offers some financial substance. During the TTM period, the company posted net income of $101.33 million or $2.11 per share. Revenue landed at $140.38 million. Its latest quarterly sales growth rate clocked in at 21.5%.
That said, analysts anticipate an 82% erosion in the top line for fiscal 2024 to $25.1 million. Last year, the company generated sales of $140.14 million. Obviously, that’s not a great look, leading to a trailing-year sales multiple of 0.69X. In the past year, this stat averaged 10.41X.
However, in fiscal 2025, a gradual recovery trek may materialize, resulting in sales of $44.07 million. Further, the high-side target calls for $116.25 million, making SCYX potentially one of the undervalued biotech stocks.
On the date of publication, Josh Enomoto 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.
