Despite market volatility, the biotech industry has performed relatively well due to breakthrough advances, advancement in agriculture biotechnology and inelastic demand for healthcare products and services. Investors looking to invest in biotech stocks could consider buying LAVA Therapeutics N.V. (LVTX) now.
However, considering the lingering macroeconomic headwinds, I think it is best to steer clear of fundamentally weak Talaris Therapeutics, Inc. (TALS).
The industry benefits from government efforts. Last year, the Biden administration announced a $2 billion investment in biotech and biomanufacturing activities, with the Department of Defense contributing $1 billion, mostly for manufacturing facilities in the United States.
In addition, agricultural biotechnology is gaining traction. It involves using advanced technological procedures to invent new products with higher quality attributes. Moreover, advances in genetic engineering have made it possible to control genetic modifications caused in the organism.
Also, increased production of biotech plants using agricultural biotechnology is boosting the market’s growth. The global agricultural biotechnology industry is expected to grow at a 5.8% CAGR to $55.20 billion by 2030.
The global biotechnology market is estimated to grow at a CAGR of 7.7% until 2026. Investors’ interest in biotech stocks is evident from the iShares Biotechnology ETF’s (IBB) 8.8% gains over six months.
Let’s discuss the stocks mentioned above in detail.
Stock to Buy:
LAVA Therapeutics N.V. (LVTX)
Headquartered in Utrecht, the Netherlands, LVTX is a clinical-stage immuno-oncology company, focuses on developing cancer treatments.
LVTX’s trailing-12-month Price/Book of 0.44x is 77.9% lower than the industry average of 1.99x. Its trailing-12-month Price/Sales multiple of 2.29 is 43.1% lower than the industry average of 4.02.
For the third quarter ended December 31, 2022, LVTX’s net sales increased 86.3% year-over-year to $15.26 million. Its total assets came in at $149.89 million for the period that ended September 30, 2022, compared to $139.25 million for the period that ended December 31, 2021.
Also, its other-current assets came in at $54.88 million, compared to $3.30 million for the same period.
The consensus revenue estimate of $17.44 million for the year ending 2023 represents a 217.1% increase year-over-year. LVTX shares have lost 6.6% intraday to close its last trading session at $1.55.
LVTX’s POWR Ratings reflect its promising outlook. The stock has an overall rating of B, which translates to a Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
LVTX also has an A grade for Sentiment and a B for Value. It is ranked #30 of 400 stocks in the Biotech industry. To access additional ratings for LVTX’s Growth, Stability, Momentum and Quality, click here.
Stock to Sell:
Talaris Therapeutics, Inc. (TALS)
TALS operates as a late-clinical stage cell therapy company in the United States. The Company is principally focused on developing allogeneic hematopoietic stem cell transplantation (allo-HSCT).
TALS’s ROTA of negative 38.15% is lower than the industry average of negative 31.61%. Also, its ROTC of negative 22.45% is lower than the industry average of negative 21.78%.
TALS’ loss from operations increased 51.8% year-over-year to $19.82 million for the third quarter ended September 30, 2022. Its net loss for the period increased by 46.9% year-over-year to $19.01 million. Also, its loss per share came in at $0.46, up 43.8% year-over-year.
Street expects TALS’s EPS is expected to remain negative in 2023 and 2024. The stock has lost 80.7% over the past year to close the last trading session at $1.84.
TALS has an overall D rating, equating to a Sell in our POWR Ratings system.
It has a D grade for Momentum, Value, and Quality. It is ranked #354 in the same industry. We have also rated TALS for Sentiment, Growth, and Stability. Get all the TALS ratings here.
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LVTX shares were trading at $1.55 per share on Tuesday afternoon, down $0.00 (0.00%). Year-to-date, LVTX has declined -55.71%, versus a 7.14% rise in the benchmark S&P 500 index during the same period.
About the Author: Rashmi Kumari
Rashmi is passionate about capital markets, wealth management, and financial regulatory issues, which led her to pursue a career as an investment analyst. With a master's degree in commerce, she aspires to make complex financial matters understandable for individual investors and help them make appropriate investment decisions.
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