Renowned investor and manager of the world’s largest actively traded ETF company Cathie Wood has been an advocate of the genomics industry for a long time. In a CNBC interview, Wood stated that she views a genomic revolution and fintech growth as…
two potential industry disruptive trends in 2021, following the electric vehicle (EV) industry boom last year. DNA sequencing has been making breakthrough progress in recent years and is expected to eventually lead to cures for virtually all critical diseases. In this regard, Wood said, “We’re going to be able to cure diseases that we never thought it would be possible to cure, including cancer.”
The biotech industry’s business resiliency and degree of medical innovation were revealed over the past year. Investors poured capital into pharmaceutical companies and biotech firms, which are now leveraging abundant capital funds and advanced technology to make significant progress on critical ailment treatments. Companies such as Vertex Pharmaceuticals Incorporated (VRTX – Get Rating) and Incyte Corporation (INCY – Get Rating) have been releasing positive data from clinical trials over the past couple of months, which is driving favorable revenue and earnings growth estimates. Given this backdrop, Wood’s Ark Genomic Revolution ETF (ARKG) has gained 133.4% over the past year, and 30.1% over the past six months.
While the biotech industry is expected to redefine healthcare standards over the long term, many companies have been making only minor, current advancements in the field. Consequently, it may take a long time for such companies to generate acceptable profits from their drug pipelines. This is because significant investment and technical prowess is required for these companies to develop their drug candidates for commercial use. While Wood has ample funding to hold such stocks until they deliver decent results, retail investors might not have that capacity. Thus, we think some companies held by ARKG, such as Fate Therapeutics, Inc. (FATE – Get Rating) and Twist Bioscience Corporation (TWST – Get Rating), which are currently operating in their preliminary research stages, are best avoided until they release verified data demonstrating progress on their respective drug developments.
Stocks to Buy:
VRTX focuses on developing therapies to treat cystic fibrosis. With the company’s potential to develop break-through treatments for critical ailments, it is one of Wood’s top picks for ARKG. Wood holds roughly 1.75 million shares of VRTX, which represents a 0.78% weighting in the ETF. The stock has a weighted rank of #37 of in Ark. Wood has a 0.68% stake in the company.
VRTX’s robust drug development pipeline and positive results from clinical trials have allowed it to secure a top position in Ark. On April 20, VRTX partnered with CRISPR Therapeutics, Inc. (CRSP) to jointly develop CTX001, a drug for the treatment of sickle cell disease and beta thalassemia. The collaboration paves the way for VRTX to venture beyond out its specialty to develop drugs for other serious diseases.
Last month, VRTX’s breakthrough drug, KAFTRIO, in combination with Ivacaftor, received a positive opinion from European Medicines Agency Committee for Medicinal Products for Human Use for cystic fibrosis (CF) treatment. Its TRIKAFTA CF drug received approval from the Australian Therapeutic Goods Administration (TGA) in March also. These developments reflect VRTX’s leading position in CF research and drug pipeline.
VRTX’s non-GAAP net product revenues increased 29% year-over-year to $1.63 billion in the fourth quarter, ended December 31, 2021. Its non-GAAP operating income rose 50% from its year-ago value to $887 million, while its non-GAAP net income improved 49% from the same period last year to $661 million. Its non-GAAP quarterly EPS came in at $2.51, up 48% from the prior year quarter.
A consensus EPS estimate of $2.70 for the most recent quarter, ended March 2021, represents a 5.5% rise year-over-year. The company has an impressive earnings surprise history; it beat the Street’s EPS estimates in three of the trailing four quarters. Analysts expect the company’s revenues to rise 9.6% from the same period last year to $1.66 billion for the about-to-be-reported quarter.
Shares of VRTX have…
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