We recently compiled a list of the 12 Best Biotech Stocks To Invest In According To Hedge Funds. In this article, we are going to take a look at where Jazz Pharmaceuticals plc (NASDAQ:JAZZ) stands against the other biotech stocks.
As we have mentioned in our article, “10 Best Penny Stocks to Buy Under $1,” the size of the global biotechnology industry was assessed to be worth $1.38 trillion in 2023 and is expected to grow at a CAGR of 11.8% from 2024 to 2033, predicted to be worth around $4.25 trillion.
Specifically, the U.S. biotechnology market was forecast to be $246.18 billion last year, and at a CAGR of 11.6% from 2024 to 2034, it is expected to be worth approximately $830.31 billion as per Precedence Research. North America’s revenue share was 37.79%, while Asia Pacific produced a revenue share of 23.99%. In terms of revenue share by application, the biopharmacy segment had 41.73% in 2023, and the application segment for bioindustries accounted for 24.33% of total revenue. In terms of technology, the tissue engineering and regeneration market has projected a 19.26% revenue share for 2023.
According to stock analysis, there are 665 stocks in the biotechnology industry, with a combined market value of $1,559.75 billion and total sales of $127.6 billion.
However, the U.S. Food and Drug Administration and other drug authorities’ clearance decisions and research data have a significant impact on the future of these occasionally volatile equities.
It has always been necessary to have a high risk tolerance and the ability to wait years or even decades for results when investing in biotechnology stocks. The resilience of biotech investors has been put to the test by inconsistent results in recent years and thus far this year. According to Morningstar strategist Karen Andersen, biotech had a strong start to 2024, driven by an uptick in M&A and every indication that interest rates would begin to decline. However, the second quarter of 2024 has been more mixed for the industry, with rates appearing to be stabilizing rather than falling, despite ongoing (but improving) inflation. Higher rates typically deter investors from waiting for hazy returns on their biotech investments.
Andersen sees a lot of promising things in biotech as well as room for expansion, despite the recent mixed outcomes, stating:
“We still see tailwinds for the industry going forward. Smaller-cap names are still targets for acquisitions by bigger biopharma firms, and a wave of acquisitions has continued since late last year, particularly focused on oncology and immunology,” “We think obesity acquisitions are likely going forward, as big biopharma can bring development and commercialization expertise to multiple programs in midstage trials at small biotechs. Second, on a more fundamental level, new technologies and launches in new therapeutic areas are poised to boost productivity and drive biotech performance.”
Moreover, the report “Future of Biotech AI-driven Drug Discovery” states that artificial intelligence may drastically speed up drug research, cutting down on development timeframes from many years to a matter of years. Through the integration of artificial intelligence AI with drug development and biology, scientists can build customized therapies for patients. Instead of replacing scientists, AI will improve their skills by enabling them to automate repetitive operations and produce fresh insights. Companies need to go from isolated pilots to a complete, data-driven approach, integrating analytics into decision-making, and emphasizing quick, observable results that help patients and the scientific method in order to properly utilize AI.
Currently, more than 450 life sciences companies, classified as “startups” or “scaleups,” are actively utilizing machine learning and deep learning-based predictive and generative capabilities to enhance their research strategies, as per the findings of BioPharmaTrend’s report, “The State of Artificial Intelligence (AI) in the Biopharma Industry.”
Fitch Ratings also continues to maintain a neutral outlook on the global biotech industry for 2024. Despite rising interest rates, it expects growth driven by demographic trends and innovation. Although they are confronting difficulties with investment and regulation, Fitch highlights that companies are concentrating more on research and development as well as strategic changes that improve drug pricing.
Methodology:
We sifted through holdings of biotech ETFs and online rankings to form an initial list of 20 biotech stocks. Then we selected the 12 stocks that were the most popular among institutional investors. The stocks are ranked in ascending order of the number of hedge funds that have stakes in them, as of Q2 2024.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points. (see more details here)
A biopharmaceutical scientist in their lab, studying a newly-diagnosed therapy-related acute myeloid leukemia. .
Jazz Pharmaceuticals plc (NASDAQ:JAZZ)
Number of Hedge Fund Holders: 44
Jazz Pharmaceuticals is a biopharmaceutical company with its headquarters in Ireland that specializes in cancer and sleeping problem treatments. It offers nine licensed drugs in neurology and oncology; these include Xyrem and Xywav for narcolepsy, Rylaze for acute lymphoblastic leukemia, Zepzelca for metastatic small-cell lung cancer, and Vyxeos for acute myeloid leukemia.
Strong commercial launches continue to be a major factor in Jazz Pharmaceuticals’ (NASDAQ: JAZZ) growth.
Jazz’s main product, Xyrem, which it acquired in 2005 for $123 million, became a huge success in treating narcolepsy. Nevertheless, Xyrem’s sales have suffered since generic versions were available in January 2023, even though the biopharmaceutical company continues to make some profits through royalties and distribution deals.
The company is concentrating on Xywav, a low-sodium Xyrem variant that was approved in 2020, in an effort to mitigate this decline. Although Xywav is anticipated to increase modestly, the narcolepsy market is becoming more competitive, increasing the risks associated with clinical development and commercialization for the company.
Jazz has been expanding its range of products with the recent approval of Rylaze for leukemia and Zepzelca for small-cell lung cancer. The firm’s aim to reduce its need for Xyrem depends on the successful introduction of these drugs.
Epidiolex was added to the firm’s portfolio in 2021 when it paid $7.2 billion to purchase GW Pharmaceuticals. Epidiolex, a cannabidiol treatment for serious seizures, added $865 million to Jazz’s revenue in 2023, supporting the company’s diversification strategies and long-term growth potential.
Jazz Pharmaceuticals plc (NASDAQ:JAZZ)’ price goal was lifted by JPMorgan to $202 from $190, citing excellent business endurance and an appealing entry position. Baird, on the other hand, decreased the price target to $154 from $160, citing worse Rylaze performance despite the robust rise in Epidiolex sales in Q2 2024. The solid Q2 2024 earnings with 6.95% growth in revenue YoY matched Wall Street expectations but resulted in a minor narrowing of the 2024 projection. Rylaze appeared to be the weak spot in revenue. However, both firms kept their bullish ratings on the stock.
Ryan Wilder’s Vestal Point Capital is the largest shareholder in the company, with 1,500,000 shares worth $160.09 million.
Overall JAZZ ranks 12th on our list of the best biotech stocks to buy according to hedge funds. While we acknowledge the potential of JAZZ as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns, and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than JAZZ but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.