Inside the DNA of Three Biotechnology Stocks

This week, we use AAII’s A+ Investor Stock Grades to provide insight into three biotechnology stocks. With the increase in technology and engineering innovation, should you consider the three biotechnology stocks of Catalyst Pharmaceuticals Inc. (CPRX), Exelixis Inc. (EXEL) and Organogenesis Holdings Inc. (ORGO)?

Biotechnology Stocks Recent News

​The global biotechnology industry is experiencing significant growth, driven by advancements in genetic engineering, personalized medicine and sustainable bio-based solutions. Innovations such as gene therapies and next-generation diagnostics are transforming disease prevention and treatment. As patients and providers seek more effective and targeted therapeutic options, medicine tailored to individual genetic profiles is experiencing a boost.

According to Precedence Research, the global biotechnology market is projected to grow at a compound annual growth rate (CAGR) of approximately 11.8% through 2033. Key growth drivers include increasing investment in research and development (R&D), a consumer preference for more personalized medicine and an increase in chronic illnesses. Given these projections, biotechnology companies such as Catalyst Pharmaceuticals, Exelixis and Organogenesis Holdings could be worth examining.

Grading Biotechnology Stocks With AAII’s A+ Stock Grades

When analyzing a company, it is helpful to have an objective framework that allows you to compare companies in the same way. This is why AAII created the A+ Stock Grades, which evaluate companies across five factors that research and real-world investment results indicate to identify market-beating stocks in the long run: value, growth, momentum, earnings estimate revisions (and surprises) and quality.

Using AAII’s A+ Stock Grades, the following table summarizes the attractiveness of three biotechnology stocks — Catalyst Pharmaceuticals, Exelixis and Organogenesis Holdings — based on their fundamentals.

AAII’s A+ Stock Grade Summary for Three Biotechnology Stocks

What the A+ Stock Grades Reveal

Catalyst Pharmaceuticals Inc. (CPRX) is a commercial-stage biopharmaceutical company headquartered in Coral Gables, Florida, with a focus on developing and commercializing treatments for rare neuromuscular and neurological diseases. The company operates primarily in the U.S., with strategic partnerships extending its reach into international markets. Its portfolio includes therapies for conditions such as Lambert-Eaton myasthenic syndrome, epilepsy and Duchenne muscular dystrophy. Catalyst Pharmaceuticals emphasizes operational growth through product acquisitions, licensing agreements and strategic commercialization. Under its current leadership, the company continues to expand its therapeutic pipeline while prioritizing ethical practices, patient access and long-term sustainability initiatives.

Catalyst Pharmaceuticals has a Momentum Grade of A, based on its Momentum Score of 87. This means that the stock’s momentum is very strong in terms of its weighted relative price strength over the last four quarters. The weighted four-quarter relative strength rank is the relative price change for each of the past four quarters, with the most recent quarterly price change given a weight of 40% and each of the three previous quarters given a weight of 20%. The ranks are 87, 53, 57 and 90, sequentially from the most recent quarter. The weighted four-quarter relative price strength is 11.6%.

A higher-quality stock possesses traits associated with upside potential and reduced downside risk. Backtesting of the Quality Grade shows that stocks with higher grades, on average, outperformed stocks with lower grades from 1998 through 2019.

The A+ Quality Grade is the percentile rank of the average of the percentile ranks of return on assets (ROA), return on invested capital (ROIC), gross profit to assets, buyback yield, change in total liabilities to assets, accruals to assets, Z double prime bankruptcy risk (Z) score and F-Score. The score is variable, meaning it can consider all eight measures or, should any of the eight measures not be valid, the valid remaining measures. To be assigned a Quality Score, though, stocks must have a valid (non-null) measure and corresponding ranking for at least four of the eight quality measures.

Catalyst Pharmaceuticals has a Quality Grade of A, based on a score of 94, which is very strong. The company ranks strongly in terms of return on assets, return on invested capital and F-Score. Its return on assets is 25.4%, ranking in the 98th percentile among all U.S.-listed stocks. Its return on invested capital of 40.1% ranks in the 82nd percentile, and its F-Score of 7 ranks in the 85th percentile. The F-Score is a number between 0 and 9 that assesses the strength of a company’s financial position. It considers the profitability, leverage, liquidity and operating efficiency of a company. Catalyst Pharmaceuticals also has a gross income to assets of 49.1%, which is above the sector median of 18.2% and ranks in the 88th percentile.

The components of the Growth Composite Score consider a company’s success in growing sales on a year-over-year and long-term annualized basis and its ability to consistently generate positive cash from its core operations. The company’s Growth Grade is B, which is strong. Catalyst Pharmaceuticals has generated positive annual cash from operations in the past five consecutive years and has a five-year annualized sales growth rate of 36.9%.

Exelixis Inc. (EXEL) is a biotechnology company headquartered in Alameda, California, specializing in the discovery, development and commercialization of therapies for difficult-to-treat cancers. The company operates primarily in the U.S., with a significant presence in the San Francisco Bay Area, where it has expanded its laboratory and office facilities to support its growing operations. Exelixis’ portfolio includes Cabometyx (cabozantinib), a treatment for advanced renal cell carcinoma, and Cometriq (cabozantinib), a treatment for progressive medullary thyroid cancer. The company is also advancing a diverse pipeline of oncology therapeutics, including next-generation small molecules and biotherapeutics, through both internal development and strategic partnerships. Exelixis is committed to operational excellence and sustainability, focusing on innovation in cancer care and maintaining a strong financial position to support its long-term growth objectives.

The company has a Value Grade of C, based on its Value Score of 45, which is average. The Value Grade is the percentile rank of the average of the percentile ranks of the price-to-sales (P/S) ratio, price-earnings (P/E) ratio, price-to-book-value (P/B) ratio, price-to-free-cash-flow (P/FCF) ratio, shareholder yield and the ratio of enterprise value to earnings before interest, taxes, depreciation and amortization (EBITDA).

The company has a shareholder yield of 7.3%, ranking in the 10th percentile among all U.S.-listed stocks. Its price-earnings ratio of 19.6 ranks in the 53rd percentile. The enterprise-value-to-EBITDA ratio is 10.4, ranking in the 39th percentile.

Earnings estimate revisions indicate how analysts view a firm’s short-term prospects. Exelixis has an Earnings Estimate Revisions Grade of B, based on a score of 72, which is positive. The grade is based on the statistical significance of its latest two quarterly earnings surprises and the percentage change in its consensus estimate for the current fiscal year over the past month and past three months.

Exelixis reported a positive earnings surprise of 39.8% for the first quarter of 2025, and in the prior quarter reported a positive earnings surprise of 11.8%. Over the last month, the consensus earnings estimate for the first quarter of 2025 has increased from $0.554 to $0.626 per share based on eight upward and two downward revisions. Over the last month, the consensus earnings estimate for full-year 2025 has increased from $2.298 to $2.587 per share based on 11 upward revisions and one downward revision.

Exelixis has a Growth Grade of B, which is strong. The company has a five-year annualized sales growth rate of 17.5%, compared to the sector median of 10.4%.

Organogenesis Holdings Inc. (ORGO) is a regenerative medicine company headquartered in Canton, Massachusetts, specializing in the development, manufacture and commercialization of product solutions for advanced wound care and surgical and sports medicine markets. The company operates additional facilities in Norwood, Massachusetts; San Diego, California; Birmingham, Alabama; St. Petersburg, Florida; and Reinach, Switzerland. Organogenesis Holdings offers a diverse portfolio of products — including Apligraf, Dermagraft and PuraPly, among others — aimed at promoting healing and tissue regeneration. In November 2024, the company expanded its manufacturing capacity by leasing a 122,000-square-foot biomanufacturing facility in Smithfield, Rhode Island, to support future growth. Organogenesis Holdings continues to focus on innovation and operational excellence to meet the needs of patients and health care providers.

The company has a Quality Grade of A, based on a score of 88, which is very strong. The company ranks strongly in terms of its buyback yield and its gross income to assets. Its buyback yield of 4.2% ranks in the 90th percentile among all U.S.-listed stocks, and its gross income to assets of 74.5% ranks in the 96th percentile. Organogenesis Holdings has a return on assets of –3.4%, above the sector median of –28.9%, and an F-Score of 7.

Organogenesis Holdings has a Value Grade of B, based on a score of 67, which is good value. The company ranks in the 20th percentile for its shareholder yield and in the 30th percentile for its price-to-sales ratio. The company has a shareholder yield of 4.2% and price-to-sales ratio of 0.84. A lower price-to-book ratio is considered better value, and Organogenesis Holdings’ price-to-book ratio of 0.97 is below the sector median of 1.85.

The company has a Momentum Grade of C, based on its Momentum Score of 55. This means that the stock’s momentum is average in terms of its weighted relative price strength over the last four quarters. The ranks are 39, 21, 91 and 65, sequentially from the most recent quarter. The weighted four-quarter relative price strength is –0.7%.