Key factors such as growing demand for healthcare services and pharma products amid an aging population and high frequency of chronic diseases, increasing focus on specialty medicines, and ongoing advancements in biotechnology and drug discovery technologies contribute to the pharmaceutical industry’s long-term potential.
Given the industry’s bright prospects, it could be wise to invest in fundamentally strong pharma stocks Perrigo Company plc (PRGO), Amneal Pharmaceuticals, Inc. (AMRX), and Supernus Pharmaceuticals, Inc. (SUPN) for solid returns.
Increasing healthcare costs and the need for enhanced accessibility to medication drive high demand for generic drugs. The global generic pharmaceutical market is estimated to be worth around $740.50 billion by 2032, growing at a CAGR of 8.1% during the forecast period from 2024 to 2032.
Moreover, customers in the pharmaceutical market are increasingly looking for personalized and targeted treatments with a focus on preventative healthcare. This has led to a rise in demand for precision medicines tailored to specific genetic profiles and offer more effective treatments with fewer side effects.
The precision medicine market is anticipated to expand to $118.08 billion in 2028 at a CAGR of 9.9%.
Further, the incorporation of cutting-edge technologies like artificial Intelligence (AI) has bolstered drug production and clinical trials and expanded the scope of the pharma market. The AI in the pharmaceutical market is projected to reach $97.35 billion by 2030, growing at a CAGR of 29.2%.
Additionally, investors’ interest in pharma stocks is evident from iShares U.S. Pharmaceutical ETF’s (IHE) 11.2% returns over the past six months.
Given these encouraging trends, let’s look at the fundamentals of the top Medical – Pharmaceuticals stocks, beginning with the third choice.
Stock #3: Perrigo Company plc (PRGO)
Based in Dublin, Ireland, PRGO provides over-the-counter health and wellness solutions to enhance individual well-being in the U.S. and internationally. The company operates through Consumer Self-Care Americas and Consumer Self-Care International segments.
On March 4, 2024, PRGO announced that Opill had been shipped to major retailers and pharmacies and would be available on shelves nationwide and online later this month. Opill was approved by the U.S. Food and Drug Administration (FDA) for OTC use for all ages in July 2023 and is the first-ever daily birth control pill available without a prescription in the U.S.
The company distributes an annual dividend of $1.10, which yields 3.52% on the current market price, higher than the four-year average dividend yield of 2.55%. Its dividend payouts have grown at a CAGR of 6.8% over the past three years.
PRGO’s trailing-12-month EBIT margin of 6.16% is 462.7% higher than the industry average of 1.09%. Further, the stock’s trailing-12-month EBITDA margin of 13.88% is 140.3% higher than the industry average of 5.78%.
For the fourth quarter that ended December 31, 2023, PRGO’s net sales increased marginally year-over-year to $1.15 billion. The company’s adjusted gross profit grew 3.8% from the prior year’s quarter to $460.30 million. Its adjusted operating income from the Consumer Self-Care Americas segment came in at $464.40 million, up 5.4% from the prior year’s period.
Furthermore, the company’s cash and cash equivalents and restricted cash stood at $751.30 million as of December 31, 2023, compared to $600.70 million as of December 31, 2022.
Per the fiscal 2024 outlook, PRGO expects organic net sales and total net sales growth of 1% – 3% and flat, respectively. It also expects adjusted EPS to range between $2.50 and $2.65, resulting in mid-teens adjusted EPS growth, excluding infant formula.
Analysts expect PRGO’s revenue for the third quarter (ending September 2024) to increase 3% year-over-year to $1.16 billion. The company’s EPS is expected to grow 26% year-over-year to $0.81 for the same period. Furthermore, the company has surpassed the consensus EPS estimates in each of the trailing four quarters.
PRGO’s solid fundamentals are reflected in its POWR Ratings. 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, each weighted to an optimal degree.
The stock has an A grade for Growth and a B in Value. PRGO is ranked #41 among 161 stocks in the A-rated Medical - Pharmaceuticals industry.
Click here to access additional PRGO’s ratings (Momentum, Sentiment, Stability, and Quality).
Stock #2: Amneal Pharmaceuticals, Inc. (AMRX)
AMRX develops, manufactures, markets, and distributes generics, injectables, biosimilars, and specialty branded pharmaceutical products worldwide. The company operates through three segments: Generics; Specialty; and AvKARE.
On March 25, 2024, AMRX received an Abbreviated New Drug Application (ANDA) approval from the FDA for ciprofloxacin and dexamethasone otic suspension.
This product is indicated for treating infections caused by susceptible isolates of the designated microorganisms in Acute Otitis Externa (AOE) in pediatric, adult, and elderly patients due to staphylococcus aureus and pseudomonas aeruginosa. This approval represents the addition of another complex, high-value product.
On February 27, AMRX entered an exclusive licensing agreement with Zambon Biotech SA, part of the Zambon group, for IPX203 in the European Union, United Kingdom, and Switzerland. IPX203 is a novel, oral formulation of carbidopa/levodopa (CD/LD) extended-release capsules for the treatment of Parkinson’s disease (PD) that is under review with the FDA.
AMRX’s trailing-12-month EBIT margin of 11.34% is 936% higher than the industry average of 1.09%. Likewise, the stock’s trailing-12-month EBITDA and levered FCF margin of 20.92% and 12.70% are significantly higher than the industry averages of 5.78% and 0.90%, respectively.
For the fiscal fourth quarter, which ended on December 31, 2023, AMRX’s net revenue increased 1.2% year-over-year to $616.98 million and reported a gross profit of $189.83 million. During the quarter, the company’s cash and cash equivalents stood at $91.54 million, compared to $25.98 million as of December 31, 2022.
Analysts predict AMRX’s revenue for the first quarter (ended March 2024) to increase 10.9% year-over-year to $618.12 million, and its EPS for the same quarter is projected to come in at $0.09. Moreover, the company has an excellent earnings surprise history, surpassing consensus revenue and EPS estimates in each of the trailing four quarters.
Shares of AMRX have surged 91.7% over the past nine months to close the last trading session at $6.
AMRX’s bright prospects are reflected in its POWR Ratings. The stock has an overall rating of B, equating to a Buy in our proprietary rating system.
AMRX has a B grade for Growth, Value, and Sentiment. It is ranked #31 in the same industry.
In addition to the POWR Ratings we’ve stated above, we also have AMRX ratings for Momentum, Quality, and Stability. Get all AMRX ratings here.
Stock #1: Supernus Pharmaceuticals, Inc. (SUPN)
SUPN develops and commercializes products for treating central nervous system (CNS) diseases. Its commercial products include Trokendi XR and Oxtellar XR. The company’s products also comprise Qelbree, APOKYN, XADAGO, MYOBLOC, GOCOVRI, and Osmolex ER. In addition, its product candidates include SPN-830, SPN-817, and SPN-820.
SPUN’s trailing-12-month gross profit margin of 86.21% is 50.9% higher than the 57.14% industry average. Its 2.21% trailing-12-month EBIT margin is 146.6% higher than the 0.89% industry average. Likewise, the stock’s 16.17% trailing-12-month EBITDA margin is 204.4% higher than the 5.31% industry average.
For the fourth quarter that ended December 31, 2023, SUPN’s total revenues were $164.31 million. Net sales of Qelbree® increased 97% year-over-year to $46.4 million, and net sales of GOCOVRI® rose 10% from the prior year’s quarter to $32.0 million. As of December 31, 2023, its current liabilities reduced to $290.20 million, compared to $687.96 million as of December 31, 2022.
Street expects SUPN’s revenue for the fiscal year ending December 2024 to be $601.46 million. Its EPS is expected to increase 43.5% year-over-year to $1.64 for the same year. In addition, the company surpassed consensus EPS estimates in each of the trailing four quarters.
Over the past three months, the stock has surged 13% to close the last trading session at $31.43.
SUPN’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 stock has an A grade for Value and a B in Quality. Within the same industry, SUPN is ranked #19.
Click here to access additional ratings of SUPN for Stability, Growth, Momentum, and Sentiment.
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PRGO shares were unchanged in premarket trading Tuesday. Year-to-date, PRGO has declined -0.36%, versus a 9.73% rise in the benchmark S&P 500 index during the same period.
About the Author: Nidhi Agarwal
Nidhi is passionate about the capital market and wealth management, which led her to pursue a career as an investment analyst. She holds a bachelor's degree in finance and marketing and is pursuing the CFA program. Her fundamental approach to analyzing stocks helps investors identify the best investment opportunities.
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