The surge in investment and spending in global medicine is fueling the pharma industry. Therefore, investors could consider investing in quality pharma stocks Zoetis Inc. (ZTS), Wave Life Sciences Ltd. (WVE), and Johnson & Johnson (JNJ).
The IQVIA Institute for Human Data Science predicts a surge in global medication spending, reaching approximately $1.9 trillion by 2027. This growth, expected to be between 3-6%, is attributed to the introduction of new drugs and the heightened utilization of recently launched brands, bolstering the pharma industry.
The U.S. Pharmaceuticals market is anticipated to achieve a revenue of $603.40 billion in 2023. The market is expected to expand at a CAGR of 5.8% to reach $798.20 billion by 2028. The U.S. is poised to dominate global revenue.
Moreover, the global pharmaceutical manufacturing market is predicted to reach $863.60 billion by 2030, with a CAGR of 7.8%, driven by increased demand, technological advancements, and rising cases of chronic disorders.
Additionally, the pharmaceutical industry is evolving with shifts in consumer behavior, a surge in digital solutions, escalating cybersecurity threats, growing patient engagement, adoption of high-tech solutions for R&D, and expansion into a global marketplace driven by increased digitalization and technological advancements.
Besides, the global OTC pharmaceuticals market is expected to expand at a CAGR of 11.4% to reach $82.56 billion by 2028, driven by growing consumer preference for self-medication, innovations in formulations and delivery systems, and the introduction of new active ingredients, fostering a market.
Considering these conducive trends, let’s examine the fundamentals of the four Medical - Pharmaceuticals stock picks, starting with number 3.
Stock #3: Zoetis Inc. (ZTS)
ZTS is a leading global animal health company specializing in medicines, vaccines, and diagnostics for livestock and companion animals. The company caters to veterinarians, livestock producers, and pet owners worldwide, aiming to improve the health and well-being of animals.
On October 12, 2023, ZTS declared a dividend of $0.375 per share for the fourth quarter of 2023. The dividend is expected to be paid today.
For the third quarter, which ended September 30, 2023, ZTS' revenue and non-GAAP gross profit grew 7.4% and 8.5% year-over-year to $2.15 billion and $1.52 billion, respectively. Moreover, its non-GAAP net income attributable to ZTS and EPS amounted to $629 million and $1.36, up 11.1% and 12.4% from the previous year's quarter, respectively.
Street expects ZTS' revenue and EPS to grow 7.5% and 15.4% year-over-year to $2.19 billion and $1.33 for the fourth quarter ending December 2023, respectively. The company surpassed the EPS estimates in each of the trailing four quarters, which is impressive.
ZTS’ shares have returned 19.5% over the past year and 20.6% year-to-date to close the last trading session at $176.67.
ZTS’ POWR Ratings reflect its positive prospects. The stock has an overall rating of B, equating 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.
ZTS has a B grade for Growth, Stability, and Quality. Within the Medical - Pharmaceuticals industry, it is ranked #17 out of 155 stocks.
In addition to the POWR Ratings stated above, one can access ZTS’ additional Value, Momentum, and Sentiment ratings here.
Stock #2: Wave Life Sciences Ltd. (WVE)
Based in Singapore, WVE is a clinical-stage genetic medicine company employing the PRISM platform to develop stereopure oligonucleotides targeting RNA for various disorders, including ALS, Huntington's disease, and muscular dystrophy. The company collaborates with Pfizer, Takeda, and Glaxo Group Limited.
On September 28, 2023, WVE outlined its growth strategy during its R&D Day, introducing a siRNA program targeting INHBE for metabolic disorders, progressing with RNA editing candidate WVE-006, and aiming for five new clinical candidates by 2025.
On June 26, WVE joined the small-cap Russell 2000® and broad-market all-cap Russell 3000® Indexes during the annual reconstitution, becoming part of widely used benchmarks for investment strategies, with around $12.10 trillion in assets benchmarked against Russell's U.S. indexes.
For the third quarter ended September 30, 2023, WVE generated revenue of $49.21 million, up significantly from the prior-year quarter. The company’s net income increased 118.6% year-over-year to $7.25 million. Its net income per share attributable to ordinary shareholders grew 116.7% from the previous-year quarter to $0.07.
As of September 30, WVE had $199.92 million in total assets, compared to $146.39 million as of December 31, 2022.
WVE’s revenue is expected to grow significantly year-over-year to $39.14 billion for the fourth quarter ending December 2023. Its EPS is expected to improve 38.7% for the same quarter.
Shares of WVE increased 29.8% over the past year and 45.1% over the past six months to close the last trading session at $5.31.
WVE’s POWR Ratings reflect this sound outlook. The stock has an overall rating of B, equating to a Buy in our proprietary rating system.
WVE has a B grade for Growth, Sentiment, and Quality. Within the same industry, it is ranked #16.
Click here for WVE’s additional Value, Momentum, and Stability ratings.
Stock #1: Johnson & Johnson (JNJ)
JNJ is a global healthcare company that develops, manufactures, and sells a diverse range of healthcare products, including consumer health items, pharmaceuticals, and medical devices. With well-known brands like NEUTROGENA and JOHNSON'S, the company serves a wide customer base worldwide.
On November 30, JNJ MedTech finalized the acquisition of Laminar, Inc., a medical device company focusing on eliminating the left atrial appendage in atrial fibrillation patients. The $400 million deal includes potential milestone payments. Laminar's unique rotational motion approach received FDA approval for a pivotal study beginning in early 2024.
JNJ pays an annual dividend of $4.76, which translates to a yield of 3.08% on the prevailing price level, higher than its four-year average dividend yield of 2.63%.
For the third quarter, JNJ's worldwide sales to customers and gross profit amounted to $21.35 billion and $14.75 billion, up 6.8% and 6.7% year-over-year, respectively. The company’s adjusted net earnings rose 14.1% year-over-year to $6.78 billion.
Moreover, its adjusted net earnings per share from continuing operations increased 19.3% from the previous year's quarter to $2.66.
Analysts expect JNJ’s revenue and EPS to grow 3.6% and 7.2% year-over-year to $87.76 billion and $10.79 for the fiscal year ending December 2024, respectively. The company surpassed the EPS estimates in each of the trailing four quarters.
The stock has gained 5.2% over the past month and 1.7% intraday to close the last trading session at $154.66.
JNJ’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall rating of A, equating to a Strong Buy in our proprietary rating system.
JNJ has a B for Value, Stability, Sentiment, and Quality. Within the same industry, it is ranked #6.
To see JNJ’s additional POWR Ratings for Growth and Momentum, click here.
What To Do Next?
43 year investment veteran, Steve Reitmeister, has just released his 2024 market outlook along with trading plan and top 11 picks for the year ahead.
JNJ shares were trading at $157.19 per share on Friday afternoon, up $2.53 (+1.64%). Year-to-date, JNJ has declined -8.32%, versus a 21.26% rise in the benchmark S&P 500 index during the same period.
About the Author: Kritika Sarmah
Her interest in risky instruments and passion for writing made Kritika an analyst and financial journalist. She earned her bachelor's degree in commerce and is currently pursuing the CFA program. With her fundamental approach, she aims to help investors identify untapped investment opportunities.
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