The Pharmaceuticals market has been growing steadily in recent years, mainly due to the increasing demand for customized medicine and treatments worldwide.
Given this backdrop, it could be wise to consider fundamentally strong pharma stocks, Eli Lilly and Company (LLY), Green Thumb Industries Inc. (GTBIF), and Supernus Pharmaceuticals, Inc. (SUPN), for big returns this summer.
The United States boasts one of the world's largest pharmaceutical markets. This is fueled by several key factors, including a substantial and aging population, significant healthcare expenditures by government organizations globally, and extensive efforts to improve the affordability and accessibility of pharmaceuticals.
Looking ahead, the pharmaceutical market is expected to experience a steady annual growth rate of 6% from 2024 to 2028, resulting in a market volume of $802.80 billion by 2028.
Moreover, the rising usage of customized medicine in neurology, pulmonary, antiviral, and psychiatry, as well as emerging economies, would open up new potential for the global personalized medicine market. Therefore, the U.S. personalized medicine market is expected to reach around $373.96 billion by 2033, growing at a CAGR of 8.5% from 2024 to 2033.
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%.
Alternative medicines are also showing prospects. For instance, there are explorations about cannabinoids and their impact on diseases in a controlled environment. The global cannabis pharmaceuticals market is expected to expand at a CAGR of 51% till 2030.
Additionally, investors’ interest in pharmaceutical stocks is evident from the iShares U.S. Pharmaceutical ETF’s (IHE) 12.4% returns over the past six months.
Given these favorable industry trends, let’s look at the fundamentals of the top Medical - Pharmaceuticals stocks, beginning with the third choice.
Stock #3: Eli Lilly and Company (LLY)
LLY discovers, develops, and markets human pharmaceuticals worldwide. The company provides medicines for diabetes, obesity, rheumatoid arthritis, atopic dermatitis, as well as products for oncology.
On May 24, LLY announced that it had more than doubled its investment in its Lebanon, Indiana, manufacturing site with a new $5.3 billion commitment, increasing the company's total investment in this site from $3.7 billion to $9 billion.
This expansion would enhance LLY's capacity to manufacture Active Pharmaceutical Ingredients (API) for Zepbound (tirzepatide) injection and Mounjaro (tirzepatide) injection so that more adults with chronic diseases like obesity and type 2 diabetes may benefit from these important treatments.
On May 6, 2024, LLY declared a dividend for the second quarter of 2024 of $1.30 per share on outstanding common stock, payable on June 10, 2024. LLY pays an annual dividend of $5.20, which translates to a yield of 0.63% on the prevailing price level. Its four-year average dividend yield is 1.25%.
LLY’s trailing-12-month gross profit margin of 80.16% is 40.5% higher than the industry average of 57.04%. Further, the stock’s trailing-12-month EBIT margin of 32.86% is significantly higher than the industry average of 1.24%. Also, LLY’s trailing-12-month EBITDA margin of 37.2% is 523.6% higher than the industry average of 5.97%.
For the first quarter that ended March 31, 2024, LLY’s revenue increased 26% year-over-year to $8.77 billion. Its non-GAAP gross margin rose 32.5% from the year-ago value to $7.23 billion. Also, the company’s non-GAAP net income and non-GAAP EPS were $2.34 billion and $2.58, up 59.5% and 59.3% from the previous year’s quarter, respectively.
According to its updated 2024 financial guidance, LLY expects revenue in the range of $42.40-$43.60 billion, up from the prior guidance of $40.40-$41.60 billion. Its non-GAAP earnings per share are expected to be from $13.50 to $14, compared to the previous guidance of $12.20-$12.70.
Street expects LLY’s revenue for the second quarter (ending June 2024) to increase 20.3% year-over-year to $10 billion. Its EPS for the current quarter is expected to grow 32.9% year-over-year to $2.80. Moreover, the company surpassed the consensus EPS estimates in each of the trailing four quarters, which is impressive.
LLY’s stock has gained 91% over the past year and 40.7% year-to-date to close the last trading session at $820.34.
LLY’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 Sentiment and a B for Growth. LLY is ranked #27 among 158 stocks in the Medical - Pharmaceuticals industry.
Click here to access additional LLY ratings (Momentum, Value, and Stability).
Stock #2: Green Thumb Industries Inc. (GTBIF)
GTBIF manufactures, distributes, markets, and sells cannabis products for medical and adult use. It operates through two segments: Retail and Consumer Packaged Goods.
On April 24, 2024, GTBIF announced the opening of its 16th retail location in Florida and 93rd nationwide, RISE Dispensary Wesley Chapel. The new store will offer medical cannabis patients a diverse collection of cannabis products, including RYTHM premium flower and full-spectrum vapes, Dogwalkers pre-rolls, Good Green flower and &Shine flower, pre-rolls, vapes, and chews.
The new store openings are expected to expand GTBIF’s retail footprint, positioning the company for robust growth and profitability in the cannabis market.
GTBIF’s trailing-12-month EBIT margin of 20.02% is significantly higher than the industry average of 1.24%. Likewise, the stock’s trailing-12-month EBITDA and levered FCF margins of 29.73% and 9.63% are 398.1% and 767.1% higher than the industry averages of 5.97% and 1.11%, respectively.
For the fiscal first quarter, which ended on March 31, 2024, GTBIF’s revenues increased 11% year-over-year to $275.81 million, and its gross profit grew 16.2% year-over-year to $144.93 million. Net income attributable to GTBIF increased 240% from the prior year’s quarter to $31.08 million.
Furthermore, its net income per share grew 225% year-over-year to $0.13. Its adjusted EBITDA increased 18.8% from the year-ago value to $90.55 million.
Analysts predict GTBIF’s revenue for the second quarter (ending June 2024) to increase 10% year-over-year to $277.57 million, and its EPS for the same quarter is projected to grow 18.8% year-over-year to $0.06. Moreover, the company has an excellent earnings surprise history, surpassing consensus revenue estimates in each of the trailing four quarters.
Shares of GTBIF have surged 21.9% over the past nine months to close the last trading session at $11.40.
GTBIF’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.
GTBIF has an A grade for Sentiment and a B for Stability and Quality. It is ranked #16 in the same industry.
In addition to the POWR Ratings we’ve stated above, we also have GTBIF ratings for Momentum, Growth, and Value. Get all GTBIF 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.
On May 7, 2024, SUPN signed an exclusive licensing agreement with M8 Pharmaceuticals, an Acino company, to seek regulatory approval and commercialize Qelbree (Viloxazine XR) under M8's trademark in Latin America.
This strategic partnership is aligned with Acino's mission to provide Latin American patients access to innovative medicines and strengthen its leadership position in the central nervous system therapeutic space. The collaboration would provide prescribers with a new option to improve the ADHD treatment paradigm for millions of patients.
SUPN’s trailing-12-month gross profit margin of 87.17% is 52.8% higher than the 57.04% industry average. Its 15.17% trailing-12-month EBITDA margin is 154.2% higher than the 5.97% industry average. Likewise, the stock’s 98.48% trailing-12-month levered FCF margin is significantly higher than the 1.11% industry average.
For the first quarter that ended March 31, 2024, SUPN’s total revenues were $143.64 million. Net sales of Qelbree® increased 75% year-over-year to $45.1 million, and net sales of GOCOVRI® rose 2% from the prior year’s quarter to $26.5 million. As of March 31, 2024, its total current assets came in at $544.32 million, compared to $493.11 million as of December 31, 2023.
Street expects SUPN’s revenue for the fiscal year ending December 2025 to increase 4.1% year-over-year to $624.60 million. Its EPS is expected to increase 53.2% year-over-year to $1.75 for the same year. In addition, the company surpassed consensus EPS estimates in three of the trailing four quarters.
SUPN’s stock has declined marginally over the past six months to close the last trading session at $27.12.
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 for Quality and Growth. Within the same industry, SUPN is ranked #15.
Click here to access additional ratings of SUPN for Stability, Momentum, and Sentiment.
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LLY shares closed at $820.34 on Friday, up $5.28 (+0.65%). Year-to-date, LLY has gained 41.22%, versus a 11.30% 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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