The pharmaceutical industry is on the brink of vigorous expansion, driven by an ever-growing medicinal drug and vaccine market. The industry maintains stability due to the unabated demand for its offerings, making it less susceptible to economic volatility.
Given this backdrop, investors could consider buying fundamentally robust pharma stocks Organon & Co. (OGN), GoodRx Holdings, Inc. (GDRX), and Collegium Pharmaceutical, Inc. (COLL) this week.
The pharma industry is expected to continue its robust performance in the upcoming months as the COVID-19 variants, EG.5 (Eris), accounting for nearly 29% of infections, FL.1.5.1 with 13.7% of cases, and XBB.1.16.6 with 10.2% of cases swiftly spread in the United States.
Despite the minimal public health risk conveyed by the WHO, the rising infection, hospitalization, and death rates have impelled industry leaders to review and modify existing medicines and vaccines. On average, approximately 4,546 patients are hospitalized daily in the United States, with a significant 14% of these patients requiring intensive care.
Moreover, the pharma industry is witnessing swift technological advances and escalating demand for generic drugs due to a steady rise in chronic illnesses, an aging population, explorations in gene therapy, and improved after-care services.
Persistent innovation serves as a defining characteristic and competitive strategy within pharmaceutical companies – an approach designed to drive revenue growth and meet industry competition. Over 20% of sales turned back into R&D, primarily targeted at drug discovery.
The global drug discovery market is projected to reach $181.40 billion by 2032, growing at an 8.5% CAGR. As per Statista, revenue in pharma is expected to reach $1.48 trillion by 2028, growing at a CAGR of 5.8%.
In light of these encouraging trends, let's look at the fundamentals of three promising Medical - Pharmaceuticals stocks, beginning with number 3.
Stock #3: Organon & Co. (OGN)
OGN develops and delivers health solutions through a portfolio of prescription therapies and medical devices for women’s health in the United States and internationally.
On July 1, OGN launched Hadlima™ (adalimumab-bwwd) in the U.S. –its biggest commercial launch as a standalone company. Hadlima is emerging as one of a few biosimilar offerings, earning commercial success so far.
OGN pays an annual dividend of $1.12 per share, translating to a dividend yield of 6.60%. Its four-year average yield is 3.14%.
OGN’s forward non-GAAP P/E multiple of 3.85 is 79.4% lower than the industry average of 18.70. Its forward Price/sales multiple of 0.68% is 81% lower than the industry average of 3.60%.
OGN’s trailing-12-month levered FCF margin of 1.97% is 339.3% higher than the 0.45% industry average. Its trailing-12-month EBIT margin of 24.19% is significantly higher than the 0.53% industry average.
For the fiscal second quarter that ended June 30, 2023, OGN’s revenues stood at $1.61 billion, up 1.5% year-over-year. Its non-GAAP adjusted gross profit stood at $1.01 billion. Its adjusted EBITDA increased 3.5% from the year-ago quarter to $530 million.
Non-GAAP adjusted net income and non-GAAP adjusted earnings per share stood at $336 million and $1.31, up 5.3% and 4.8% year-over-year, respectively.
Street expects OGN’s revenue to increase 3% year-over-year in the fiscal third quarter ending September 2023 to come at $1.58 billion. Its EPS is expected to come at $1.09.
The stock has gained 2.3% intraday to close the last trading session at $16.96. Over the past five days, it gained 4.1%.
OGN’s POWR Ratings reflect this promising outlook. The stock has an overall B rating, translating to Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
It also has an A grade for Value and a B for Sentiment. It is ranked #31 within the 157-stock Medical - Pharmaceuticals industry.
Beyond what is stated above, we’ve also rated OGN for Growth, Momentum, Stability, and Quality. Get all OGN ratings here.
Stock #2: GoodRx Holdings, Inc. (GDRX)
GDRX provides a consumer-focused digital healthcare platform in the United States. The company offers consumers free access to branded and generic medications, medical provider consultations via telehealth, and comprehensive healthcare research and information.
On September 21, GDRX offered new savings on antivirals, medications, and vaccines for the upcoming cold and flu season. Last season, the company saved Americans more than $20 million on cold and flu treatments. With these significant savings, Americans can find affordable ways to prevent or treat seasonal illnesses, regardless of insurance status.
GDRX’s forward EV/Sales of 2.63x is 19.4% lower than the industry average of 3.27x. Its forward Price/Sales of 2.70x is 25.1% lower than the industry average of 3.60x.
GDRX’s trailing-12-month EBIT and levered FCF margins of 7.17% and 16.48% are significantly higher than the industry averages of 0.53% and 0.45%, respectively. Its trailing-12-month asset turnover ratio of 0.45x is 19.7% higher than the 0.38x industry average.
During the fiscal second quarter that ended June 30, 2023, GDRX’s revenue stood at $189.68 million. Its adjusted operating income and adjusted EBITDA increased 6.8% and 13.2% year-over-year to $42.97 million and $53.47 million, respectively.
For the same quarter, its adjusted net income and adjusted earnings per share stood at $28.39 million and $0.07, up 4.4% and 16.7% year-over-year, respectively.
Street expects GDRX’s revenue and EPS in the fiscal year ending December 2023 to come at $755.06 million and $0.05, respectively. The company surpassed consensus revenue estimates in each of the trailing four quarters and EPS estimates in three of the trailing four quarters, which is impressive.
GDRX’s shares have gained 9.9% year-to-date to close the last trading session at $5.12. Over the past year, it gained 3%.
GDRX’s positive outlook is reflected in its POWR Ratings. It has an overall rating of B, equating to a Buy in our proprietary rating system.
GDRX has an A grade for Growth and a B for Quality. Within the same industry, it is ranked #24.
Click here for the additional POWR Ratings for Value, Momentum, Stability, and Sentiment for GDRX.
Stock #1: Collegium Pharmaceutical, Inc. (COLL)
COLL is a specialty pharmaceutical company that develops and commercializes medicines for pain management.
On August 7, COLL entered an Accelerated Share Repurchase (ASR) agreement with Jefferies LLC to repurchase $50 million of the company’s common stock. COLL will execute the ASR as part of the $100 million share repurchase program authorized by its Board of Directors in January 2023. After completing this ASR, COLL will have $50 million remaining under the program.
COLL’s forward EV/EBITDA of 3.50x is 71.8% lower than the industry average of 12.41x. Its forward non-GAAP P/E multiple of 4.44% is 76.3% lower than the industry average of 18.70%.
COLL’s trailing-12-month EBITDA margin of 42.78% is 715.6% higher than the industry average of 5.25%. Its trailing-12-month EBIT and levered FCF margins of 13.39% and 40.25% are significantly higher than the industry averages of 0.53% and 0.45%, respectively.
For the fiscal second quarter that ended June 30, 2023, COLL’s net product revenue and gross profit stood at $135.55 million and $73.83 million, up 9.7% and 41% year-over-year, respectively. Its adjusted EBITDA increased 20.6% from the year-ago quarter to $85.81 million.
Its non-GAAP adjusted net income and adjusted earnings per share stood at $52.45 million and $1.26, up 27.9% and 17.8% year-over-year, respectively. For the six months that ended June 30, 2023, cash, cash equivalents, and restricted cash increased 127.3% year-over-year to $284.80 million.
Analysts expect COLL’s revenue and EPS in the fiscal third quarter ending September 2023 to increase 11.1% and 19.3% year-over-year to $141.12 million and $1.31, respectively. The company surpassed consensus revenue estimates in three of the trailing four quarters.
The stock has gained 41.7% over the past year to close the last trading session at $23.49. Over the past three months, it gained 8%.
COLL’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall rating of B, which equates to a Buy in our proprietary rating system.
It has a B grade for Growth, Value, and Quality. It is ranked #23 within the Medical - Pharmaceuticals industry.
To see COLL’s additional ratings for Momentum, Stability, and Sentiment, click here.
What To Do Next?
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OGN shares were trading at $17.05 per share on Tuesday morning, up $0.09 (+0.53%). Year-to-date, OGN has declined -36.70%, versus a 14.48% rise in the benchmark S&P 500 index during the same period.
About the Author: Sristi Suman Jayaswal
The stock market dynamics sparked Sristi's interest during her school days, which led her to become a financial journalist. Investing in undervalued stocks with solid long-term growth prospects is her preferred strategy. Having earned a master's degree in Accounting and Finance, Sristi hopes to deepen her investment research experience and better guide investors.
3 Pharma Stocks Ready to Shine This Week StockNews.com
