The pharmaceutical industry is poised for long-term growth due to technological advancements, an aging population, and a robust research and development pipeline, ensuring innovative treatments. Given the industry’s growth prospects, Procaps Group S.A. (PROC), Organon & Co. (OGN) and Amphastar Pharmaceuticals, Inc. (AMPH) might be ideal additions to your watchlists.
Before delving deeper into their fundamentals, let’s discuss what’s happening in the pharma industry.
The pharmaceutical industry is expected to sustain its strong performance in the coming years due to the high demand for healthcare products, ongoing research, an aging population, chronic disease prevalence, and technological advancements.
Also, the global pharmaceutical market is expected to reach $1.47 trillion by 2028, exhibiting a CAGR of 6.2%. The industry’s largest segment is oncology drugs, with a projected market volume of $1.16 trillion in 2024.
Moreover, investors’ interest in pharmaceutical stocks is evident from the VanEck Pharmaceutical ETF’s (PPH) 7.8% returns over the past six months.
However, the pharmaceutical industry in the United States faces competition, FDA regulations, research expenses, patent expirations, cost and accessibility discussions, compromising market exclusivity, increasing innovation pressure, counterfeit drugs, and rising healthcare demand, all of which necessitate adaptation and strategic decision-making.
So, let’s take a look at the fundamentals of the three Medical – Pharmaceuticals stocks, starting with number 3.
Stock #3: Procaps Group S.A. (PROC)
Based in Luxembourg, Luxembourg, PROC develops, produces, and markets pharmaceutical solutions worldwide. The company formulates, manufactures, and markets branded prescription drugs in various therapeutic areas, including feminine care products, pain relief, skin care, digestive health, growth and development, cardiology, vision care, central nervous system, and respiratory.
PROC’s trailing-12-month EBIT margin of 11.77% is significantly higher than the industry average of 0.07%. However, its 55.04% trailing-12-month gross profit margin is 3.7% lower than the 57.17% industry average.
For the third quarter ended September 30, 2023, PROC reported revenue of $118.41 million, increased 7.3% year-over-year. Also, its gross profit increased marginally year-over-year to $68.40 million for the same period.
However, PROC’s income for the period came in at $8.20 billion, declined 63.7% year-over-year. Also, its EPS came in at $0.08, down 63.6% for the same period.
Analysts expect PROC’s revenue to increase 8.5% year-over-year to $460.10 million for the quarter ending December 2024. Its EPS is expected to decrease 12.7% year-over-year to $0.28 for the same period. Shares of PROC have slumped 13.9% over the past year to close the last trading session at $4.26.
PROC’s POWR Ratings reflect this uncertain outlook. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
PROC has a C grade for Stability and Quality. It is ranked #44 out of 167 stocks in the Medical – Pharmaceuticals industry. Click here for the additional POWR Ratings for Momentum, Growth, Value and Sentiment for PROC.
Stock #2: 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.
OGN’s trailing-12-month EBIT margin of 21.22% is significantly higher than the 0.07% industry average. However, its trailing-12-month CAPEX / Sales of 3.82% is 9.6% lower than the 4.22% industry average.
For the fiscal third quarter that ended September 30, 2023, OGN’s revenues stood at $1.52 billion, down marginally year-over-year. Its adjusted EBITDA came in at $447 million, decreased 18.1% year-over-year.
However, its cash and cash equivalents came in at $414 million for the period that ended September 30, 2023, compared to $706 million for the period that ended December 31, 2022. Its non-GAAP net income and EPS came in at $223 million and $0.87.
The consensus revenue estimate of $6.38 billion for the year ending December 2024 represents a 2.5% increase year-over-year. Its EPS is expected to increase 4.6% year-over-year to $4.26 for the same period. It has lost 50.9% over past year to close the last trading session at $15.69.
OGN’s uncertain fundamentals are reflected in its POWR Ratings.
It is ranked #40 in the same industry. It has a C grade for Growth. To see additional OGN’s ratings for Value, Quality, Sentiment, Stability and Momentum, click here.
Stock #1: Amphastar Pharmaceuticals, Inc. (AMPH)
AMPH manufactures, markets, and sells generic and proprietary injectable, inhalation, and intranasal products in the United States, China, and France. The company operates through two segments, Finished Pharmaceutical Products and Active Pharmaceutical Ingredients (API).
AMPH’s trailing-12-month levered FCF margin of 40.50% is significantly higher than the industry average of 0.24%. Its 54.69% trailing-12-month gross profit margin is 4.3% lower than the 57.17% industry average.
During the third quarter ended September 30, 2023, AMPH reported net revenues of $180.56 million, increase 50.3% year-over-year. Also, its non-GAAP net income and EPS increased 205.9% and 202.6% year-over-year to $61.90 million and $1.15 for the same period, respectively.
However, its total liabilities came in at $949.49 million for the period that ended September 30, 2023, compared to $213.33 million for the period that ended December 31, 2022. Also, its total current liabilities came in at $257.96 million, compared to $94.86 million for the same period.
Street expects AMPH’s revenue to increase 24.2% year-over-year to $795.61 million for the year ending December 2024. Its EPS is expected to grow 10.4% year-over-year to $3.71 for the same period. AMPH’s shares have lost 7.6% over past six months to close the last trading session at $56.43.
AMPH has a C grade for Value and Sentiment. It is ranked #36 in the same industry.
Beyond what is stated above, we’ve also rated AMPH for Growth, Stability, Momentum and Quality. Get all AMPH ratings 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.
OGN shares rose $0.28 (+1.78%) in premarket trading Friday. Year-to-date, OGN has gained 10.75%, versus a 0.67% rise in the benchmark S&P 500 index during the same period.
About the Author: Rashmi Kumari
Rashmi is passionate about capital markets, wealth management, and financial regulatory issues, which led her to pursue a career as an investment analyst. With a master's degree in commerce, she aspires to make complex financial matters understandable for individual investors and help them make appropriate investment decisions.
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