The pharma industry is witnessing considerable growth due to growing healthcare needs amid increasing chronic disease prevalence and the rise of e-pharma. Pharma companies are also increasingly adapting to meet rising demand and market dynamics via the latest technology and innovation.
Thus, investors could consider investing in top pharma stocks Novo Nordisk A/S (NVO), Johnson & Johnson (JNJ), Merck & Co., Inc. (MRK), and AbbVie Inc. (ABBV) for potential returns.
The global use of medicines is forecasted to grow by 12% through 2028, reaching 3.80 trillion defined daily doses. The U.S. market outlook is raised by 3 percentage points to 2-5% CAGR through 2028, reflecting increased patient use of higher-value therapies and recent growth.
Besides, in January 2024, global pharma output and sales are forecasted to increase by 4.6% and 5.1%, respectively. In the U.S., pharmaceutical output is expected to grow by 1.4%, supported by strong liquidity and an aging population driving demand for medicines.
In addition, this year, the pharma and life sciences sector anticipates robust deal activity, ranging from $225 billion to $275 billion, focusing on innovation and clinical differentiation. M&A efforts will prioritize precision medicine, oncology, immunology, weight loss, and cardiovascular therapeutics to drive growth and deliver value in a competitive environment.
Further, the AI pharma market is witnessing significant growth due to increasing adoption for clinical trials, cross-industry collaborations, and the need to reduce drug discovery timelines and costs. The AI in the pharmaceutical market is estimated at $3.05 billion in 2024 and is expected to grow at a CAGR of 42.7% to reach $18.06 billion by 2029.
Considering these favorable market trends, let’s discuss the fundamentals of the four best Medical – Pharmaceuticals stocks, starting with the fourth choice.
Stock #4: Novo Nordisk A/S (NVO)
Based in Bagsvaerd, Denmark, NVO is a pharmaceutical company specializing in diabetes, obesity, and rare diseases, focusing on research, development, and distribution of pharmaceutical products. It offers a range of treatments, including insulin pens, growth hormone pens, and smart solutions for diabetes management.
On April 8, 2024, NVO reported initiating a share repurchase program on February 6, 2024, intending to repurchase up to DKK20 billion ($2.91 billion) worth of B shares over 12 months. As of April 5, 2024, the company had repurchased 1.72 million B shares at an average price of DKK864.38 ($125.64) per share, totaling DKK1.48 billion ($215.66 million).
On March 25, NVO announced its intentions to acquire Cardior Pharmaceuticals for up to €1.03 billion ($1.11 billion), bolstering its cardiovascular disease pipeline with Cardior's lead compound, CDR132L. This move reflects NVO's strategic focus on addressing significant unmet needs in cardiovascular therapy through internal and external innovation.
For the fourth quarter ended December 31, 2023, NVO’s net sales increased 37% year-over-year to DKK65.86 billion ($9.57 billion). Its gross profit grew 40.2% from the year-ago quarter to DKK55.85 billion ($8.12 billion). Its operating and net profit rose 56.6% and 61.6% from the prior-year quarter to DKK26.77 billion ($3.89 billion) and DKK21.96 billion ($3.19 billion), respectively.
NVO expects a free cash flow (excluding impact from business development) of DKK64 billion ($9.30 billion) to 74 billion ($10.76 billion) for the fiscal year 2024.
Analysts expect NVO’s revenue and EPS to increase 23.6% and 24% year-over-year to $41.61 billion and $3.35, respectively, for the fiscal year ending December 2024. Moreover, the company surpassed consensus revenue and EPS estimates in three of the trailing four quarters, which is promising.
NVO’s shares have surged 62.4% over the past nine months and 38.4% over the past six months to close the last trading session at $127.46. Also, the stock gained 1.3% intraday.
NVO’s POWR Ratings reflect this strong outlook. The stock has an overall rating of A, equating to a Strong Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, each weighted optimally.
The stock has a B grade for Sentiment and Quality. In the Medical - Pharmaceuticals industry, NVO is ranked #12 among 161 stocks.
To access additional ratings for NVO’s Growth, Value, Momentum, and Stability, click here.
Stock #3: 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 broader customer base worldwide.
On April 5, 2024, JNJ acquired Shockwave Medical, Inc. (SWAV) for $335 per share in cash, totaling approximately $13.10 billion, expanding its presence in cardiovascular intervention. The transaction is anticipated to close by mid-year 2024, subject to shareholder and regulatory approvals.
During the fourth quarter that ended December 31, 2023, JNJ’s sales to customers and gross profit amounted to $21.40 billion and $14.60 billion, up 7.3% and 5.4% year-over-year, respectively. The company’s adjusted net earnings and net earnings per share from continuing operations rose 2.4% and 11.7% year-over-year to $5.56 billion and $2.29, respectively.
Street expects JNJ’s revenue and EPS to grow 3.8% and 7.5% year-over-year to $88.43 billion and $10.66 for the fiscal year ending December 2024, respectively. Also, the company surpassed the consensus revenue and EPS estimates in each of the trailing four quarters.
JNJ’s stock has declined marginally intraday to close the last trading session at $151.59.
JNJ’s sound 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, and Quality. Within the same industry, it is ranked #10.
Click here for JNJ’s additional POWR Ratings for Growth, Momentum, and Sentiment ratings.
Stock #2: Merck & Co., Inc. (MRK)
MRK operates globally in healthcare, offering human health pharmaceuticals and veterinary products. Through collaborations with leading organizations, it aims to develop innovative treatments across various medical fields, including oncology, immunology, and neuroscience.
On April 5, 2024, MRK paid a quarterly dividend of $0.77 per common share for the second quarter of 2024. The company pays $3.08 annually, which translates to a yield of 2.43% on the prevailing price level. Its four-year average dividend yield is 2.95%.
The company’s dividend payouts have grown at CAGRs of 7.7% and 8.8% over the past three and five years, respectively. Moreover, Merck has raised its dividends for 13 consecutive years.
On March 11, MRK finalized its acquisition of Harpoon Therapeutics, Inc. (HARP), making HARP a wholly-owned subsidiary, with MRK recording a non-tax deductible charge of around $650 million to R&D expenses.
This acquisition will expand MRK's oncology pipeline, including MK-6070, currently in Phase 1/2 trial (NCT04471727) for advanced cancers, impacting approximately $0.26 per share on expected full-year non-GAAP EPS.
In the fourth quarter, which ended December 31, 2023, MRK’s sales increased 5.8% from the prior-year quarter to $14.63 billion. In addition, non-GAAP net income attributable to MRK and EPS amounted to $67 million and $0.03, respectively.
For the fiscal year 2024, the company anticipates sales between $62.70 billion to $64.20 billion, with a non-GAAP EPS between $8.44 and $8.59.
Analysts expect revenue and EPS for the fiscal year ending December 2024 to grow 6.1% and 467.7% year-over-year to $63.78 billion and $8.57, respectively. Further, the company topped consensus revenue estimates in each of the trailing four quarters.
Shares of MRK have gained 7.8% over the past three months and 21.8% over the past six months to close the last trading session at $126.56.
MRK’s POWR Ratings reflect this robust outlook. The stock has an overall A rating, translating to a Strong Buy in our proprietary rating system.
It has a B grade for Growth, Stability, Sentiment, and Quality. In the same industry, it is ranked #6.
In addition to the POWR Ratings stated above, access MRK’s Value and Momentum ratings here.
Stock #1: AbbVie Inc. (ABBV)
ABBV is a global pharmaceutical company known for its diverse portfolio, including medications like Humira, Skyrizi, and Imbruvica, addressing conditions ranging from autoimmune diseases to cancer and neurological disorders.
On March 25, 2024, ABBV announced a definitive agreement to acquire Landos Biopharma, Inc. (LABP) for about $137.50 million in cash, with additional contingent value rights of up to $75 million. The acquisition strengthens ABBV's portfolio in inflammatory and autoimmune diseases, particularly with Landos' lead asset, NX-13, targeting ulcerative colitis and Crohn's disease.
On February 28, ABBV and OSE Immunotherapeutics SA partnered to develop OSE-230, a novel monoclonal antibody targeting chronic inflammation. ABBV gained exclusive global rights, providing an upfront payment of $48 million and potential milestone payments totaling up to $665 million, with additional royalties on global sales of OSE-230.
ABBV reported net revenue of $14.30 billion in the fourth quarter that ended December 31, 2023. The company's operating earnings and net earnings stood at $3.20 billion and $824 million, respectively. Moreover, its adjusted EPS amounted to $2.79 for the quarter.
The company projects its adjusted EPS for the fiscal year 2024 to be between $11.05 and $11.25.
Analysts expect ABBV’s revenue and EPS to grow marginally and 1.1% year-over-year to $54.54 billion and $11.23, respectively, for the fiscal year ending December 2024. The company surpassed the revenue estimates in three of the trailing four quarters.
Over the past nine months, the stock has soared 25.3% to close the last trading session at $169.80. Also, it gained 14.5% over the past six months.
ABBV’s optimistic 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.
ABBV has an A grade for Quality and a B for Growth, Value, and Stability. Within the same industry, it is ranked #5.
Beyond the POWR Ratings highlighted above, we have also rated ABBV for Momentum and Sentiment. Get all ABBV ratings here.
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NVO shares were trading at $124.71 per share on Tuesday morning, down $2.75 (-2.16%). Year-to-date, NVO has gained 21.17%, versus a 8.79% 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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