Demand for new and innovative drugs and widespread adoption of precision medicines is expected to boost the pharma industry. As the industry shows solid potential, quality pharma stock AbbVie Inc. (ABBV) might be a good value buy for August. However, it could be best to wait for a better entry point in Pfizer Inc. (PFE).
Customers in the pharmaceutical market are increasingly looking for personalized and targeted treatments with a focus on preventative healthcare. This has led to a rise in demand for precision medicines tailored to specific genetic profiles and offer more effective treatments with fewer side effects.
Revenue in the pharmaceutical market is expected to show a CAGR of 5.8%, resulting in a market volume of $1.48 billion by 2028.
Also, the global drug discovery market is significantly driven by the rising prevalence of various chronic diseases, rising healthcare expenditure, and patent expiration of certain popular drugs across the globe.
The global population is also facing a growing disease burden, significantly fueling the demand for new and innovative drugs. The global drug discovery market is expected to grow at a CAGR of 9.2% until 2032.
Additionally, the introduction of generic medicines has helped in sustaining the healthcare system of the country with improved patient access and generating savings for taxpayers, employers and insurance providers. The US generic drug market is expected to reach $110.70 billion by 2028, exhibiting a CAGR of 4.1% until 2028.
Take a look at the stocks mentioned above:
Stock to Buy:
AbbVie Inc. (ABBV)
ABBV discovers, develops, manufactures, and sells pharmaceuticals worldwide.
On July 26, 2023, ABBV and Calibr announced an expanded strategic collaboration to advance several innovative preclinical and early-stage clinical assets across ABBV's core therapeutic growth areas, including immunology, oncology, neuroscience, and other areas of interest.
This partnership expands the collaboration ABBV and Scripps Research formed in 2019 to develop a broad range of potential new and novel therapeutics.
On July 25, ABBV announced that Health Canada had approved RINVOQ (upadacitinib, 45 mg [induction dose] and 15 mg and 30 mg [maintenance dose]), an oral, once-daily selective and reversible JAK inhibitor, for the treatment of adults with moderately to severely active ulcerative colitis (UC) who have demonstrated prior treatment failure, i.e., an inadequate response to, loss of response to, or intolerance to at least one of conventional, and/or biologic therapy.
On June 22, 2023, ABBV declared a quarterly dividend of $1.48, payable on August 15. ABBV pays $5.92 annually as dividends. This translates to a yield of 3.99% at the current price, compared to the four-year average dividend yield of 4.45%.
Its forward EV/EBIT of 12.75x is 25.9% lower than the industry average of 17.20x. Its forward EV/EBITDA multiple of 12.26 is 9.6% lower than the industry average of 13.56.
For the fiscal second quarter ended June 30, 2023, ABBV’s net revenues came in at $13.87 billion. The company’s net earnings increased 11.8% year-over-year to $2.03 billion, while its non-GAAP EPS came in at $2.91. Also, operating earnings rose 37% year-over-year to $4.51 billion.
Analysts expect ABBV’s revenue for the fiscal third quarter ending September 2023 to be $13.61 billion. Its EPS is expected to be $2.86 for the same quarter. Also, it has surpassed EPS estimates in three of the trailing four quarters, which is impressive.
The stock has gained 23.2% over the past three months to close the last trading session at $149.05.
ABBV’s POWR Ratings reflect its promising outlook. The stock has an overall rating of A, which translates to a Strong Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
ABBV also has an A grade for Quality and a B in Value and Stability. It is ranked #5 among 166 stocks in the Medical - Pharmaceuticals industry.
To access additional ratings for ABBV’s Growth, Sentiment, and Momentum, click here.
Stock to Hold:
Pfizer Inc. (PFE)
PFE discovers, develops, manufactures, markets, distributes, and sells biopharmaceutical products worldwide.
On July 18, PFE announced that it had partnered with Flagship Pioneering, Inc. to create a new pipeline of innovative medicines. Under the terms of the novel agreement, Flagship, and PFE will each invest $50 million upfront to explore opportunities to develop ten single-asset programs by leveraging Flagship's ecosystem of more than 40 human health companies and multiple biotechnology platforms.
PFE will fund and have the option to acquire each selected development program. Flagship and its bioplatform companies will be eligible to receive up to $700M in milestones and royalties for each successfully commercialized program.
On June 28, PFE and OPKO Health Inc. (OPK) announced that the U.S. Food and Drug Administration (FDA) had approved NGENLA (somatrogon-ghla), a once-weekly, human growth hormone analog indicated for the treatment of pediatric patients aged three years and older who have growth failure due to inadequate secretion of endogenous growth hormone. NGENLA is expected to become available for U.S. prescribing in August 2023.
On June 22, 2023, PFE declared a quarterly dividend of $0.41, payable on September 5. PFE pays $1.64 annually as dividends. This translates to a yield of 4.61% at the current price, higher than the four-year average dividend yield of 3.73%.
PFE’s forward EV/EBIT of 10.19x is 40.7% lower than the industry average of 17.20x. Its forward EV/EBITDA multiple of 7.94 is 41.4% lower than the industry average of 13.56.
PFE’s revenues decreased 54.1% year-over-year to $12.73 billion in the fiscal second quarter that ended February 28, 2023. Also, its income declined 67.1% year-over-year to $3.84 billion. Its adjusted EPS decreased 67.2% year-over-year to $0.67.
PFE’s revenue is expected to decrease 32% year-over-year to $15.40 billion for the fiscal third quarter ending September 2023. Its EPS is expected to fall 62% year-over-year to $0.68. Also, it has failed to surpass revenue estimates in each of the trailing four quarters, which is disappointing.
The stock has plunged 30.5% year-to-date to close the last trading session at $35.61.
PFE’s prospects are reflected in its POWR Ratings. The stock has an overall C rating, equating to a Neutral in our proprietary rating system.
PFE has a C grade for Stability, Sentiment, and Quality. It is ranked #41 in the same industry.
Click here to see the additional POWR Ratings for PFE (Growth, Momentum, and Value).
What To Do Next?
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ABBV shares were trading at $148.96 per share on Friday morning, down $0.09 (-0.06%). Year-to-date, ABBV has declined -5.05%, versus a 18.91% 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.
Are Pfizer (PFE) and AbbVie (ABBV) Good Value Buys for August? StockNews.com
