The pharmaceutical industry is expected to continue to grow in the coming years, driven by factors such as the aging population, the increasing prevalence of chronic diseases, and the development of new technologies. Moreover, given healthcare’s non-cyclical nature, the pharma industry is expected to stay stable, even under economic strains.
Amid this, let’s look into pharma stocks Novo Nordisk A/S (NVO), AbbVie Inc. (ABBV), and Novartis AG (NVS), which can boost your portfolio. But before we dive deeper into the stock fundamentals, let’s understand the industry landscape better.
Several key factors, such as a rising global population, shape the healthcare landscape. In 2022, there were 771 million people aged 65 years and older, accounting for almost 10% of the world’s population. This figure is expected to hit 16% in 2050.
On top of it, the World Health Organization (WHO) estimates that by 2050, chronic diseases like cardiovascular diseases, cancer, diabetes, and respiratory ailments will make up 86% of the 90 million deaths each year. These factors should act as tailwinds for the pharmaceutical market.
According to an IQVIA Institute Report, the global spending on medicines is expected to reach $1.90 trillion by 2027, excluding the spending on COVID-19 vaccines and therapeutics, expanding at a rate of 3–6% per year.
With the implementation of new technologies, a revolution in the pharma market called pharma 4.0, characterized by greater integration of digitization in drug discovery and manufacturing, is taking place. The global pharma 4.0 market is projected to reach $46.90 million in 2031, growing at a 17.7% CAGR.
According to Statista, revenue in the pharmaceuticals market is projected to reach $1.12 trillion in 2023. Moreover, revenue is expected to show an annual growth rate of 5.8%, resulting in a market volume of $1.48 trillion by 2028.
With the investment opportunity in the Medical - Pharmaceuticals industry well laid down, let’s delve deeper into the fundamentals of the stocks listed above, starting with the third.
Stock #3: Novo Nordisk A/S (NVO)
NVO, based in Bagsvaerd, Denmark, is a global healthcare company specializing in pharmaceuticals. Its segments are Diabetes and Obesity care; and Rare Diseases. It develops and markets a range of products for these conditions.
On August 10, NVO announced its plans to acquire Inversago Pharma, a Montreal-based firm focusing on CB1 receptor-based therapies for obesity, diabetes, and metabolic disorder treatment. This acquisition is expected to expand NVO's clinical development pipeline.
On June 12, NVO announced that it would invest DKK 15.9 billion ($2.30 billion) to expand its existing Active Pharmaceutical Ingredient (API) production facility in Denmark. This is anticipated to create additional production capacity, which should help the company meet its demand.
For the fiscal second quarter that ended June 30, 2023, NVO’s net sales increased 31.6% from year-ago value to DKK $54.30 billion ($7.85 billion), while its gross profit increased 32% year-over-year to DKK $46.44 billion ($6.71 billion). Its EBIT came in at DKK $23.89 billion ($3.45 billion), up 29.9% from the prior-year value.
The company’s net profit and EBITDA came in at DKK $19.43 billion ($2.81 billion) and at DKK $26.07 billion ($3.77 billion), representing increases of 45.9% and 30.1%, respectively, from the prior-year quarter.
Street expects NVO’s revenue to increase 35.4% year-over-year in the current quarter (ending September 2023) to $8.15 billion, while its EPS is estimated to improve 60.6% year-over-year to $1.34. Additionally, it topped the revenue estimates in three of the trailing four quarters.
The stock has gained 85.2% over the past year and 39.9% to close the last trading session at $189.31.
NVO’s POWR Ratings reflect its solid prospects. The stock has an overall rating of A, which equates to a Strong Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
It has an A grade for Quality and a B for Growth and Stability. Out of 159 stocks in the Medical - Pharmaceuticals industry, it is ranked #3. In addition to the POWR Ratings we’ve stated, we also have NVO’s ratings for Value, Momentum, and Sentiment. Get all NVO ratings here.
Stock #2: AbbVie Inc. (ABBV)
ABBV is a global pharmaceutical company known for addressing autoimmune diseases and blood cancers. They also offer treatments for various conditions, collaborate with other biopharmaceutical companies, and have a diverse product portfolio spanning from dermatology to oncology.
In August, ABBV received European Commission approval for AQUIPTA® (atogepant) for the prophylaxis of migraine in adults with four or more migraine days per month, providing a valuable treatment option for both chronic and episodic migraine sufferers. This should prove to be beneficial for the company.
On July 26, ABBV and the medicinal research institute Calibr announced an expanded strategic collaboration to advance multiple preclinical and early-stage clinical assets across the company’s core therapeutic growth areas.
Thomas Hudson, M.D., senior vice president, research and development, and chief scientific officer at ABBV, said, "Working together with Calibr, AbbVie is excited to explore and further develop the potential of novel technologies and new clinical indications to bring breakthrough medicines to patients."
ABBV’s net revenues stood at $13.87 billion for the fiscal second quarter (ended June 30). Its operating earnings increased 37% year-over-year to $4.51 billion. Net earnings attributable to ABBV improved 119% from year-ago value to $2.02 billion. Earnings per share attributable to ABBV came in at $1.14, registering an improvement of 123.5% from last-year value.
The consensus EPS estimate for the next year (ending December 2024) of $11.10 indicates a marginal improvement from the prior year. Its revenue for the same year is expected to be $53.05 billion. ABBV has an impressive earnings surprise history, surpassing EPS estimates in three of the trailing four quarters.
Over the past three months, the stock has gained 8.3% to close the last trading session at $148.20. The stock has gained 8.8% over the past year.
ABBV’s strong fundamentals are reflected in its POWR Ratings. It has an overall rating of A, which translates to a Strong Buy in our proprietary rating system. It has an A grade for Quality and a B for Value, Stability, and Sentiment.
Within the same industry, it is ranked #2. Click here to view ABBV’s ratings for Growth and Momentum.
Stock #1: Novartis AG (NVS)
NVS, based in Basel, Switzerland, is a global healthcare company with two main segments: Innovative Medicines, which offers prescription drugs across various therapeutic areas, and Sandoz, which specializes in manufacturing pharmaceuticals and biotechnology products.
On August 28, NVS’ Sandoz division announced that it had completed acquiring brand rights for systemic antifungal agent Mycamine ® (micafungin sodium, Funguard® in Japan) from Astellas. This is expected to boost the company’s portfolio.
In the same month, NVS announced the successful acquisition of Chinook Therapeutics, a biopharmaceutical company specializing in precision medicines for kidney diseases, in a deal worth up to $3.5 billion. This should enhance the company’s renal portfolio.
For the fiscal second quarter, NVS’ net sales increased 6.6% year-over-year to $13.62 billion, while its operating income increased 31.1% year-over-year to $2.92 billion. Its core net income and core EPS stood at $3.81 billion and $1.83, registering increments of 11.1% and 17.3% from prior-year values, respectively.
The consensus revenue estimate of $13.82 billion for the third quarter (ending September 2023) represents a 10.2% increase year-over-year. The consensus EPS estimate of $1.78 for the current quarter indicates a 12.7% improvement year-over-year. The company surpassed the consensus EPS estimates in three of the trailing four quarters.
The stock has gained 26.4% over the past year and 18.9% over the past six months to close the last trading session at $100.72.
NVS’ robust prospects are reflected in its POWR Ratings. It has an overall rating of A, which translates to a Strong Buy in our proprietary rating system.
NVS has an A grade for Growth and Stability and a B for Value, Sentiment, and Quality. It is ranked first out of 159 stocks in the same industry. Click here to see the other ratings of NVS (Momentum).
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NVO shares were trading at $189.31 per share on Monday afternoon, up $3.69 (+1.99%). Year-to-date, NVO has gained 41.15%, versus a 18.87% rise in the benchmark S&P 500 index during the same period.
About the Author: Anushka Dutta
Anushka is an analyst whose interest in understanding the impact of broader economic changes on financial markets motivated her to pursue a career in investment research.
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