With the increasing number of drug sales, higher investments in R&D, and incorporation of new technology, the pharma industry has grown exponentially and is expected to thrive in the foreseeable future.
Given this backdrop, fundamentally strong pharma stocks Pacira BioSciences, Inc. (PCRX), Amneal Pharmaceuticals, Inc. (AMRX), and Novartis AG (NVS) could be solid buys now.
The consistent upsurge in the pharma industry's performance is the unwavering requirement for pharmaceutical products, withstanding even potential economic turbulence. Factors like rising disease prevalence, an aging U.S. population, and mounting healthcare expenditure are projected to catapult the U.S. pharmacy market to reach $861.67 billion by 2028, growing at a CAGR of 6.3%.
2023 stood out as a dynamic period for the pharma industry, with M&A deal values accelerating to nearly pre-pandemic rates. This momentum is projected to continue into 2024, with anticipated activity amounting to between $225 billion to $275 billion across all sectors. An emphasis on innovation could shape future operational strategies, leading to substantial funding allocation toward research and development initiatives.
The resilience of the pharma industry testifies to the growing health needs and the revolutionary wave of drug development, especially pronounced within developing economies. The worldwide drug discovery market is projected to reach $181.40 billion by 2032, growing at a CAGR of 8.5%.
Additionally, technological transformation is poised to redefine the pharma landscape further. A case in point is the increasing integration of AI that revolutionizes operations, including drug production, clinical trials, R&D, and patient care. Consequently, the global AI in the pharmaceutical market is projected to reach over $11.81 billion, growing at a 29.3% CAGR by 2032.
Considering these conducive trends, let's take a look at the fundamentals of the three Medical – Pharmaceuticals stocks, starting with number 3.
Stock #3: Pacira BioSciences, Inc. (PCRX)
PCRX provides non-opioid pain management and regenerative health solutions for healthcare practitioners and their patients.
On November 10, 2023, PCRX received the U.S. Food and Drug Administration (FDA) approval for its supplemental new drug application (sNDA) to expand the EXPAREL (bupivacaine liposome injectable suspension) label to include administration in adults as an adductor canal block and a sciatic nerve block in the popliteal fossa.
PCRX’s CEO and chairman, Dave Stack, said, “In line with our corporate mission to provide a non-opioid to as many patients as possible, this new indication provides additional flexibility in the use of EXPAREL as a regional analgesic for more than 3 million lower extremity procedures annually, further increasing the utility of EXPAREL for major orthopedic procedures.”
PCRX’s trailing-12-month cash per share of $2.13 is 68.7% higher than the industry average of $1.27. Its trailing-12-month levered FCF and EBIT margins of 18.41% and 11.73% are significantly higher than the industry averages of 0.09% and 0.39%, respectively.
For the fiscal third quarter that ended September 30, 2023, PCRX’s total revenues and income from operations stood at $163.93 million and $17.72 million, respectively. Moreover, its adjusted EBITDA stood at $52.94 million.
For the same quarter, its non-GAAP net income and non-GAAP net income per common share increased 22.7% and 22% year-over-year to $36.63 million and $0.72, respectively.
Street expects PCRX’s revenue and EPS for the fiscal first quarter ending March 2024 to increase 6.2% and 42.4% year-over-year to $170.28 million and $0.75, respectively.
The stock has gained 1.9% intraday to close the last trading session at $33.07. Over the past three months, it has gained 19%. The stock is trading above its 50-day and 100-day moving averages of $30.76 and $30.61, respectively, indicating an uptrend.
PCRX’s robust prospects are reflected in its POWR Ratings. The stock has an overall B rating, equating to Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 distinct factors, with each factor weighted to an optimal degree.
The stock has a B grade for Growth, Value, and Quality. It is ranked #26 out of 162 stocks within the Medical – Pharmaceuticals industry.
Click here for the additional POWR Ratings for PCRX (Momentum, Stability, and Sentiment).
Stock #2: Amneal Pharmaceuticals, Inc. (AMRX)
AMRX develops, manufactures, markets, and distributes generics, injectables, biosimilars, and specialty branded pharmaceutical products worldwide. The company operates through three segments: Generics; Specialty; and AvKARE.
On January 10, AMRX announced the approval and launch of fluorometholone ophthalmic suspension. The product received 180-day competitive generic therapy (CGT) exclusivity from the U.S. Food and Drug Administration.
FML suspension is indicated for the treatment of corticosteroid-responsive inflammation of the palpebral and bulbar conjunctiva, cornea, and anterior segment of the globe. Its launch is anticipated to drive AMRX's continued growth.
AMRX’s trailing-12-month asset turnover ratio of 0.63x is 61.2% higher than the industry average of 0.39x. Its trailing-12-month levered FCF and EBIT margins of 6.62% and 11.18% are significantly higher than the industry averages of 0.09% and 0.39%, respectively.
For the fiscal third quarter that ended September 30, 2023, AMRX’s net revenue and gross profit increased 13.7% and 19.7% year-over-year to $620.04 million and $232.53 million, respectively. Moreover, its adjusted EBITDA stood at $153.80 million, up 22.4% from the prior-year quarter.
For the same quarter, its adjusted net income and adjusted earnings per share increased 38% and 35.7% year-over-year to $60.31 million and $0.19, respectively.
Street expects AMRX’s revenue for the fiscal first quarter ending March 2024 to increase 7.8% year-over-year to $601.02 million. Its EPS is expected to be $0.11 for the same quarter. The company surpassed consensus revenue and EPS estimates in each of the trailing four quarters, which is impressive.
The stock has gained 185.5% over the past nine months to close the last trading session at $5.51. Over the past year, it has gained 163.6%. The stock is trading above its 50-day and 100-day moving averages of $5.20 and $4.62, respectively.
AMRX’s solid fundamentals are reflected in its POWR Ratings. The stock has an overall rating of A, translating to a Strong Buy in our proprietary rating system.
AMRX has an A grade for Growth and Value and a B for Sentiment. Within the same industry, it is ranked #11.
Beyond what we’ve stated above, we have also rated the stock for Momentum, Stability, and Quality. Get all ratings of AMRX here.
Stock #1: Novartis AG (NVS)
Headquartered in Basel, Switzerland, NVS researches, develops, manufactures, and markets healthcare products in Switzerland and internationally. The company offers prescription medicines for patients and physicians.
On January 5, NVS received approval from the U.S. FDA for commercial manufacturing of Pluvicto at its new large-scale, state-of-the-art radioligand therapy (RLT) manufacturing facility in Indianapolis, Indiana, U.S.
The 70,000-square foot site, the company’s second U.S. location, is designed specifically for RLT manufacturing and is now the largest and most advanced NVS facility of its kind in the world. The Indianapolis site represents the next phase of RLT manufacturing growth, as this new addition brings substantial supply increases for the foreseeable future.
In 2023, NVS repurchased a total of 87.5 million shares for $8.40 billion on the SIX Swiss Exchange second trading line, which included 52.8 million shares ($4.9 billion) under the $15 billion share buyback and 23 million shares ($2.30 billion) under the new up-to $15 billion share buyback announced in July 2023.
NVS pays an annual dividend of $3.31 per share, which translates to a dividend yield of 3.07% on the current share price. Its four-year average yield is 3.47%. NVS’ dividend payments have grown at CAGRs of 4.3% and 3.6% over the past three and five years, respectively.
NVS’ trailing-12-month cash per share of $6.04 is 377% higher than the industry average of $1.27. Its trailing-12-month levered FCF and EBIT margins of 41.30% and 29.83% are significantly higher than the industry averages of 0.09% and 0.39%, respectively.
For the fiscal fourth quarter that ended December 31, 2023, NVS’ net sales and core operating income increased 8% and 4.8% year-over-year to $11.42 billion and $3.82 billion, respectively. Moreover, its free cash flow stood at $2.14 billion. For the same quarter, its core net income and core EPS increased 5.5% and 10.1% year-over-year to $3.13 billion and $1.53, respectively.
Street expects NVS’ revenue for the fiscal first quarter ending March 2024 to be $11.56 billion. For the fiscal year ending December 2024, the company’s revenue and EPS are expected to grow 6.1% and 9.8% year-over-year to $48.21 billion and $7.31, respectively. The company surpassed consensus revenue estimates in three of the trailing four quarters.
The stock has gained 20.2% over the past year to close the last trading session at $107.75. Over the past three months, it has gained 14.9%. The stock is trading above its 50-day and 100-day moving averages of $101.39 and $99.42, respectively.
NVS’ POWR Ratings reflect its positive prospects. The stock has an overall A rating, equating to a Strong Buy in our proprietary rating system.
NVS has an A grade for Quality and a B for Value, Stability, and Sentiment. Within the same industry, it is ranked #2.
To see additional POWR Ratings for Growth and Momentum for NVS, click here.
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NVS shares fell $4.05 (-3.76%) in premarket trading Wednesday. Year-to-date, NVS has gained 6.71%, versus a 3.28% rise in the benchmark S&P 500 index during the same period.
About the Author: Neha Panjwani
From her school days, Neha harbored a profound fascination for finance, a passion that steered her toward a career as an investment analyst following the completion of her bachelor's degree in commerce. Currently enrolled in the CFA program, Neha is dedicated to further enriching her comprehension of investment fundamentals. Neha's primary objective is to aid retail investors in discerning optimal investment opportunities by diligently evaluating crucial aspects of financial instruments, with a primary focus on stocks and ETFs. Her commitment lies in empowering individuals to make informed and strategic investment decisions in the dynamic world of finance.
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