The pharma sector is expected to grow significantly in the coming years as global medical needs expand. Therefore, it could be wise to invest in quality pharma stocks Eagle Pharmaceuticals, Inc. (EGRX), Organon & Co. (OGN) and Collegium Pharmaceutical, Inc. (COLL) this month.
Before delving deeper into their fundamentals, let’s discuss what’s happening in the pharma industry.
The United States is projected to spend $605-$635 billion on medication in 2025. In 2023, the US pharma market accounts for 43.7% of the global pharma industry. This significant expenditure on medication indicates the huge demand for pharma products in the United States.
Also, the dominance of the US pharmaceutical sector underlines the country’s crucial role in positioning global healthcare trends and breakthroughs.
AI is transforming the pharma industry through innovation, process enhancement, strategic collaborations, and evolving recruiting patterns, with implications extending beyond the pharma sector. Pharma companies are leveraging AI advancements through patents, with AI-related patent applications increasing by 40% in second quarter 2023. This expansion is an important component of the industry’s commitment to innovation.
Moreover, overwhelming drug demand is expected to bode well for the pharmaceutical industry. The global drug formulation market is projected to grow at a CAGR of 8.2% until 2027.
In addition, with chronic diseases on the rise all across the world, demand for pharmaceutical products is at an all-time high. The global pharmaceutical market is expected to reach $1.48 trillion by 2028, growing at a 5.8% CAGR.
With these favorable trends in mind, let’s delve into the fundamentals of three best Medical - Pharmaceuticals stocks, beginning with number 3.
Stock #3: Eagle Pharmaceuticals, Inc. (EGRX)
EGRX is a pharma company that focuses on developing and commercializing product candidates to treat diseases of the central nervous system, metabolic critical care, and oncology in the United States.
EGRX’s forward EV/Sales multiple of 0.99 is 69.7% lower than the industry average of 3.25. Its forward EV/EBITDA multiple of 3.15% is 74.5% lower than the industry average of 12.39.
EGRX’s trailing-12-month levered FCF margin of 14.88% is significantly higher than the industry average of 0.25%. Its trailing-12-month EBIT margin of 16.19x is significantly higher than the industry average of 0.53x.
For the second quarter ended June 30, 2023, EGRX’s total revenue came in at $64.65 million. Its non-GAAP net income and EPS came in at $15.50 million and $1.18, respectively.
Also, its total current liabilities came in at $86.63 million for the period that ended June 30, 2023, compared to $111.09 million for the period that ended December 31, 2022. Its total liabilities came in at $152.78 million, compared to $172.60 million for the same period.
Analysts expect EGRX’s revenue to increase 6.8% year-over-year to $64.80 million for the quarter ending December 2023. Its EPS is expected to come in at $1.08 for the same period. It surpassed EPS estimates in all four trailing quarters. Shares of EGRX has gained marginally intraday to close the last trading session at $14.46.
EGRX’s POWR Ratings reflect this promising outlook. The stock has an overall B rating, translating to Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
EGRX also has an A grade for Value and a B for Sentiment. It is ranked #37 out of 159 stocks in the Medical - Pharmaceuticals industry. Click here for the additional POWR Ratings for Growth, Momentum, Stability and Quality for EGRX.
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 forward non-GAAP P/E multiple of 3.70 is 80.1% lower than the industry average of 18.56. Its forward Price/Sales multiple of 0.66% is 81.8% lower than the industry average of 3.62%.
OGN’s trailing-12-month levered FCF margin of 1.97% is 659.3% higher than the 0.26% industry average. Its trailing-12-month EBITDA margin of 27.82% is 428.5% higher than the 5.26% industry average.
OGN’s revenues for the second quarter ended June 30, 2023, increased marginally year-over-year to $1.61 million. Its non-GAAP net income increased 5.3% year-over-year to $336 million. Its adjusted EBITDA rose 3.5% year-over-year to $530 million. Also, its non-GAAP EPS came in at $1.31, representing an increase of 4.8% year-over-year.
The consensus revenue estimate of 6.33 billion for the year ending December 2023 represents a 2.5% increase year-over-year. Its EPS is expected to come in at $4.41 for the same period. OGN’s shares have gained marginally intraday to close the last trading session at $16.32.
OGN’s overall B rating equates to a Buy in our POWR Ratings system. It also has an A grade for Value and a B for Sentiment.
It is ranked #32 in the same industry. Beyond what is stated above, we’ve also rated OGN for Momentum, Growth, Stability and Quality. Get all OGN ratings here.
Stock #1: Collegium Pharmaceutical, Inc. (COLL)
COLL is a specialty pharmaceutical company that develops and commercializes medicines for pain management.
COLL’s forward EV/EBITDA multiple of 3.43 is 72.3% lower than the industry average of 12.39. Its forward non- GAAP P/E multiple of 4.46% is 76% lower than the industry average of 18.56%.
COLL’s trailing-12-month EBITDA margin of 42.78x is 712.6% higher than the industry average of 5.26x. Its trailing-12-month EBIT margin of 13.39% is significantly higher than the industry average of 0.53%.
COLL’s net product revenue increased 9.7% year-over-year to $135.55 million for the second quarter that ended June 30, 2023. Its adjusted net income increased 27.9% year-over-year to $52.45 million. Also, its adjusted EPS increased 17.8% year-over-year to $1.26. The company’s adjusted EBITDA came in at $85.80 million, up 21% year-over-year.
COLL’s revenue is expected to increase by 22.6% year-over-year to $568.86 million for the year ending December 2023. Its EPS is expected to grow 33.6% year-over-year to $5.29 for the same period. The stock has gained 35.1% over the past year to close the last trading session at $23.58.
COLL’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall rating of B, which equates to a Buy in our proprietary rating system.
It is ranked #25 in the same industry. It has a B grade for Growth, Value and Quality. To see additional COLL’s ratings for Stability, Sentiment, and Momentum, click here.
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OGN shares were trading at $16.13 per share on Thursday afternoon, down $0.19 (-1.16%). Year-to-date, OGN has declined -40.12%, versus a 11.56% 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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