The pharmaceutical industry is expected to expand due to rising demand and technological advancements, an aging population and the development of innovative drugs for complex diseases. Given the industry’s growth prospects, fundamentally strong pharma Eli Lilly and Company (LLY), AstraZeneca PLC (AZN) and GSK plc (GSK) might be worth buying.
Before delving deeper into their fundamentals, let’s discuss what’s happening in the pharma industry.
According to Statista, U.S. pharmaceutical revenues are expected to grow at a CAGR of 6% to reach $802.80 billion by 2028. Oncology Drugs is the industry’s largest segment, with a forecast market volume of $114.60 billion in 2024.
According to an IQVIA Institute estimate, total spending and global demand for medicines could reach $2.30 trillion over the next four years. “The continued growth in spending is driven by an increase in the volume of medicines, which reflects that more patients globally are getting access to novel medicines with better clinical outcomes,” said Murray Aitken, senior vice president and executive director of the IQVIA Institute for Human Data Science.
Moreover, the global pharma 4.0 market is expected to reach $63.17 billion by 2032, increasing at an 18% CAGR. Investors’ interest in pharmaceutical stocks can be gauged from iShares U.S. Pharmaceutical ETF’s (IHE) 14.1% returns over the past month.
Considering these conducive trends, let’s look at the fundamentals of the three Medical - Pharmaceuticals stocks, starting with number three.
Stock #3: Eli Lilly and Company (LLY)
LLY is a global pharmaceutical company known for discovering, developing, and marketing a wide range of human pharmaceuticals worldwide. Its diverse product portfolio includes treatments for diabetes, cancer, autoimmune diseases, mental health disorders, and COVID-19.
LLY’s trailing-12-month EBIT margin of 30.56% is significantly higher than the industry average of 0.06%. Its 35.28% trailing-12-month EBITDA margin is significantly higher than the 5.24% industry average.
For the third quarter that ended September 30, 2023, LLY generated revenue of $9.50 billion, up 36.8% year-over-year. The company’s non-GAAP gross margin increased 41.5% from the previous-year quarter to $7.76 billion. Its non-GAAP net income and EPS stood at $94.80 million and $0.10, respectively.
Analysts expect LLY’s revenue to increase 16.5% year-over-year to $39.14 billion for the quarter ending December 2024. Its EPS is expected grow 96.9% year-over-year to $12.38 for the same period. Its EPS surpassed in all four trailing quarters. The stock has gained 92.8% over past year to close the last trading session at $660.43.
LLY’s POWR Ratings reflect this promising outlook. The stock has an overall rating of B, equating to a Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
LLY has a B grade for Stability, Sentiment and Quality. Within the Medical - Pharmaceuticals industry, it is ranked #35 out of 163 stocks. To see additional POWR Ratings for Growth, Value and Momentum for LLY, click here.
Stock #2: AstraZeneca PLC (AZN)
Headquartered in Cambridge, the United Kingdom, AZN is a renowned biopharmaceutical company focusing on discovering, developing, manufacturing, and commercializing prescription medicines. Its marketed products treat oncology, covid-19, respiratory, cardiovascular, renal, and metabolism diseases, etc.
AZN’s trailing-12-month EBITDA margin of 41.57% is 693.3% higher than the 5.24% industry average. Its trailing-12-month asset turnover ratio of 0.47x is 21.1% higher than the 0.39x industry average.
AZN’s total revenues increased 4.6% year-over-year to $11.49 billion for the third quarter (ended September 30, 2023), while its operating profit grew 56.9% from the year-ago value to $1.95 billion. The company’s profit after tax and EPS came in at $1.38 billion and $0.89.
The consensus revenue came in at $50.46 billion for the fiscal year ending December 2024 represents a 10.4% increase year-over-year. Its EPS is expected to grow 14% year-over-year to $4.19 for the same year. It surpassed EPS estimates in three of four trailing quarters. AZN’s shares have gained 5.2% past year to close the last trading session at $66.85.
It’s no surprise that AZN has an overall A rating, equating to a Strong Buy in our POWR Ratings system. It has an A grade for Growth and a B for Value, Stability and Quality. It is ranked #6 in the same industry.
Beyond what is stated above, we’ve also rated AZN for Sentiment and Momentum. Get all AZN ratings here.
Stock #1: GSK plc (GSK)
Headquartered in Brentford, United Kingdom, GSK operates in the research, development, and manufacturing of vaccines and specialty medicines in the United Kingdom, the U.S., and internationally. The company operates through four segments: Pharmaceuticals, Pharmaceuticals R&D, Vaccines, and Consumer Healthcare.
On January 9, 2024, GSK announced the acquisition of Aiolos Bio for a $1 billion upfront payment with potential milestone payments of up to $400 million. This strategic move adds AIO-001, a phase II-ready, long-acting antibody targeting the TSLP pathway, to GSK’s respiratory pipeline, which may benefit asthma patients.
By acquiring Aiolos Bio, GSK strengthens its position as a respiratory market leader and demonstrates its commitment to improve the lives of asthma patients globally.
GSK’s trailing-12-month EBIT margin of 26.09% is significantly higher than the industry average of 0.06%. Its 34.18% trailing-12-month EBITDA margin is 552.2% higher than the 5.24% industry average.
GSK’s turnover for the third quarter that ended September 30, 2023, increased 4.1% year-over-year to £8.15 billion ($10.31 billion). Its adjusted operating profit rose 6.4% over the prior-year quarter to £2.77 billion ($3.51 billion).
For the same quarter, the company’s adjusted profit before taxation rose 7.8% year-over-year to £2.62 billion ($3.32 billion). Also, its adjusted earnings per share from continuing operations was 50.40p, up 7.5% over the prior-year quarter.
Street expects GSK’s revenue to increase 4.7% year-over-year to $40.25 billion for the year ending December 2024. Its EPS is expected grow 1% year-over-year to $3.97 for the same period. Its EPS surpassed in three of four trailing quarters. Shares of GSK have gained 17.5% over past three months to close the last trading session at $40.63.
GSK has an overall A rating, equating to a Strong Buy in our POWR Ratings system.
GSK’s is ranked first in the same industry. It has an A grade for Value and a B for Stability, Sentiment and Quality. To see additional GSK’s ratings for Growth and Momentum, click here.
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LLY shares were trading at $668.00 per share on Friday morning, up $7.57 (+1.15%). Year-to-date, LLY has gained 14.60%, versus a 3.49% 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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