The pharmaceutical industry, marked by increased drug sales, substantial investments in research and development (R&D), and the integration of cutting-edge technology, has witnessed exponential growth. Analysts predict a thriving future for the sector given these dynamics.
Amid this scenario, three fundamentally robust pharmaceutical stocks – Pacira BioSciences, Inc. (PCRX – Get Rating), Amneal Pharmaceuticals, Inc. (AMRX – Get Rating), and Novartis AG (NVS – Get Rating) – emerge as potential solid investment opportunities.
The pharmaceutical industry’s consistent growth is underpinned by the continual demand for pharmaceutical products, resilient even in the face of potential economic volatility. Factors such as increasing disease prevalence, an aging U.S. population, and a rise in healthcare expenditure are anticipated to propel the U.S. pharmacy market to an estimated $861.67 billion by 2028, growing at a CAGR of 6.3%.
The year 2023 marked a dynamic period for the pharma industry, witnessing M&A deal values accelerating to nearly pre-pandemic rates. This momentum is expected to persist into 2024, with projected activity ranging between $225 billion to $275 billion across all sectors. A strategic emphasis on innovation is poised to shape future operational strategies, leading to significant funding allocation towards research and development initiatives.
The resilience of the pharma industry underscores the escalating health needs and the revolutionary wave of drug development, particularly evident in developing economies. The global drug discovery market is projected to reach $181.40 billion by 2032, growing at a CAGR of 8.5%.
Furthermore, technological transformation is set to redefine the pharma landscape. The integration of artificial intelligence (AI) is a prime example, revolutionizing operations across drug production, clinical trials, R&D, and patient care. Consequently, the global AI in the pharmaceutical market is anticipated to surpass $11.81 billion, growing at a 29.3% CAGR by 2032.
Given these promising trends, let’s delve into the fundamentals of the three Medical-Pharmaceutical stocks, starting with number 3.
Stock #3: Pacira BioSciences, Inc. (PCRX – Get Rating)
Pacira BioSciences specializes in non-opioid pain management and regenerative health solutions. Notably, PCRX received U.S. Food and Drug Administration (FDA) approval for its supplemental new drug application (sNDA) on November 10, 2023, expanding the label of EXPAREL (bupivacaine liposome injectable suspension). This approval broadens the application of EXPAREL in adults, enhancing its utility for over 3 million lower extremity procedures annually.
PCRX’s CEO and Chairman, Dave Stack, emphasized, “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 major orthopedic procedures.”
Financially, PCRX boasts robust metrics, with trailing-12-month cash per share of $2.13, surpassing the industry average of $1.27. Additionally, its levered FCF and EBIT margins stand significantly higher than industry averages.
For the fiscal third quarter ending September 30, 2023, PCRX reported total revenues of $163.93 million, income from operations of $17.72 million, and adjusted EBITDA of $52.94 million. The stock exhibits an upward trend, trading above its 50-day and 100-day moving averages, closing the last session at $33.07.
PCRX’s favorable prospects are reflected in its POWR Ratings, garnering an overall B rating, indicating a Buy. Noteworthy grades for Growth, Value, and Quality place it at #26 out of 162 stocks within the Medical-Pharmaceuticals industry.
Stock #2: Amneal Pharmaceuticals, Inc. (AMRX – Get Rating)
Amneal Pharmaceuticals engages in the development, manufacturing, marketing, and distribution of generics, injectables, biosimilars, and specialty branded pharmaceutical products globally. AMRX achieved approval and launched fluorometholone ophthalmic suspension on January 10, 2023, securing 180-day competitive generic therapy (CGT) exclusivity from the FDA.
AMRX’s financial prowess is evident through its trailing-12-month asset turnover ratio, levered FCF, and EBIT margins, all significantly surpassing industry averages. For the fiscal third quarter ending September 30, 2023, AMRX reported impressive figures, including a 13.7% YoY increase in net revenue to $620.04 million and a 22.4% YoY rise in adjusted EBITDA to $153.80 million.
Trading above its moving averages, AMRX closed the last session at $5.51, exhibiting a remarkable gain of 185.5% over the past nine months. The stock has an overall A rating in the POWR Ratings, indicating a Strong Buy.
AMRX’s A grades for Growth and Value, combined with a B for Sentiment, position it at #11 within the Medical-Pharmaceuticals industry.
Stock #1: Novartis AG (NVS – Get Rating)
Headquartered in Basel, Switzerland, Novartis is a global leader in healthcare product research, development, manufacturing, and marketing. The company received FDA approval for commercial manufacturing of Pluvicto on January 5, 2023, at its state-of-the-art radioligand therapy manufacturing facility in Indianapolis, Indiana.
In 2023, NVS repurchased 87.5 million shares for $8.40 billion, reinforcing its commitment to shareholder value. The company pays an annual dividend of $3.31 per share, yielding 3.07%, with a four-year average yield of 3.47%.
Financially robust, NVS displays impressive metrics, including a trailing-12-month cash per share of $6.04, levered FCF, and EBIT margins significantly higher than industry averages. For the fiscal fourth quarter ending December 31, 2023, NVS reported a YoY increase of 8% in net sales to $11.42 billion, along with a 4.8% rise in core operating income.
NVS closed the last session at $107.75, gaining 20.2% over the past year. Trading above its moving averages, the stock holds an overall A rating in the POWR Ratings, signifying a Strong Buy.
NVS’s A grade for Quality and B grades for Value, Stability, and Sentiment position it at #2 within the industry.
In conclusion, these top pharma stocks, characterized by strong fundamentals and bullish momentum, present compelling investment opportunities within the flourishing pharmaceutical industry. Investors should conduct thorough research and consider their risk tolerance before making investment decisions based on these recommendations.
