The pharmaceutical industry tends to perform relatively well amid recessionary pressures, as it enjoys inelastic demand for its products and services. So, investors looking for quality pharma stocks can consider buying Ironwood Pharmaceuticals, Inc. (IRWD) and Calliditas Therapeutics AB (publ) (CALT).
According to U.S. pharmaceutical industry statistics, the U.S. will have a 43.72% market share in the global pharma industry in 2023. Also, the U.S. is expected to spend $605 to 635 billion on medicine by 2025.
The global healthcare market is expected to expand at a CAGR of 21.9% until 2030.
In addition, the U.S. generic drug market is expected to reach $110.70 billion by 2028, growing at a CAGR of 4.1% until 2028. In recent years, there has been an increase in the number of generic medicine approvals across the United States, which has been aided by the FDA’s execution of the Medicine Competition Action Plan, which intends to eliminate hurdles faced by generic-drug makers.
Investors’ interest in pharma stocks is evident from VanEck Vectors Pharmaceutical ETF (PPH) 6.5% returns over the past six months.
Let’s delve deeper into the fundamentals of the stocks.
Ironwood Pharmaceuticals, Inc. (IRWD)
IRWD, a healthcare company, focuses on the development and commercialization of gastrointestinal (GI) products.
IRWD’s forward EV/EBITDA multiple of 4.95 is 62.6% lower than the industry average of 13.25. Its forward EV/EBIT multiple of 4.94 is 70.4% lower than the industry average of 16.66.
IRWD’s trailing-12-month gross profit margin of 88.90% is 59.2% higher than the industry average of 55.85%. Its trailing-12-month EBITDA margin of 60.88% is significantly higher than the industry average of 2.19%.
IRWD’s total revenues increased 6.7% year-over-year to $104.06 million for the fiscal first quarter that ended March 31, 2023. The company’s adjusted EBITDA increased 3.7% year-over-year to $60.38 million. Also, its non-GAAP net income and EPS came in at $45.70 million and $0.25, up 20% and 19% year-over-year, respectively.
Analysts expect IRWD’s revenue to increase 4.5% year-over-year to $429.11 million in 2023. Its EPS is expected to grow 10.7% year-over-year to $1.06 in 2023. IRWD’s shares have gained marginally intraday to close its last trading session at $10.21.
IRWD’s POWR Ratings reflect this promising outlook. The stock has an overall rating of A, equating to a Strong Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
IRWD has an A grade for Value and Quality and a B for Momentum. Within the Medical - Pharmaceuticals industry, it is ranked #16 out of 166 stocks. Click here for the additional POWR Ratings for Growth, Sentiment, and Stability for IRWD.
Calliditas Therapeutics AB (publ) (CALT)
Headquartered in Stockholm, Sweden, CALT is a commercial-stage specialty pharmaceutical company focused on identifying, developing, and commercializing pharmaceuticals products for treatments in orphan indications with an initial focus on renal and hepatic diseases.
CALT’s trailing-12-month Price/Sales multiple of 4 is 2.1% lower than the industry average of 4.09.
CALT’s trailing-12-month asset turnover ratio of 0.60x is 72.1% higher than the 0.35x industry average. Its trailing-12-month gross profit margin of 97.50% is 74.6% higher than the 55.85% industry average.
For the first quarter that ended March 31, 2023, CALT’s net sales increased 284.8% year-over-year to SEK191.35 million ($18.17 million). Its gross profit increased 271.2% from the year-ago value to SEK182.32 ($17.31 million).
The company’s total current assets and total assets amounted to SEK1.29 billion and SEK1.79 billion ($115.80 million and $169.83 million) for the period that ended March 31, 2023, compared to SEK896.48 million and SEK1.34 billion ($85.11 million and $127.64 million) for the period ended March 31, 2022, respectively.
Street expects CALT’s revenue to increase 123.8% year-over-year to $331.49 million in 2024. Its EPS is expected to come in at $2.75 in 2024. It surpassed EPS estimates in three of four trailing quarters. The stock has gained 39.1% over the past six months to close its last trading session at $21.09.
CALT’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 #24 in the same industry. It has an A grade for Growth and a B for Value, and Momentum. To see additional CALT’s rating for Stability, Sentiment, and Quality, click here.
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IRWD shares were trading at $10.22 per share on Thursday morning, up $0.01 (+0.10%). Year-to-date, IRWD has declined -17.51%, versus a 9.53% 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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