Pharmaceutical companies are the backbone of modern healthcare, often leading the charge in groundbreaking medical advancements. Despite occasional bumps, these companies remain at the forefront of innovation, tackling some of society’s most challenging diseases head-on and improving global health outcomes.
As the quest for cures continues, pharmaceutical stocks emerge as a beacon of hope in the investment landscape. Thus, it could be wise to invest in robust pharma stocks ACADIA Pharmaceuticals Inc. (ACAD), Neurocrine Biosciences, Inc. (NBIX), and Supernus Pharmaceuticals, Inc. (SUPN), which are poised to yield fortunes for investors.
Before discussing these stocks, let’s assess the dynamics of the pharmaceutical industry.
Despite facing challenges such as escalating R&D expenses and heightened pricing pressures from payers, the pharmaceutical and biotech sectors are undergoing significant changes to remain competitive.
Major industry players are increasingly investing in new manufacturing facilities worldwide to expand production capacity for innovative therapies, including biologics, cell and gene therapies, and mRNA-based medicines.
A concerning trend emerged in the first quarter of 2024 as drug shortages surged to an all-time high, exceeding previous records. With 323 drugs experiencing scarcity, ranging from vital medications like oxytocin to prescriptions for conditions like ADHD, the crisis spans across various categories.
Although the exact number of affected patients remains unspecified, past data reveals a significant impact, particularly on older adults aged 65 to 85. Amidst this concerning trend, the escalating demand for medications underscores a significant growth avenue for pharmaceutical companies.
Given this scenario, IQVIA projects a 12% increase in global medicine consumption by 2028, translating to an annual usage of 3.8 trillion defined daily doses. Simultaneously, pharmaceutical spending is forecasted to surge by 38%, propelling market revenue to $1.47 trillion by 2028 at a robust CAGR of 6.2%.
Moreover, with the emergence of Pharma 4.0, the pharmaceutical sector is undergoing a paradigm shift driven by transformative technologies. These advancements include the development of smart medicines and digital therapeutics, which integrate drugs with digital elements, facilitating real-time monitoring of dosage intake and release.
By 2031, the global pharma 4.0 market is expected to reach $54.43 billion, exhibiting a CAGR of 18.3%.
Considering these encouraging trends, let’s look at the fundamentals of the three best Medical – Pharmaceuticals stocks, beginning with number 3.
Stock #3: ACADIA Pharmaceuticals Inc. (ACAD)
ACAD is a pharma company that focuses on CNS disorder treatments. Its key product is NUPLAZID for Parkinson’s disease psychosis. The company is also developing DAYBUE for Rett Syndrome, and its several drugs are in trial phases for conditions like schizophrenia, Prader-Willi syndrome, Alzheimer’s disease psychosis, Rett syndrome, and Fragile X syndrome.
On April 22, 2024, ACAD announced that Health Canada accepted its New Drug Submission (NDS) for trofinetide, a treatment for Rett syndrome, a rare neurodevelopmental disorder. Health Canada granted Priority Review for Acadia’s submission. If granted marketing authorization, trofinetide will be the first option available for treating Rett syndrome in Canada.
Over the past three years, ACAD’s revenue has grown at a CAGR of 21.1%. Also, its total assets have improved at a CAGR of 4.2% over the same period.
ACAD’s trailing-12-month levered FCF margin of 4.23% is 316.3% higher than the industry average of 1.02%. Likewise, its trailing-12-month asset turnover ratio of 1.08x compares to the industry average of 0.40x.
During the fiscal first quarter that ended March 31, 2024, ACAD’s total revenues increased 73.7% year-over-year to $205.83 million, driven by the launch of DAYBUE for Rett syndrome and increased market share of NUPLAZID for Parkinson’s disease psychosis. Its income from operations came to $15.21 million, compared to a loss from operations of $53.58 million in the prior year’s quarter.
Moreover, the company’s net income and EPS stood at $16.56 million and $0.10, compared to net loss and net loss per share of $43.02 million and $0.27, respectively. As of March 31, 2024, its cash, cash equivalents, and investment securities amounted to $470.50 million versus $438.90 million as of December 31, 2023.
The consensus revenue estimate of $236.11 million for the second quarter (ending June 2024) indicates a 42.9% year-over-year rise. Likewise, the consensus EPS estimate of $0.19 for the ongoing quarter reflects a significant growth from the prior year’s quarter. Also, the company beat the consensus revenue estimates in three of the four trailing quarters.
Shares of ACAD have lost 10.7% over the past month to close the last trading session at $14.86.
ACAD’s robust fundamentals are apparent in its POWR Ratings. The stock has an overall rating of B, which equates 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.
ACAD has an A grade for Growth and Value and a B for Quality. Among 161 stocks in the Medical – Pharmaceuticals industry, it is ranked #26. Click here to access additional ACAD ratings for Momentum, Stability, and Sentiment.
Stock #2: Neurocrine Biosciences, Inc. (NBIX)
NBIX develops and markets pharmaceuticals targeting neurological, endocrine, and psychiatric disorders. Its portfolio encompasses remedies for tardive dyskinesia, Parkinson’s disease, endometriosis, and uterine fibroids, supplemented by ongoing clinical programs spanning diverse therapeutic areas.
On April 30, 2024, the company received approval from the U.S. Food and Drug Administration for INGREZZA SPRINKLE (valbenazine) capsules, a new oral granules formulation of INGREZZA (valbenazine) capsules.
This alternative administration option is designed for adults with tardive dyskinesia and chorea associated with Huntington’s disease, particularly those experiencing dysphagia or difficulty swallowing.
On April 23, NBIX released promising results from its Phase 2 trial of NBI-1065845 in adults with major depressive disorder. The study achieved its primary and key secondary endpoints, indicating that the daily oral intake of NBI-1065845 led to significant improvements in the Montgomery Åsberg Depression Rating Scale (MADRS) total score compared to baseline.
This suggests that NBI-1065845 has the potential to be an effective treatment option for individuals with major depressive disorder.
Additionally, in the same month, the company submitted two New Drug Applications to the FDA for crinecerfont as a treatment for adult and pediatric patients with classic congenital adrenal hyperplasia.
NBIX’s revenue has grown at a CAGR of 23.8% over the past three years. In addition, its levered FCF and total assets have improved at CAGRs of 30.4% and 23.4%, respectively, in the same timeframe.
The stock’s trailing-12-month net income margin, ROCE, and ROTA of 18.65%, 18.16%, and 10.65% compare to the negative industry averages of 4.82%, 41.21%, and 27.95%, respectively. Also, its trailing-12-month levered FCF margin of 36.29% is significantly higher than the 1.02% industry average.
During the first quarter that ended March 31, 2024, NBIX’s total revenue increased 22.6% year-over-year to $515.30 million, with double-digit growth in its net product sales. Notably, INGREZZA net product sales were $506 million, up 23% year-over-year. Its operating income amounted to $99.30 million, compared to an operating loss of $114.20 million in the prior-year quarter.
Furthermore, the company’s non-GAAP net income and non-GAAP EPS were $124.80 million and $1.20 versus a net loss and loss per share of $49.50 million and $0.51 in the previous year’s period, respectively. As of March 31, 2024, its cash, cash equivalents, and marketable securities stood at $1.21 billion, compared to $1.03 billion as of December 31, 2023.
Street expects NBIX’s revenue to increase 20.9% year-over-year to $547.13 million for the second quarter (ending June 2024). Its EPS is expected to be $1.49 in the current quarter, reflecting a 19.3% growth year-over-year. Moreover, the company topped the consensus revenue and EPS estimates in three of the trailing four quarters.
NIVIX’s stock has gained 43.2% over the past year to close the last trading session at $138.48.
It’s no surprise that NBIX has an overall rating of B, which equates to Buy in our proprietary rating system. The stock has an A grade for Quality and a B for Value. Within the same industry, it is ranked #22.
In addition to the POWR Ratings we stated above, we also have NBIX’s ratings for Growth, Momentum, Stability, and Sentiment. Get all NBIX ratings here.
Stock #1: Supernus Pharmaceuticals, Inc. (SUPN)
SUPN develops and commercializes products for treating central nervous system (CNS) diseases in the U.S. Its commercial products are Trokendi XR and Oxtellar XR. The company’s commercial products also comprise Qelbree, APOKYN, XADAGO, MYOBLOC, GOCOVRI, and Osmolex ER. In addition, its product candidates include SPN-830, SPN-817, and SPN-820.
SUPN’s revenue has grown at 2.4% and 8.1% CAGRs over the past three and five years. Over the past three years, the company’s levered FCF has increased at a CAGR of 51.1%.
SUPN’s trailing-12-month gross profit margin of 87.2% is 54.5% higher than the industry average of 56.43%, and its 15.17% trailing-12-month EBIT margin is favorably compared to the 5.29% industry average. Also, the stock’s trailing-12-month levered FCF margin of 98.48% is significantly higher than the industry average of 1.02%.
For the first quarter that ended March 31, 2024, SUPN’s total revenues stood at $143.64 million, with a 75% year-over-year increase in net sales of Qelbree to $45.10 million. Also, Qelbree’s total IQVIA prescriptions surged 31% from the prior year period to 176,503.
As of March 31, 2024, the company’s adjusted operating earnings and earnings before income taxes amounted to $22.30 million and $243 thousand, respectively. Its cash, cash equivalents, and current and long-term marketable securities stood at $309.40 million, compared to $271.50 million as of December 31, 2023.
Analysts expect SUPN’s revenue for the second quarter (ending June 2024) to increase 10.3% year-over-year to $149.47 million. Its EPS is expected to be $0.39 for the same quarter. Moreover, the company surpassed consensus EPS estimates in three of the trailing four quarters.
Over the past three months, the stock has gained 5.4% to close the last trading session at $28.97.
SUPN’s solid fundamentals are reflected in its POWR Ratings. The stock has an overall rating of B, translating to Buy in our proprietary rating system.
SUPN has a B grade for Growth, Value, and Quality. In the Medical - Pharmaceuticals industry, it is ranked #14.
Beyond what we’ve stated above, we have also rated the stock for Momentum, Stability, and Sentiment. Get all ratings of SUPN here.
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NBIX shares were trading at $140.91 per share on Wednesday afternoon, up $2.43 (+1.75%). Year-to-date, NBIX has gained 6.94%, versus a 11.52% rise in the benchmark S&P 500 index during the same period.
About the Author: Shweta Kumari
Shweta's profound interest in financial research and quantitative analysis led her to pursue a career as an investment analyst. She uses her knowledge to help retail investors make educated investment decisions.
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