Given sustained healthcare spending owing to an increasing frequency of chronic diseases and the rapidly aging population worldwide combined with growing research and development (R&D) efforts, the pharmaceutical industry’s outlook radiates promise. Further, digital transformation is revolutionizing drug discovery and manufacturing processes, driving the industry’s growth.
Considering the industry’s tailwinds, it could be wise to invest in fundamentally sound pharma stocks Wave Life Sciences Ltd. (WVE), Teva Pharmaceutical Industries Limited (TEVA), and Collegium Pharmaceutical, Inc. (COLL) for potential gains.
Before delving deeper into the fundamentals of these stocks, let’s discuss factors that shape the pharma industry’s prospects.
Crucial trends that will shape the pharmaceutical industry in 2024 and beyond include continued dominance of small molecule drugs, rising demand for personalized medicine, growing adoption of biologics, innovations in gene editing, outsourcing of drug development and manufacturing, growing R&D expenditure, and favorable regulatory climate.
Statista reported that revenue in the U.S. pharmaceuticals market is expected to reach $636.90 billion this year. In addition, revenue is projected to grow at a CAGR of 6%, resulting in a market volume of $802.80 billion by 2028.
According to a new report titled Global Use of Medicines 2023 – Outlook through 2027 from the IQVIA Institute for Human Data Science, IQVIA Institute, the total spending and global demand for medicine is expected to increase over the next five years to nearly $1.90 trillion by 2027.
The increasing prevalence of chronic and rare diseases demanding targeted therapies and rising focus on genomic research are contributing to the growth of the personalized medicine market. Also, the increasing geriatric population would drive the demand for precision medicines. The global precision medicine market is expected to total $118.08 billion in 2028, growing at a CAGR of 9.9%.
As the pharma industry continues to evolve, new advanced technologies are emerging that are changing the way drugs are discovered, developed, tested, and brought to market.
Pharma 4.0 presents numerous opportunities for pharmaceutical companies. By utilizing cutting-edge technologies, including AI, big data and analytics, additive manufacturing, blockchain, and IoT, the industry is finding innovative ways to approach drug discovery and development, allowing for faster and more accurate data analysis, and ultimately leading to better patient outcomes.
The AI in the pharmaceutical market is expected to exceed $18.06 billion, expanding at a CAGR of 42.7% during the forecast period (2024-2029).
Given these encouraging industry trends, let’s look at the fundamentals of the best Medical - Pharmaceuticals stocks, beginning with the third choice.
Stock #3: Wave Life Sciences Ltd. (WVE)
Headquartered in Singapore, WVE is a clinical-stage genetic medicine company that designs and produces novel stereopure oligonucleotides via PRISM, a discovery and drug-developing platform. It is developing oligonucleotides that target ribonucleic acid (RNA) to correct disease-causing mutations, modulate protein activity, restore production of functional proteins.
On December 15, 2023, WVE initiated dosing in the Phase 2 FORWARD-53 clinical trial, which evaluates WVE-N531 as a treatment for boys with Duchenne muscular dystrophy (DMD) who are amenable to exon 53 skipping. FORWARD-53 is designed to assess functional dystrophin protein at 24 and 48 weeks with every other week dosing of WVE-N531.
“Following encouraging data from the WVE-N531 proof-of-concept trial, we believe we are on the right path toward addressing a significant unmet need in DMD – the generation of endogenous dystrophin protein to levels that meaningfully impact the trajectory of the disease,” said Anne-Marie Li-Kwai-Cheung, MChem, MTOPRA, RAPS, Chief Development Officer at WVE.
Also, on December 6, WVE announced the initiation of dosing in healthy volunteers in the RestorAATion clinical trial program, which is investigating WVE-006 for alpha-1 antitrypsin deficiency (AATD).
Initiating dosing in RestorAATion marks an important milestone for the alpha-1 community, where treatment options are very limited to address the underlying genetic mutation that commonly causes AATD. WVE-006 has the potential to transform the treatment paradigm for this disease, and the company is positioned to achieve this vision as part of its collaboration with GSK.
For the third quarter that ended September 30, 2023, WVE reported revenue of $49.21 million, compared to $285 thousand in the same quarter of 2022. Its income from operations came in at $4.44 million, compared to a loss from operations of $38.90 million for the prior year’s period.
In addition, the company’s net income was $7.25 million, or $0.07 per share, compared to a net loss of $39 million, or $0.42 per share in the previous year’s quarter, respectively. As of September 30, 2023, Wave had $139.94 million in cash and cash equivalents versus $88.50 million as of December 31, 2022.
Analysts expect WVE’s revenue to increase 2,751.5% year-over-year to $104.05 million for the fiscal year that ended December 2023. Similarly, the company’s revenue for the first quarter (ending March 2024) is expected to grow 52.7% year-over-year to $19.74 million.
Shares of WVE have gained 8.3% over the past nine months to close the last trading session at $4.32.
WVE’s POWR Ratings reflect its bright prospects. The stock has an overall rating of B, which translates to a Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, each weighted to an optimal degree.
The stock has a B grade for Growth, Sentiment, Value, and Quality. WVE is ranked #17 of 163 stocks within the Medical - Pharmaceuticals industry.
In addition to the POWR Ratings we’ve stated above, we also have WVE ratings for Stability and Momentum. Get all WVE ratings here.
Stock #2: Teva Pharmaceutical Industries Limited (TEVA)
Based in Tel Aviv, Israel, TEVA develops, manufactures, markets, and distributes generic medicines, specialty medicines, and biopharmaceutical products internationally. It provides sterile products, hormones, high-potency drugs, and cytotoxic substances in different dosage forms like tablets, capsules, liquids, injectables, inhalants, transdermal ointments, patches, and creams.
On January 31, 2024, TEVA announced its intention to divest its active-pharmaceutical ingredient (API) business, or TAPI. This intended divestiture will play a crucial role in Teva’s “Pivot to Growth” strategy and enable the company to maximize current and potential revenue systems, focusing on capital reallocation toward growth and innovation.
Further, the intended divestiture of TAPI is anticipated to create additional value for Teva’s shareholders and other stakeholders by allowing the company to better address a distinct, growing market with its leading product offerings. It will also enhance the divested company’s position as a global leader in the expanding API market.
On December 14, 2023, TEVA and Biolojic Design Ltd., a biotechnology company that uses computational biology and AI to transform antibodies into intelligent medicinal solutions, announced an exclusive license agreement for the development of a potential novel antibody-based therapy for treating Atopic Dermatitis and Asthma.
This agreement supports one of Teva’s primary pillars in its Pivot to Growth strategy announced in May 2023, to step up innovation, by enhancing the company’s early-stage pipeline organically and through strategic partnerships.
TEVA’s net revenues increased 14.8% year-over-year to $4.46 billion in the fourth quarter that ended December 31, 2024. Its non-GAAP gross profit grew 23.1% from the year-ago value to $2.59 billion. The company’s non-GAAP operating income came in at $1.55 billion, up 36.8% from the previous year’s period.
Furthermore, non-GAAP net income attributable to TEVA rose 43.5% year-over-year to $1.14 billion, and non-GAAP EPS attributable to TEVA was $1, an increase of 40.8% from the prior year’s quarter. Its adjusted EBITDA grew 33.9% year-over-year to $1.66 billion.
As per its 2024 business outlook, the company expects its revenue to be $15.70-$16.30 billion. TEVA’s non-GAAP operating income is expected to be between $4 billion and $4.50 billion, and its adjusted EBITDA of $4.50-5 billion. Its non-GAAP EPS is estimated to be between $2.20 and $2.50.
Street expects TEVA’s EPS for the first quarter (ending March 2024) to increase 27.3% year-over-year to $0.51. The consensus revenue estimate of $3.76 billion for the current quarter indicates an improvement of 2.8% year-over-year. Moreover, the company topped consensus revenue estimates in each of the trailing four quarters.
TEVA’s stock has surged 13.5% over the past month and 44.1% over the past six months to close its last trading session at $12.10.
TEVA’s sound fundamentals are reflected in its POWR Ratings. The stock has an overall rating of B, equating to a Buy in our proprietary rating system.
The stock has an A grade for Value and Growth. TEVA is ranked #14 of 163 stocks in the Medical - Pharmaceuticals industry.
To see additional POWR Ratings of TEVA for Sentiment, Quality, Stability, and Momentum, click here.
Stock #1: Collegium Pharmaceutical, Inc. (COLL)
COLL is a specialty pharmaceutical company engaged in developing and commercializing medicines for pain management. The company’s portfolio includes Xtampza ER, an abuse-deterrent and oil formulation of oxycodone; Nucynta ER and Nucynta IR, which are formulations of tapentadol; Belbuca, a buccal film that contains buprenorphin; and Symproic.
On November 9, 2023, COLL announced entering an Accelerated Share Repurchase (ASR) agreement with Jefferies LLC to repurchase $25 million of the company’s common stock. This ASR execution is part of the $100 million share repurchase program authorized by its Board of Directors in January 2023.
COLL’s financial strength, underscored by solid cash generation, enables the company to execute its capital deployment strategy. Since 2021, it has returned $112 million of capital to its shareholders through share repurchases. This additional $25 million ASR program is a productive use of its capital with the potential to generate greater returns for its shareholders.
During the third quarter that ended September 30, 2023, COLL’s net product revenues increased 7.6% year-over-year to $136.71 million. Its gross profit rose 36.5% from the year-ago value to $80.31 million. Its income from operations was $45.01 million, up 119.9% year-over-year. The company’s adjusted EBITDA grew 19.4% from the prior year’s quarter to $89.40 million.
Additionally, the company’s adjusted net income increased 29.3% from the previous year’s quarter to $55 million, and its adjusted EPS came in at $1.34, up 21.9% year-over-year.
According to the financial guidance for 2024, COLL expects net product revenues in the range of $580 million to $595 million. The company’s adjusted EBITDA is expected in the range of $380 million to $395 million.
Analysts expect COLL’s revenue and EPS for the fourth quarter (ended December 2023) to increase 14.1% and 28.8% year-over-year to $147.91 million and $1.40, respectively. For the fiscal year 2024, the company’s revenue and EPS are estimated to grow 3.9% and $16.1% from the prior year to $587.30 million and $6.11, respectively.
Over the past six months, COLL’s stock has gained 44.8% and 17.4% over the past year to close the last trading session at $32.96.
COLL’s robust outlook is reflected in its POWR Ratings. The stock has an overall rating of A, equating to a Strong Buy in our proprietary rating system.
COLL has an A grade for Quality and a B for Growth and Value. It is ranked #12 out of 163 stocks in the same industry.
Click here to access additional COLL ratings for Sentiment, Stability, and Momentum.
What To Do Next?
43 year investment veteran, Steve Reitmeister, has just released his 2024 market outlook along with trading plan and top 11 picks for the year ahead.
TEVA shares were unchanged in premarket trading Thursday. Year-to-date, TEVA has gained 15.90%, versus a 1.59% rise in the benchmark S&P 500 index during the same period.
About the Author: Mangeet Kaur Bouns
Mangeet’s keen interest in the stock market led her to become an investment researcher and financial journalist. Using her fundamental approach to analyzing stocks, Mangeet’s looks to help retail investors understand the underlying factors before making investment decisions.
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