The pharmaceutical industry's growth prospects appear promising due to factors including the adoption of advanced technologies, increased investment in research and development (R&D), the prevalence of chronic diseases, a rapidly aging population, and the development of drugs for rare conditions.
Therefore, it could be wise to consider buying fundamentally strong pharma stocks Perrigo Company plc (PRGO), ACADIA Pharmaceuticals Inc. (ACAD), and Pacira BioSciences, Inc. (PCRX).
Before diving deeper into the fundamentals of these stocks, let’s discuss why the pharmaceutical industry is well-positioned for growth.
Over the last five years, global medicine spending rose by 35%, with a projected 38% surge by 2028, underlining the increasing demand for medicinal products.
According to an IQIVIA report, global medicine spending is projected to increase by 2% despite reduced expectations for COVID-19 treatments. This growth is driven by increased utilization of advanced medications in critical fields such as immunology, endocrinology, and oncology.
The global spending on medicine, using list prices, is forecasted to grow by 38% through 2028. Additionally, the industry's strong growth reflects the increasing global demand and highlights ongoing innovation in drug development. The global drug discovery market is expected to reach $181.40 billion by 2032, growing at a rate of 8.5% annually.
The rising incidence of chronic diseases like cancer, arthritis, diabetes, and heart disease necessitates frequent treatments and medications, sustaining a continuous demand for drugs and therapies. This year, global pharmaceutical revenue is expected to reach $1.16 trillion and is projected to grow at a CAGR of 6.2% to reach $1.47 trillion by 2028.
On top of it, AI is changing the pharmaceutical sector by revolutionizing drug discovery, enhancing manufacturing processes, and promoting strategic partnerships. Companies prioritize innovation to strengthen patent portfolios and invest strategically in AI. The global market for AI in drug discovery is forecasted to grow to $13 billion by 2032.
Considering these conducive trends, let’s take a look at the fundamentals of the three Medical - Pharmaceuticals stock picks, beginning with the third choice.
Stock #3: Perrigo Company plc (PRGO)
Headquartered in Dublin, Ireland, PRGO provides over-the-counter health and wellness solutions to enhance individual well-being internationally. It operates through the Consumer Self-Care Americas and Consumer Self-Care International segments.
In terms of the trailing-12-month EBITDA margin, PRGO’s 14.06% is 175.5% higher than the 5.10% industry average. Its 6.09% trailing-12-month EBIT margin is considerably higher than the 0.05% industry average. Likewise, the stock’s 0.43x trailing-12-month asset turnover ratio is 11.5% higher than the 0.39x industry average.
For the third quarter ended September 30, 2023, PRGO’s net sales increased 2.1% year-over-year to $1.12 billion, and the company’s adjusted gross profit came in at $443.60 million, up 10.6% from the same period a year ago. Additionally, its adjusted earnings from continuing operations and adjusted EPS rose 15.1% and 14.3% over the prior-year quarter to $87 million and $0.64, respectively.
Analysts expect PRGO’s EPS and revenues for the quarter ended December 31, 2023, to increase 11.1% and 1.2% year-over-year to $0.83 and $1.17 billion, respectively. It surpassed the consensus EPS estimates in each of the trailing four quarters. Over the past three months, AMPH’s stock has gained 9.2% to close the last trading session at $31.56.
PRGO’s POWR Ratings reflect strong prospects. It has an overall rating of B, translating to a Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
It has an A grade for Growth and a B for Value. It is ranked #38 out of 161 stocks in the Medical – Pharmaceuticals industry. In total, we rate PRGO on eight different levels. Beyond what we stated above, we also have given PRGO grades for Momentum, Stability, Sentiment, and Quality. Get all the PRGO’s ratings here.
Stock #2: ACADIA Pharmaceuticals Inc. (ACAD)
ACADIA is a biopharmaceutical company that focuses on developing and commercializing innovative medicines to address unmet medical needs in central nervous system (CNS) disorders and rare diseases. Its offerings include NUPLAZID and Trofinetide for Alzheimer's disease psychosis and Rett Syndrome, as well as treatments and programs for neuropsychiatric symptoms.
In terms of the trailing-12-month asset turnover ratio, ACAD’s 1.02x is 162.8% higher than the 0.39x industry average.
For the fiscal third quarter that ended on September 30, 2023, ACAD’s total revenues increased 62% year-over-year to $211.70 million. Its net interest income increased 79.7% year-over-year to $4.13 million. Also, as of September 30, 2023, its total assets stood at $632.54 million compared to $587.81 million as of December 31, 2022.
For the quarter ended December 31, 2023, ACAD’s revenue is expected to increase 64% year-over-year to $223.80 million. Likewise, its EPS for the quarter ending June 30, 2024, is expected to increase significantly year-over-year to $0.32. Over the past year, the stock has gained 33.8% to close the last trading session at $25.56.
ACAD’s POWR Ratings reflect a favorable outlook. It has an overall rating of B, which translates to a Buy in our proprietary rating system.
It has a B grade for Growth, Value, and Sentiment. It is ranked #32 in the same industry. To see ACAD’s Momentum, Stability, and Quality ratings, click here.
Stock #1: Pacira BioSciences, Inc. (PCRX)
PCRX provides non-opioid pain management and regenerative health solutions for healthcare practitioners and their patients in the United States. The company offers EXPAREL and ZILRETTA injections, along with the iovera system, for targeted nerve treatment.
On February 7, 2024, PCRX secured a national group purchasing agreement with Premier, Inc., effective January 1, 2024, enabling Premier members to access special pricing for EXPAREL, aimed at enhancing patient care and cost savings in healthcare.
In terms of the trailing-12-month EBITDA margin, PCRX’s 23.30% is 356.6% higher than the 5.10% industry average. Likewise, its 18.41% trailing-12-month levered FCF margin is significantly higher than the 0.07% industry average. Moreover, its 11.73% trailing-12-month EBIT margin is considerably higher than the 0.05% industry average.
PCRX reported a preliminary total revenue of $675 million for the year ended December 31, 2023, compared to $666.80 million for the year ended December 31, 2022. The company’s full-year EXPAREL net product sales amounted to $538.10 million, compared to $536.90 million in 2022.
Additionally, its ZILRETTA and iovera° net product sales stood at $111.10 million and $19.70 million in 2023, compared to $105.50 million and $15.30 million in 2022, respectively.
Street expects PCRX’s EPS and revenue for the quarter ended December 31, 2023, to increase 6.2% and 5.4% year-over-year to $0.85 and $181.20 million, respectively. Over the past three months, the stock gained 4% to close the last trading session at $29.23.
It’s no surprise that PCRX has an overall rating of B, which translates to a Buy in our proprietary POWR Ratings system.
It is ranked #31 in the Medical – Pharmaceuticals industry. It has an A grade for Value and a B for Growth and Quality. Click here to see PCRX’s Momentum, Stability, and Sentiment ratings.
What To Do Next?
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PRGO shares were trading at $32.29 per share on Thursday afternoon, up $0.73 (+2.31%). Year-to-date, PRGO has gained 0.34%, versus a 5.15% rise in the benchmark S&P 500 index during the same period.
About the Author: Abhishek Bhuyan
Abhishek embarked on his professional journey as a financial journalist due to his keen interest in discerning the fundamental factors that influence the future performance of financial instruments.
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