The pharmaceutical industry is poised to witness significant growth thanks to the rising adoption of biologics, increasing demand for personalized medicine, and consistent R&D efforts. Also, the pharma landscape is undergoing a major transformation marked by the adoption of advanced technologies, substantial investments, and a supportive regulatory climate.
Given the industry’s bright prospects, it could be wise to invest in quality pharma stocks Johnson & Johnson (JNJ), Spero Therapeutics, Inc. (SPRO), Ipsen S.A. (IPSEY), and Procaps Group S.A. (PROC) for substantial gains.
The pharmaceutical industry plays a vital role in healthcare as it is continually working toward the research, discovery, and development of safe and effective medicines and therapies to treat and prevent diseases. Medical needs across the globe are increasing due to a rapidly aging population and the growing prevalence of chronic diseases.
Pharma companies are highly driven to manufacture innovative products, and therefore, they spend considerable amounts on research and development (R&D). In 2022, R&D spending in the pharmaceutical industry reached around $244 billion worldwide. For comparison, in 2012, R&D expenditures totaled nearly $137 billion.
According to Statista, revenue in the pharmaceuticals market is expected to total $1.16 billion in 2024. In global comparison, the majority of the revenue will be generated in the U.S. (about $636.90 billion this year). Furthermore, revenue is projected to grow at a CAGR of 6.2% from 2024 to 2028, attaining a market volume of $1.47 trillion by 2028.
In recent years, there has been a significant surge in demand for personalized medicine. The market is experiencing robust growth owing to factors like high requirements for customized treatment, increasing rates of cancer, and rising incidence of rare illnesses. The U.S. personalized medicine market is estimated to grow at a CAGR of 6.4% (2023-2030).
In addition, driven by the increasing need for personalized and precision medicine, the pharma 4.0 market is poised to witness significant expansion in the upcoming years. Technological advancements such as AI, big data analytics, robotics, and IoT are enabling new forms of innovative drug discovery and manufacturing practices.
The global pharma 4.0 market size is expected to be valued at $16.75 billion in 2024. Further, the market is expected to reach $54.43 billion by 2031, exhibiting a CAGR of 18.3% during the forecast period (2024-2030).
Given these favorable trends, let’s look at the fundamentals of the top Medical - Pharmaceuticals stocks, beginning with the fourth choice.
Stock #4: Procaps Group S.A. (PROC)
Headquartered in Luxembourg, PROC develops, produces, and markets pharmaceutical solutions globally. It formulates, manufactures, and markets branded prescription drugs in several therapeutic areas like feminine care products, pain relief, skin care, digestive health, cardiology, central nervous system, and respiratory.
On November 30, 2023, PROC and Genomma Lab Internacional, S.A.B. de C.V., the leading pharmaceutical and personal care company in Latin America, announced a strategic agreement to develop, manufacture and market five Softgel products within Latin America. Under the partnership, PROC will manufacture, and Genomma will market and distribute the products.
“Genomma’s strong core brands, proven business model and significant footprint throughout Latin America in the OTC market, make Genomma an ideal partner for our innovative oral delivery systems,” said Ruben Minski, CEO of Procaps Group.
On September 7, PROC signed an agreement with BDR Pharmaceuticals International Pvt. Limited for 27 oncology molecules for Latin America, including 20 TKIs (Tirosyne Kinase Inhibitors). This agreement would significantly contribute to Procaps’ participation in the oncology market across the Latin America region and would widen its scope.
For the third quarter that ended September 30, 2023, PROC’s net revenues increased 7.2% year-over-year to $118.41 million. The company’s gross profit grew marginally from the year-ago value to $68.40 million. Its adjusted EBITDA for the quarter was $22 million.
Street expects PROC’s revenue for the fourth quarter (ended December 2023) to increase 9% year-over-year to $110.60 million. For the fiscal year 2024, the revenue is expected to grow 8.5% year-over-year to $460.10 million. Furthermore, the company has surpassed the consensus EPS estimates in all four trailing quarters.
Shares of PROC have gained 2.8% over the past six months to close the last trading session at $4.02.
PROC’s robust outlook is reflected in its POWR Ratings. 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 Sentiment, Value, and Quality. PROC is ranked #25 out of 162 stocks in the Medical - Pharmaceuticals industry.
Click here to access additional PROC ratings for Growth, Stability, and Momentum.
Stock #3: Ipsen S.A. (IPSEY)
Based in Boulogne-Billancourt, France, IPSEY operates as a global biopharmaceutical company. It provides drugs in the areas of oncology, neuroscience, and rare diseases. The company offers Somatuline, Dysport, Decapeptyl, Cabometyx, Onivyde, and Tazverik. It also provides NutropinAq for growth failure in children.
On December 7, IPSEY and GENFIT S.A. (GNFT) announced the U.S. Food and Drug Administration (FDA) acceptance of the New Drug Application (NDA) for investigational elafibranor. Also, the European Medicines Agency (EMA) has validated the Marketing Authorization Application (MAA) for elafibranor.
An oral, once-daily dual peroxisome activated receptor alpha/delta (PPAR α,δ) agonist, investigational elafibranor could be the first novel second-line treatment for the rare, cholestatic liver disease, primary biliary cholangitis (PBC), in nearly a decade. The target FDA PDUFA date under priority review is June 10, 2024.
On November 13, IPSEY and Medison Pharma, a global pharma company focused on providing access to highly innovative therapies to patients in international markets, announced the Health Canada approval for Bylvay™ (odevixibat) for the treatment of pruritus in patients aged six months or above with Progressive Familial Intrahepatic Cholestasis (PFIC).
Bylvay is the first medication approved in Canada for the treatment of pruritus in patients aged six months or older with PFIC, and it offers new hope for patients suffering from this rare disease and their families.
For the nine months that ended September 30, 2023, IPSEY’s total sales increased 4.6% year-over-year to €2.31 billion ($2.50 billion). The company’s revenue from Neuroscience grew 19.9% from the prior year’s period to €489 million ($529.81 million).
As per the financial guidance for the full year 2023, the company expects total sales growth of more than 6% at constant exchange rates, and its core operating margin is expected to be more than 30% of total sales.
Analysts expect IPSEY’s revenue for the fiscal year (ended December 2023) to increase 9.4% year-over-year to $3.55 billion. For the fiscal year 2024, the company’s revenue is expected to grow 5.2% from the prior year to $3.74 billion.
IPSEY’s stock has gained 12.6% over the past year to close the last trading session at $29.10.
IPSEY’s sound fundamentals are reflected in its POWR Ratings. The stock has an overall rating of B, which translates to a Buy in our proprietary rating system.
IPSEY has an A grade for Value and Stability. The stock also has a B grade for Growth. Within the Medical - Pharmaceuticals industry, IPSEY is ranked #23 of 162 stocks.
In addition to the POWR Ratings stated above, one can access IPSEY’s ratings for Quality, Sentiment, and Momentum here.
Stock #2: Spero Therapeutics, Inc. (SPRO)
SPRO is a clinical-stage biopharmaceutical company that focuses on identifying, developing, and commercializing novel treatments for multi-drug resistant (MDR) bacterial infections and rare diseases. Its product portfolio includes tebipenem pivoxil hydrobromide (HBr), SPR206, and SPR720.
On January 2, SPRO announced the first patient and first visit for PIVOT-PO, a global pivotal Phase 3 clinical trial of tebipenem HBr in patients with complicated urinary tract infections (cUTI), including acute pyelonephritis (AP). SPRO is entitled to receive $95 million in development milestones payable over two years as part of the GSK license agreement.
“We are developing Tebipenem HBr to potentially be the first oral broad-spectrum carbapenem in the U.S. for use in patients with cUTI. Oral administration may provide physicians with an alternative to hospital-based IV therapy, for appropriate patients, with potential value to the broader healthcare system,” said Sath Shukla, President and CEO of SPRO.
During the third quarter that ended September 30, 2023, SPRO’s total revenues increased 1169.8% year-over-year to $25.47 million. The company’s collaboration revenue grew 2061% from the year-ago value to $23.38 million. Its cash, cash equivalents and marketable securities came in at $93.83 million as of September 30, 2023.
For the fiscal year that ended December 2023, Street expects SPRO’s revenue to increase 6.3% year-over-year to $56.89 million. Similarly, the consensus revenue estimate of $66 million for the fiscal year 2024 indicates an improvement of 16% year-over-year. In addition, the company topped consensus revenue estimates in each of the trailing four quarters.
Shares of SPRO have surged 5.4% over the past month to close the last trading session at $1.55.
SPRO’s POWR Ratings reflect its promising prospects. The stock has an overall rating of B, which translates to a Buy in our proprietary rating system.
The stock has an A grade for Value and a B for Sentiment and Quality. SPRO is ranked #22 of 162 stocks within the Medical - Pharmaceutical industry.
To see additional POWR Ratings of SPRO for Growth, Stability, and Momentum, click here.
Stock #1: Johnson & Johnson (JNJ)
JNJ researches, develops, and sells various products in the healthcare field globally. The company operates through Consumer Health; Pharmaceutical; and MedTech segments. It provides its products under the Aveeno, Clean & Clear, Neutrogena, Ogx, Johnson's, Listerine, Band-Aid, and Acuvue brands.
On January 8, JNJ entered a definitive agreement to acquire Ambrx Biopharma, Inc. (AMAM), a clinical-stage biopharmaceutical company with a proprietary synthetic biology technology platform to design and develop next-generation antibody drug conjugates (ADCs).
With this acquisition, the addition of the portfolio of clinical and preclinical programs, including lead product candidate ARX517, a prostate-specific membrane antigen (psma)-targeting antibody drug conjugate (ADC), would strengthen JNJ’s commitment to oncology innovation.
On November 30, JNJ MedTech completed an acquisition of Laminar, Inc., a privately-held medical device company focused on eliminating the left atrial appendage (LAA) in patients with non-valvular atrial fibrillation (AFib). JNJ acquired Laminar for an upfront payment of $400 million, subject to customary adjustments.
This strategic acquisition will strengthen the position of JNJ in high-growth MedTech segments.
JNJ’s sales increased 7.3% year-over-year to $21.39 billion for the fourth quarter that ended December 31, 2023. The company’s gross profit grew 5.4% from the year-ago value to $14.60 billion. Its adjusted net earnings and adjusted EPS were $5.56 billion and $2.29, up 2.4% and 11.7% from the prior year’s quarter, respectively.
The company reaffirmed guidance for 2024 with operational sales growth of 5% - 6%. Its adjusted operational EPS is expected to be $10.55 - $10.75, reflecting growth of 7.4% at the mid-point.
Analysts expect JNJ’s EPS for the fiscal year (ending December 2024) to increase 7.6% year-over-year to $10.67, and its revenue is expected to grow 3.9% from the prior year to $88.45 billion. Moreover, the company topped the consensus EPS and revenue estimates in each of the trailing four quarters, which is impressive.
JNJ’s stock has gained 1.3% over the past month and 8% over the past three months to close the last trading session at $158.77.
JNJ’s POWR Ratings reflect its robust outlook. The stock has an overall rating of A, which translates to a Strong Buy in our proprietary rating system.
The stock has a B grade for Quality, Stability, and Value. JNJ is ranked #9 of 162 stocks in the same industry.
To access additional ratings of JNJ for Sentiment, Growth, and Momentum, click here.
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JNJ shares rose $0.64 (+0.40%) in premarket trading Wednesday. Year-to-date, JNJ has gained 1.30%, versus a 3.28% 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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