The rise in chronic diseases, advancements in technology, and a strong research and development pipeline have ignited a heightened demand for pharmaceutical products and services. Moreover, the pharmaceutical sector's resilience to economic fluctuations offers a stable environment for companies operating within this industry.
Given the industry’s stability, this article sheds light on the fundamentals of three promising pharma stocks, Amneal Pharmaceuticals, Inc. (AMRX), AbbVie Inc. (ABBV), and GSK plc (GSK), which might be ideal buys now.
The pharmaceutical sector is anticipated to continue thriving, aided by the increasing prevalence of chronic diseases. As the global population ages, there is a corresponding rise in conditions such as diabetes, cardiovascular disease, cancer, and respiratory disorders. These ailments typically require ongoing treatment and management, leading to a sustained demand for pharmaceutical products and services.
Additionally, the pharmaceutical industry heavily relies on research and development (R&D) for drug discoveries, with companies typically dedicating around 20% or more of their sales revenues to R&D endeavors.
The discovery of novel drugs is essential for the continual progress of pharmaceutical firms, and the revenue generated from newly branded medications can make a significant impact on their overall financial performance. The global drug discovery market is projected to hit $133.11 billion by 2032, growing at a 9.2% CAGR from 2023 to 2032.
On top of it, pharmaceutical companies are recognizing the need to accelerate their processes across the value chain, from drug development to market uptake, by leveraging technological advancements such as Artificial Intelligence (AI).
Embracing AI and analytics, particularly generative AI (GenAI), holds immense potential to unlock opportunities in various areas such as drug discovery, clinical trial design, and customer engagement. According to PWC, by leveraging these technologies, pharma companies can achieve 60% to 70% reductions in process timelines and 30% reduction in operational costs.
Buoyed by such encouraging prospects, revenue in the global pharmaceuticals market is projected to reach a remarkable $1.16 trillion this year and climb up to $1.47 trillion by 2028, demonstrating a 6.2% CAGR spanning 2024 to 2028.
Keeping all these factors in mind, let’s now dive deeper into the fundamentals of the featured Medical - Pharmaceuticals stocks in detail:
Stock #3: Amneal Pharmaceuticals, Inc. (AMRX)
AMRX develops, manufactures, markets, and distributes generics, injectables, biosimilars, and specialty branded pharmaceutical products worldwide. The company operates through three segments: Generics; Specialty; and AvKARE.
On January 10, 2024, AMRX revealed approval and launch of its medicine, fluorometholone ophthalmic suspension, which garnered a 180-day Competitive Generic Therapy (CGT) exclusivity from the U.S. Food and Drug Administration (FDA). This exclusivity is reserved for the first generic versions of important medications.
Andy Boyer, the Executive Vice President and Chief Commercial Officer - Generics at AMRX, highlighted the launch of this complex high-value product as a strategic move for AMRX, especially within the ophthalmic products category, which is seen as less saturated and offers long-term sustainability. He further emphasized that AMRX’s commitment to expanding its portfolio of cost-effective medications remains steadfast.
On December 1, 2023, AMRX and Strides Pharma Science Limited announced the addition of Icosapent ethyl acid soft gel capsules to their portfolio. The product, referencing VASCEPA®, has been in-licensed from Strides and was commercialized by AMRX during the fourth quarter of 2023. The launch of Icosapent ethyl marked another step toward AMRX's goal to introduce more than 40 new products last year.
For the fiscal third quarter, which ended on September 30, 2023, AMRX’s net revenue increased 13.7% year-over-year to $620.04 million, while its gross profit rose 19.7% from the prior-year quarter to $232.53 million.
Moreover, the company’s net income came in at $25 million and $0.06 per share versus a net loss of $2.39 million and $0.02 per share in the prior-year quarter, respectively. During the same quarter, its cash and cash equivalents stood at $86.93 million, up 234.7% compared to $25.98 million as of December 31, 2022.
Analysts predict AMRX’s revenue for the fiscal fourth quarter (ended December 2023) to increase 4.1% year-over-year to $634.79 million, while EPS for the same quarter is projected to come in at $0.09. Moreover, the company has an excellent surprise history, surpassing its revenue and EPS estimates in each of the trailing four quarters.
The stock has soared 199.5% over the past nine months to close the last trading session at $5.57.
AMRX’s POWR Ratings reflect this promising outlook. The stock has an overall A rating, translating to a Strong 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 Value and a B for Sentiment. In the 161-stock Medical - Pharmaceuticals industry, it is ranked #14. Click here to see AMRX’s ratings for Momentum, Stability, and Quality.
Stock #2: AbbVie Inc. (ABBV)
ABBV is a pharmaceutical company that specializes in discovering, developing, manufacturing, and selling medications to treat a diverse range of medical conditions worldwide. Its portfolio includes therapies for autoimmune diseases such as rheumatoid arthritis, psoriatic arthritis, Crohn's disease, ulcerative colitis, etc.
On December 6, 2023, ABBV entered into an agreement to acquire Cerevel Therapeutics. This acquisition includes Cerevel's robust neuroscience pipeline, which comprises multiple clinical-stage and preclinical candidates. These candidates hold promise for various diseases like schizophrenia, Parkinson's disease (PD), and mood disorders.
This move strengthens ABBV’s neuroscience portfolio with a wide range of leading assets, having the potential to revolutionize standards of care for patients with psychiatric and neurological disorders, addressing significant unmet needs in these areas.
Additionally, on November 30, 2023, ABBV announced a definitive agreement wherein it will acquire ImmunoGen, along with its flagship cancer therapy ELAHERE®, which is a first-in-class antibody-drug conjugate (ADC) approved for platinum-resistant ovarian cancer (PROC).
This acquisition should expedite ABBV’s presence in the solid tumor space, both commercially and clinically. Furthermore, ImmunoGen's pipeline of next-generation ADCs adds value to ABBV’s existing ADC platform and ongoing programs.
In the fiscal fourth quarter, which ended on December 31, 2023, ABBV’s net revenues amounted to $14.30 billion, while its attributable net earnings and adjusted EPS came in at $822 million and $2.79, respectively. Moreover, the company’s operating earnings stood at $3.20 billion.
Street expects ABBV’s revenue and EPS for the fiscal first quarter (ending March 2024) to come in at $11.95 billion and $2.35, respectively. Furthermore, its EPS is projected to improve by 3.4% per annum over the next five years. The company topped its EPS estimates in three of the trailing four quarters, which is promising.
ABBV’s shares have gained 26.1% over the past three months to close the last trading session at $174.08.
ABBV’s strong fundamentals are reflected in its POWR Ratings. It has an overall rating of A, which equates to a Strong Buy in our proprietary rating system.
It has an A grade for Quality and a B for Value, Stability, and Sentiment. Within the same industry, it is ranked #2. Click here to see the other ratings of ABBV for Growth and Momentum.
Stock #1: GSK plc (GSK)
Based in Brentford, the United Kingdom, GSK engages in the research, development and manufacture of vaccines and specialty medicines to prevent and treat disease internationally. It operates through four segments: Pharmaceuticals; Pharmaceuticals R&D; Vaccines; and Consumer Healthcare.
On January 9, 2024, GSK revealed its agreement to acquire Aiolos Bio, Inc., a clinical-stage biopharmaceutical company concentrating on meeting the unmet treatment needs of patients with specific respiratory and inflammatory conditions. The deal involves a $1 billion upfront payment and up to $400 million in regulatory milestone payments contingent upon success.
Through the acquisition, GSK gains access to Aiolos' AIO-001, a potentially leading long-acting anti-thymic stromal lymphopoietin (TSLP) monoclonal antibody. AIO-001 is poised to enter phase II clinical development for treating adult asthma patients, with prospects for additional indications such as chronic rhinosinusitis with nasal polyps.
GSK’s turnover for the fourth quarter (ended December 31, 2023) increased 9.2% year-over-year to £8.05 billion ($10.16 billion), while its adjusted operating profit rose 9.8% from the prior-year quarter to £1.75 billion ($2.21 billion).
During the same quarter, the company’s adjusted profit before taxation grew 14.5% year-over-year to £1.56 billion ($1.97 billion). In addition, its adjusted EPS came in at 28.90p, up 12% from the year-ago value.
The consensus revenue estimate of $9.03 billion for the fiscal first quarter (ending March 2024) represents a 4.2% improvement year-over-year. Meanwhile, the consensus EPS estimate of $0.96 for the ongoing quarter reflects a 5.1% year-over-year surge.
Moreover, the company surpassed its EPS estimates in three of the trailing four quarters and revenue estimates in each of the trailing four quarters, which is impressive.
Over the past three months, the stock has surged 21.6% to close the last trading session at $41.91.
It’s no surprise that GSK has an overall rating of A, which equates to a Strong Buy in our proprietary rating system. It has an A grade for Value and a B for Stability, Sentiment, and Quality. In the 161-stock industry, it is ranked first.
In addition to the POWR Ratings we’ve stated above, we also have GSK ratings for Growth and Momentum. Get all GSK ratings here.
What To Do Next?
Discover 10 widely held stocks that our proprietary model shows have tremendous downside potential. Please make sure none of these “death trap” stocks are lurking in your portfolio:
ABBV shares were trading at $173.25 per share on Monday afternoon, down $0.83 (-0.48%). Year-to-date, ABBV has gained 12.86%, versus a 5.80% rise in the benchmark S&P 500 index during the same period.
About the Author: Anushka Mukherjee
Anushka's ultimate aim is to equip investors with essential knowledge that empowers them to make well-informed investment choices and attain sustained financial prosperity in the long run.
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