The pharma market is poised to thrive due to the continuous medicinal advancements to meet the escalating demand for chronic disease treatment, technological advancements, and increased research and development. Given this backdrop, quality pharma stocks Procaps Group S.A. (PROC), Supernus Pharmaceuticals (SUPN), and GSK plc (GSK) could be wise portfolio additions now. Read on….
Owing to the incorporation of cutting-edge technology and high demand for new drugs for the treatment of chronic diseases, the pharma market has grown substantially. Moreover, the industry’s stability lies in the persistent need for its products, making it less susceptible to economic volatility.
To that end, fundamentally strong pharma stocks Procaps Group S.A. (PROC), Supernus Pharmaceuticals, Inc. (SUPN), and GSK plc (GSK) could be solid buys to now.
Despite the pharmaceutical industry’s enduring reputation for resilience amid the economic downturn, investments in pharma companies have dwindled over the past two years. However, the U.S. has captured a dominant share of the pharma market worldwide thanks to a surge in U.S. Food and Drug Administration (FDA) approvals, the rising chronic diseases, and robust R&D capabilities.
In 2023, the FDA approved almost 50% more novel drugs compared to 2022, restoring approval rates to historical levels. As per Statista, the pharma market revenue in the U.S. is expected to generate the highest revenue of $636.90 billion in 2024.
Growing tobacco use, alcohol consumption, and obesity, coupled with air pollution, are key contributing factors to the growing incidence of cancer. Over 35 million new cancer cases are predicted in 2050, a 77% increase from the estimated 20 million cases in 2022. Given the rapidly escalating global cancer burden, the worldwide oncology drugs segment is projected to be the largest in 2024.
Moreover, the incorporation of cutting-edge technologies like AI has bolstered drug production and clinical trials and expanded the scope of the pharma market. The AI in the pharma industry is projected to reach $97.35 billion by 2030, growing at a CAGR of 29.2%.
Furthermore, investors’ interest in pharma stocks is evident from iShares U.S. Pharmaceutical ETF’s (IHE) 18.1% returns over the past three months.
Considering these conducive trends, let’s take a look at the fundamentals of the three Medical – Pharmaceuticals stocks, starting with number 3.
Stock #3: Procaps Group S.A. (PROC)
Headquartered in Luxembourg, PROC develops, produces, and markets pharmaceutical solutions worldwide. 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 29, 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. Through the partnership, PROC manufactures, and Genomma markets and distributes the products. This should bode well for PROC.
PROC’s trailing-12-month asset turnover ratio of 0.85x is 119.7% higher than the industry average of 0.39x, while its trailing-12-month EBIT margin of 11.77% is significantly higher than the industry average of 0.09%.
For the fiscal third quarter that ended September 30, 2023, PROC’s revenue and gross profit increased 7.3% and 1.3% year-over-year to $118.41 million and $68.40 million, respectively. Moreover, its adjusted EBITDA stood at $22 million.
For the same quarter, its income for the period attributable to owners of the company and earnings per share stood at $8.19 million and $0.08, respectively.
Street expects PROC’s revenue for the fiscal year ending December 2024 to increase 8.5% year-over-year to $460.10 million. Its EPS is expected to be $0.28 for the same year. The company surpassed consensus EPS estimates in each of the trailing four quarters, which is impressive.
The stock has gained 9.5% over the past three months to close the last trading session at $3.11.
PROC’s robust prospects are reflected in its POWR Ratings. The stock has an overall B rating, equating 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.
The stock has a B grade for Value, Sentiment, and Quality. It is ranked #31 within the 261-stock Medical – Pharmaceuticals industry.
Click here for the additional POWR Ratings for PROC (Growth, Momentum, and Stability).
Stock #2: Supernus Pharmaceuticals, Inc. (SUPN)
SUPN develops and commercializes products for the treatment of 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 trailing-12-month cash per share of $1.74 is 37.6% higher than the industry average of $1.26, while its trailing-12-month EBIT margin of 4.31% is significantly higher than the industry average of 0.09%.
For the fiscal third quarter that ended September 30, 2023, SUPN’s total revenues stood at $153.88 million, while adjusted operating earnings increased 46.9% year-over-year to $37.30 million, respectively. Moreover, its earnings before income taxes stood at $9.89 million, compared to a loss before income taxes of $444 thousand.
As of September 30, 2023, SUPN’s total current liabilities stood at $287.53 million, compared to $687.96 million as of December 31, 2022.
Street expects SUPN’s revenue for the fiscal year ending December 2024 to increase 4.1% year-over-year to $622.52 million. Its EPS is expected to be $1.80 for the same year. The company surpassed consensus EPS estimates in each of the trailing four quarters.
The stock has gained 6% over the past three months to close the last trading session at $29.50. Over the past month, it has gained 2.7%.
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 an A grade for Value and a B for Quality. Within the same industry, it is ranked #27.
Beyond what we’ve stated above, we have also rated the stock for Growth, Momentum, Stability, and Sentiment. Get all ratings of SUPN here.
Stock #1: GSK plc (GSK)
Headquartered in Brentford, the United Kingdom, GSK researches, develops, and manufactures vaccines and specialty medicines to prevent and treat disease in the United Kingdom, the U.S., and internationally.
On February 15, GSK acquired Aiolos Bio (Aiolos), a clinical-stage biopharmaceutical company focused on addressing the unmet treatment needs of patients with respiratory and inflammatory conditions.
The acquisition of Aiolos includes AIO-001, a potentially best-in-class, long-acting anti-thymic stromal lymphopoietin (TSLP) monoclonal antibody ready to enter phase II clinical development for the treatment of adult patients with asthma, which could expand GSK’s respiratory biologics portfolio to potentially reach the 40% of severe asthma patients with low T2 inflammation.
It pays an annual dividend of $1.47 per share, which translates to a dividend yield of 3.46% on the current share price. Its four-year average yield is 4.93%.
GSK’s trailing-12-month asset turnover ratio of 0.51x is 30.9% higher than the industry average of 0.39x, while its trailing-12-month EBIT margin of 26.09% is significantly higher than the industry average of 0.09%.
For the fiscal fourth quarter that ended December 31, 2023, GSK’s turnover and adjusted gross profit increased 9.2% and 10.2% year-over-year to £8.05 billion ($10.21 billion) and £5.89 billion ($7.46 billion), respectively. Its adjusted operating profit stood at £1.75 billion ($2.22 billion), up 9.8% from the year-ago quarter.
For the same quarter, its adjusted profit attributable to shareholders from continuing operations and adjusted earnings per share from continuing operations increased 12.7% and 12% from the prior-year quarter to £1.17 billion ($1.49 billion) and 28.90p, respectively.
Street expects GSK’s revenue and EPS for the fiscal first quarter ending March 2024 to increase 4.5% and 5.1% year-over-year to $9.05 billion and $0.96, respectively. The company surpassed consensus revenue estimates in each of the trailing four quarters and consensus EPS estimates in three of the trailing four quarters.
The stock has gained 23.7% over the past nine months to close the last trading session at $42.34. Over the past year, it has gained 22.5%.
GSK’s POWR Ratings reflect its positive prospects. The stock has an overall A rating, equating to a Strong Buy in our proprietary rating system.
GSK has an A grade for Value and a B for Stability and Quality. Within the same industry, it is ranked #3.
To see additional POWR Ratings for Growth, Momentum, and Sentiment for GSK, click here.
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.
GSK shares rose $0.01 (+0.02%) in premarket trading Tuesday. Year-to-date, GSK has gained 15.34%, versus a 6.45% rise in the benchmark S&P 500 index during the same period.
About the Author: Neha Panjwani
From her school days, Neha harbored a profound fascination for finance, a passion that steered her toward a career as an investment analyst following the completion of her bachelor’s degree in commerce. Currently enrolled in the CFA program, Neha is dedicated to further enriching her comprehension of investment fundamentals.
Neha’s primary objective is to aid retail investors in discerning optimal investment opportunities by diligently evaluating crucial aspects of financial instruments, with a primary focus on stocks and ETFs. Her commitment lies in empowering individuals to make informed and strategic investment decisions in the dynamic world of finance.
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