Pharma Stocks Analysis: Grab, Hold, or Sell?

Consistent technological advancements, particularly in areas such as drug discovery and biotechnology, are driving growth in the pharma industry. However, challenges exist in the face of inflation and stricter regulations.

Hence, it could be ideal to buy solid pharma stocks Bristol-Myers Squibb Company (BMY) and Collegium Pharmaceutical, Inc. (COLL). However, it could be better to wait for a more opportune entry point in Pfizer Inc. (PFE) and avoid Vaxcyte, Inc. (PCVX).

Last year, the healthcare industry experienced record-breaking innovation with the highest number of FDA-approved novel medical technologies. This was driven by advancements in AI, miniaturization, and digital health, alongside a significant reduction in FDA review times.

Additionally, the resilience of the pharmaceutical industry reflects the increasing health demands and the groundbreaking advancements in drug development, especially in emerging markets. Moreover, government funding and reimbursements are providing incentives for the creation of innovative drugs. The worldwide drug discovery market is projected to grow at a CAGR of 8.5%, reaching $181.40 billion by 2032.

Furthermore, the US pharmaceutical market is dynamic, evolving to meet patient needs with a growing demand for personalized treatments, known as precision medicine, tailored to individual genetic and biological traits.

Revenue in the pharmaceuticals market is expected to grow at a CAGR of 6% until 2028.

However, the pharmaceutical industry is undergoing significant upheaval due to seismic shifts in the healthcare market. Economic pressures, intensified competition, and stricter regulatory environments are expected to escalate this year. Another major challenge is the increased consolidation in healthcare delivery, with fewer but larger and more powerful healthcare systems influencing drug purchase decisions.

With these favorable trends in mind, let's delve into the fundamentals of the four Medical - Pharmaceuticals stock picks.

Stocks to Buy:

Bristol-Myers Squibb Company (BMY)

BMY discovers, develops, licenses, manufactures, markets, distributes, and sells biopharmaceutical products worldwide. It offers products for hematology, oncology, cardiovascular, immunology, fibrotic, and neuroscience diseases.

BMY’s trailing-12-month gross profit margin of 76.63% is 34.4% higher than the industry average of 57%. Its trailing-12-month EBITDA margin of 40.93% is significantly higher than the industry average of 5.31%.

On January 23, 2024, BMY announced that it had completed the acquisition of Mirati Therapeutics, Inc., which should boost BMY’s portfolio.

The company distributes $2.40 as dividends annually, which translates to a yield of 4.85% on the current market price, higher than the four-year average of 3.17%.

During the fourth quarter, which ended December 31, 2024, BMY’s total revenues increased marginally year-over-year to $11.48 billion. Net earnings attributable to BMY stood at $1.76 billion, and EPS came in at $0.87.

Analysts expect BMY’s revenue to grow 2.6% year-over-year to $11.51 billion for the fiscal second quarter ending June 2024. Its EPS is likely to rise marginally year-over-year to $1.76 in the same quarter. The company surpassed the EPS estimates in three of the trailing four quarters.

The stock gained 1.1% intraday to close the last trading session at $49.44.

BMY’s POWR Ratings reflect its promising outlook. The stock has an overall rating of A, which translates to a Strong Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.

BMY has an A grade for Value and a B in Quality. It is ranked #15 in the 161-stock Medical - Pharmaceuticals industry.

In addition to the POWR Ratings highlighted above, one can access BMY’s ratings for Growth, Stability, Sentiment, and Momentum here.

Collegium Pharmaceutical, Inc. (COLL)

COLL is a specialty pharmaceutical company engaged in developing and commercializing medicines for pain management.

COLL’s trailing-12-month EBITDA and gross profit margins of 44.38% and 77.97% are 735.9% and 36.8% higher than the industry averages of 5.31% and 57%.

In the third quarter ending September 30, 2023, COLL saw a 7.6% year-over-year increase in net product revenues to $136.71 million. Income from operations surged by 119.9% year-over-year to $45.01 million. Also, adjusted EPS stood at $1.34, up 21.9% year-over-year.

Looking ahead to 2024, COLL anticipates net product revenues to range between $580 million and $595 million. Adjusted EBITDA is forecasted to fall within the range of $380 million to $395 million.

Street expects COLL’s revenue and EPS for the fiscal year 2023 to increase 21.7% and 36.8% year-over-year to $564.79 million and $5.42, respectively.

Over the past nine months, the stock has gained 44.5% and 24.5% over the past year to close the last trading session at $33.95.

COLL’s bright outlook is reflected in its POWR Ratings. The stock has an overall rating of B, equating to a Buy in our proprietary rating system.

COLL has an A grade for Quality and a B for Growth and Value. It is ranked #18 in the same industry.

Click here to access additional COLL ratings for Sentiment, Stability, and Momentum.

Stock to Hold:

Pfizer Inc. (PFE)

PFE discovers, develops, manufactures, markets, distributes, and sells biopharmaceutical products worldwide. It offers medicines and vaccines in various therapeutic areas, infectious diseases, COVID-19 prevention and treatment, and potential future mRNA and antiviral products under the Comirnaty and Paxlovid brands. It also provides medicines and vaccines in various therapeutic areas.

PFE’s trailing-12-month asset turnover ratio of 0.33x is 14.4% lower than the industry average of 0.39x. However, its trailing-12-month EBITDA margin of 19.46% is 266.5% higher than the industry average of 5.31%.

The company pays an annual dividend of $1.68, which yields 6.11% on the current market price, higher than the four-year average dividend yield of 3.93%.

PFE’s total revenues declined 41% year-over-year to $14.25 billion in the fiscal fourth quarter, which ended December 31, 2023. Its loss from continuing operations came in at $3.34 billion. The company’s adjusted net income came in at $593 million, representing a decline of 91% year-over-year. Also, its adjusted EPS declined 91% year-over-year to $0.10.

On the other hand, its Specialty Care revenues rose 11% year-over-year to $3.95 billion.

PFE’s revenue is expected to increase 4% year-over-year to $13.24 billion for the fiscal second quarter ending June 30, 2024. But its EPS for the same quarter is expected to decline 32.1% year-over-year to $0.46.

Over the past year, the stock has declined 36.5% to close the last trading session at $27.51. However, it soared 1.5% intraday.

PFE’s uncertain prospects are reflected in its POWR Ratings. The stock has an overall rating of C, which translates to Neutral in our proprietary rating system.

It has a C grade for Stability, Sentiment, and Quality. Within the same industry, it is ranked #57.

To access PFE’s additional Growth, Value, and Momentum ratings, click here.

Stock to Sell:

Vaxcyte, Inc. (PCVX)

PCVX is a clinical-stage biotechnology vaccine company that focuses on developing novel protein vaccines for bacterial infectious diseases.

PCVX’s trailing-12-month negative ROCE and ROTC of 34% and 20.02% are significantly lower than the industry averages of 41.91% and 22.03%.

PCVX’s total operating expenses rose 93% year-over-year to $113.03 million in the fiscal third quarter ended September 30, 2023. Its loss from operation stood at $113.03 million. The company’s net loss came in at $92.66 million and $0.91 per share.

Street expects PCVX’s EPS to decline 5.2% year-over-year to negative $1.07 in the fiscal fourth quarter ended December 2023.

The stock has soared marginally intraday, closing the last trading session at $75.01.

PCVX’s bleak fundamentals are reflected in its POWR Ratings. The stock has an overall rating of D, equating to a Sell in our proprietary rating system.

It has a D grade for Growth, Momentum, and Quality. It is ranked #142 in the same industry.

Beyond the POWR Ratings stated above, we have also rated PCVX for Value, Stability, and Sentiment. Get all PCVX ratings here.

What To Do Next?

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PFE shares were trading at $27.74 per share on Friday morning, up $0.23 (+0.84%). Year-to-date, PFE has declined -2.20%, versus a 5.59% rise in the benchmark S&P 500 index during the same period.

Her interest in risky instruments and passion for writing made Kritika an analyst and financial journalist. She earned her bachelor's degree in commerce and is currently pursuing the CFA program. With her fundamental approach, she aims to help investors identify untapped investment opportunities.

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