The global pharmaceutical industry is experiencing growth driven by factors such as increasing chronic disease prevalence and a rising aging population. Thus, investors could consider watching top pharma stocks Dr. Reddy's Laboratories Limited (RDY), Amneal Pharmaceuticals, Inc. (AMRX), and AbbVie Inc. (ABBV).
The life sciences industry in 2024 is expected to grow with a focus on integrating real-world data, personalized medicine, and the adoption of cloud and AI technologies, including generative AI. The trends indicate advancements in clinical research, increased patient access, and enhanced efficiencies in drug development. The global pharmaceutical market is expected to grow at a CAGR of 6.1% until 2030.
Besides, the U.S. pharmaceuticals market is forecasted to reach $636.90 billion in revenue in 2024, with oncology drugs leading the market share at $114.60 billion. Furthermore, the U.S. pharma market is projected to expand at a CAGR of 6% to reach $802.80 billion by 2028.
In addition, technological advancements and a shift to personalized medicine are boosting efficiency in pharmaceutical manufacturing, driving industry innovation and fostering mergers and acquisitions. The global pharmaceutical manufacturing market is expected to grow at a CAGR of 7.6% till 2030.
Moreover, the global e-pharmacy market is booming as internet penetration and digitalization of healthcare services rise, fueled by consumer preference for online purchases, particularly accentuated during the pandemic. The global e-pharmacy market is expected to expand at a CAGR of 20.4% by 2030.
Considering these conducive trends, let’s examine the fundamentals of three Medical - Pharmaceuticals stock picks, beginning with the third choice.
Stock #3: Dr. Reddy's Laboratories Limited (RDY)
Based in Hyderabad, India, RDY is a global pharmaceutical company manufacturing and marketing generic and branded drugs, active pharmaceutical ingredients, and providing research services. It develops therapies in oncology, inflammation, and offers digital healthcare services.
On January 3, 2024, RDY announced its acquisition of MenoLabs®, a leading women’s health and dietary supplement portfolio from Amyris, Inc. The deal includes seven branded products addressing menopause symptoms and the MenoLife® health tracker app. This acquisition strengthens RDY's position in the fast-growing women’s nutritional and wellness market.
RDY’s trailing-12-month EBIT margin of 24.90% is significantly higher than the industry average of 0.50%. Its trailing-12-month levered FCF margin of 8.56% is considerably higher than the 0.14% industry average.
During the third quarter, which ended December 31, 2023, RDY’s revenues rose 6.5% year-over-year to $867 million. The company's profit for the period grew 10.7% from the prior-year quarter to $166 million. Moreover, its EPS and EBITDA increased 10% and 7.6% from the previous year’s quarter to $0.99 and $254 million, respectively.
RDY’s revenue and EPS are expected to grow 7.5% and 11.2% year-over-year to $828.65 million and $0.81, respectively, for the fiscal fourth quarter ending March 2024. The company surpassed the revenue and EPS estimates in each of the trailing four quarters, which is impressive.
RDY’s shares have gained 33.7% over the past year to close the last trading session at $71.95. It gained 3.7% intraday.
RDY’s POWR Ratings reflect its sound prospects. The stock has an overall rating of B, equating to a Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
RDY has a B grade for Value, Stability, and Sentiment. Within the Medical - Pharmaceuticals industry, it is ranked #22 among 163 stocks.
To see RDY’s additional POWR Ratings for Growth, Momentum, and Quality, click here.
Stock #2: Amneal Pharmaceuticals, Inc. (AMRX)
AMRX globally develops and distributes generics, injectables, biosimilars, and specialty pharmaceuticals. The company focuses on the central nervous system and endocrine disorders. It operates through the three broad segments of Generics; Specialty; and AvKARE.
On January 10, 2024, AMRX launched fluorometholone ophthalmic suspension, receiving a 180-day Competitive Generic Therapy (CGT) exclusivity from the U.S. Food and Drug Administration (FDA). The product addresses corticosteroid-responsive eye inflammation, fostering growth in the ophthalmic category.
AMRX’s trailing-12-month EBIT margin and levered FCF margin of 11.18% and 6.62% are significantly higher than the respective industry averages of 0.50% and 0.14%.
In the third quarter, which ended September 30, 2023, AMRX generated net revenue of $620.04 million, up 13.7% year-over-year. The company's adjusted net income and adjusted EPS rose 38% and 35.7% from the previous-year quarter to $60.31 million and $0.19, respectively. Moreover, its adjusted EBITDA grew 22.4% from the prior-year period to $153.80 million.
Street expects AMRX’s revenue to grow 9% year-over-year to $2.41 billion for the fiscal year ended December 2023. Its EPS for the same fiscal year is expected to be $0.59. The company surpassed the revenue and EPS estimates in each of the trailing four quarters.
The stock has gained 177.2% over the past nine months to close the last trading session at $5.35. It has gained 143.2% over the past year.
AMRX’s POWR Ratings reflect its robust prospects. The stock has an overall rating of A, equating to a Strong Buy in our proprietary rating system.
AMRX has an A grade for Growth and Value and a B for Sentiment. Within the same industry, it is ranked #11.
In addition to the POWR Ratings stated above, one can access AMRX’s additional Momentum, Stability, and Quality ratings here.
Stock #1: AbbVie Inc. (ABBV)
ABBV is a global pharmaceutical company known for its diverse portfolio, including medications like Humira, Skyrizi, and Imbruvica, addressing conditions ranging from autoimmune diseases to cancer and neurological disorders.
On January 26, 2024, ABBV invested $223 million in expanding its Singapore manufacturing facility, adding 24,000 liters of biologics capacity and creating over 100 jobs. The site is expected to be fully operational in 2026 and is set to employ over 500 people. This represents ABBV's continued decade-long partnership and more than $740 million investment in Singapore.
ABBV’s trailing-12-month EBIT margin and levered FCF margin of 34.85% and 43.65% compare to the industry averages of 0.50% and 0.14%, respectively.
During the third quarter, which ended September 30, 2023, ABBV reported net revenue of $13.93 billion. The company's operating earnings and net earnings stood at $2.28 billion and $1.78 billion, respectively. Moreover, its adjusted EPS amounted to $2.95.
Analysts expect ABBV’s revenue and EPS to grow 0.6% and 1.5% year-over-year to $12.30 billion and $2.50, respectively, for the first quarter ending March 2024. The company surpassed the EPS estimates in three of the trailing four quarters.
The stock has gained 16.4% over the past three months to close the last trading session at $164.40. It is up 11.3% over the past year.
ABBV’s optimistic fundamentals are reflected in its POWR Ratings. The stock has an overall rating of A, equating to a Strong Buy in our proprietary rating system.
ABBV has an A grade for Quality and a B for Value and Stability. Within the same industry, it is ranked #4.
Click here for ABBV’s additional Growth, Momentum, and Sentiment ratings.
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.
ABBV shares were trading at $166.45 per share on Thursday afternoon, up $2.05 (+1.25%). Year-to-date, ABBV has gained 8.43%, versus a 2.36% rise in the benchmark S&P 500 index during the same period.
About the Author: Anushka Dutta
Anushka is an analyst whose interest in understanding the impact of broader economic changes on financial markets motivated her to pursue a career in investment research.
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