The pharma industry is fueled by the introduction of generic medicines and a growing focus on the development of personalized medicines. Given the industry’s steady growth prospects, investors could consider quality pharma stocks Neurocrine Biosciences, Inc. (NBIX), Novo Nordisk A/S (NVO), and AstraZeneca PLC ADR (AZN). These stocks are rated an A, which translates to a Strong Buy in our proprietary rating system, POWR Ratings.
The Pharmaceuticals market shows solid growth, mainly driven by innovative drugs and an increasing demand for healthcare, especially in emerging countries. Revenue in the pharmaceuticals market is expected to grow at a CAGR of 5.8%, resulting in a market volume of $1.48 trillion by 2028.
Additionally, the introduction of generic medicines has helped sustain the healthcare system of the country with improved patient access and generating savings for taxpayers, employers, and insurance providers.
The US generic drug market is expected to reach $110.70 billion by 2028, exhibiting a CAGR of 4.1%.
Moreover, people are becoming more aware of the benefits of personalized treatment, and more genetic databases are being developed. These factors have been driving the global market for personalized medicine. The global personalized medicine market is projected to grow at a CAGR of 7.2% until 2030.
With these favourable trends in mind, let's delve into the fundamentals of the three best Medical - Pharmaceuticals stocks, beginning with the third choice.
Stock #3: Neurocrine Biosciences, Inc. (NBIX)
NBIX discovers, develops, and markets pharmaceuticals for neurological, endocrine, and psychiatric disorders.
On September 14, 2023, NBIX announced the U.S. Food and Drug Administration had accepted its New Drug Application for INGREZZA (valbenazine) oral granules, a new sprinkle formulation of INGREZZA (valbenazine) capsules for oral administration.
On September 12, NBIX announced positive top-line data from the Phase 3 CAHtalyst Adult Study evaluating the efficacy, safety, and tolerability of crinecerfont in adults with classic congenital adrenal hyperplasia (CAH) due to 21-hydroxylase deficiency (21-OHD). This should bode well for the company.
NBIX’s trailing-12-month gross profit margin of 67.44% is 21.1% higher than the industry average of 55.67%. Its trailing-12-month levered FCF margin of 21.38% is significantly higher than the industry average of 0.26%.
NBIX’s revenues for the fiscal second quarter that ended June 30, 2023, increased 19.7% year-over-year to $452.70 million. Its non-GAAP net income and non-GAAP earnings per share increased 53.1% and 48.8% from the prior-year quarter to $125.70 million and $1.25, respectively.
The company’s revenue for the fiscal third quarter ending September 2023 is expected to increase 35.9% year-over-year to $681.90 million. In addition, the company has topped the consensus revenue estimates in all the trailing four quarters, which is impressive.
Over the past year, the stock has gained 14.8%, closing the last trading session at $115.46.
NBIX’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.
NBIX has an A grade for Quality and a B for Value and Sentiment. It is ranked #11 in the 160-stock Medical - Pharmaceuticals industry.
Click here to access the additional NBIX ratings (Growth, Momentum, and Stability).
Stock #2: Novo Nordisk A/S (NVO)
Based in Denmark, NVO is a healthcare company that engages in the research, development, manufacture, and marketing of pharmaceutical products worldwide. It operates in two segments, Diabetes and Obesity care; and Rare Disease.
On August 10, NVO initiated a share repurchase program, which is part of the overall share repurchase program of up to DKK 30 billion ($4.24 billion) to be executed for 12 months beginning February 1, 2023. Under the program, NVO will repurchase B shares for up to DKK 5.7 billion ($820.01 million) from August 10, 2023, to October 31, 2023.
On August 10, NVO announced its plans to acquire Inversago Pharma, a Montreal-based firm focusing on CB1 receptor-based therapies for obesity, diabetes, and metabolic disorder treatment. This acquisition is expected to expand NVO’s clinical development pipeline.
With a four-year average dividend yield of 1.60%, NVO pays an annual dividend of $0.88, which translates to a dividend yield of 0.95% on the current price level.
NVO’s trailing-12-month gross profit margin of 84.35% is 51.5% higher than the industry average of 55.67%. Its trailing-12-month levered FCF margin of 26.49% is significantly higher than the industry average of 0.26%.
For the fiscal second quarter that ended June 30, 2023, NVO’s net sales increased 31.6% from year-ago value to DKK 54.30 billion ($7.81 billion), and its gross profit increased 32% year-over-year to DKK 46.44 billion ($6.68 billion). Its EBIT came in at DKK 23.89 billion ($3.44 billion), up 29.9% from the prior-year quarter.
NVO’s shares have gained 92.5% over the past year to close the last trading session at $91.70.
NVO’s strong fundamentals are reflected in its POWR Ratings. The stock 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 in Growth and Stability. Within the same industry, it is ranked #6.
Beyond what is stated above, we’ve also rated NVO for Momentum, Value, and Sentiment. Get all NVO ratings here.
Stock #1: AstraZeneca PLC ADR (AZN)
AZN focuses on the discovery, development, manufacture, and commercialization of prescription medicines.
On June 13, 2023, AZN revealed it was partnering with Vanguard Renewables to enable the delivery of renewable natural gas to all of its sites in the United States by the end of 2026.
With a four-year average dividend yield of 2.48%, AZN pays an annual dividend of $0.93, which translates to a dividend yield of 1.36% on the current price level.
AZN’s trailing-12-month gross profit margin of 86.96% is 56.2% higher than the industry average of 55.67%. Its trailing-12-month levered FCF margin of 24.58% is significantly higher than the industry average of 0.26%.
AZN’s total revenues increased 6% year-over-year to $11.42 billion for the second quarter (ended June 30, 2023), while its operating profit grew 355.7% from the year-ago value to $2.46 billion. The company’s profit after tax and EPS increased 405.6% and 408.7% from the prior-year quarter to $1.82 billion and $1.17, respectively.
Analysts expect AZN’s revenue to increase 3.2% year-over-year to $45.78 billion for the year ending December 2023. Its EPS is expected to grow 10.8% year-over-year to $3.69 for the same year. It surpassed EPS estimates in each of the four trailing quarters.
Shares of AZN have gained 28.1% over the past year to close the last trading session at $67.94.
It’s no surprise that AZN has an overall rating of A, which equates to a Strong Buy in our proprietary rating system.
AZN has an A grade for Growth and a B in Stability, Sentiment, and Quality. It is ranked #4 in the same industry.
In addition to the POWR Ratings highlighted above, one can access AZN’s ratings for Momentum and Value here.
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NVO shares were trading at $92.26 per share on Thursday morning, up $0.56 (+0.61%). Year-to-date, NVO has gained 37.35%, versus a 13.01% rise in the benchmark S&P 500 index during the same period.
About the Author: Nidhi Agarwal
Nidhi is passionate about the capital market and wealth management, which led her to pursue a career as an investment analyst. She holds a bachelor's degree in finance and marketing and is pursuing the CFA program. Her fundamental approach to analyzing stocks helps investors identify the best investment opportunities.
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