In the ever-evolving landscape of pharmaceutical sector, the ascent of Pharma 4.0 heralds a transformative era. Besides, the growing interest among investors in pharmaceutical stocks is highlighted by the impressive performance of the Invesco Dynamic Pharmaceuticals ETF (PJP), which has seen a substantial return of 12.9% over the past six months.
Given this perspective, investors could find value in exploring reputable pharmaceutical stocks ACADIA Pharmaceuticals Inc. (ACAD), Amneal Pharmaceuticals, Inc. (AMRX), and OptiNose, Inc. (OPTN), which currently trade below $20 and are quite undervalued than their industry peers.
Drug shortages in the U.S. have reached unprecedented levels, with the American Society of Health-System Pharmacists reporting 323 active shortages as of the end of the first quarter of 2024. This marks the highest number since tracking began in 2001. The rising demand for medications presents a significant growth opportunity for pharmaceutical companies.
Moreover, IQVIA reports that global medicine usage has increased by 14% over the last five years, with a projected additional 12% rise by 2028. This surge is anticipated to elevate annual usage to 3.80 trillion defined daily doses.
On top of that, with the advent of Pharma 4.0, the pharmaceutical industry is witnessing transformative technologies. This includes the development of smart medicines and digital therapeutics, which integrate drugs with digital components, enabling real-time monitoring of dosage intake and release. The global pharma 4.0 market size is expected to reach $54.43 billion by 2031, exhibiting a CAGR of 18.3%.
Riding on these positive waves, let's dive into the core of the top Medical - Pharmaceuticals stocks, kicking off with our third pick.
Stock #3: ACADIA Pharmaceuticals Inc. (ACAD)
With a market cap of $2.82 billion, ACAD is a pharma company that focuses on CNS disorder treatments. Its key product is NUPLAZID for Parkinson's disease psychosis. The company is also developing DAYBUE for Rett Syndrome and has several drugs in various trial phases for conditions like schizophrenia, Prader-Willi syndrome, Alzheimer's disease psychosis, Rett syndrome, and Fragile X syndrome.
In terms of forward EV/Sales, ACAD is trading at 2.46x, 25.1% lower than the industry average of 3.29x. The stock’s forward Price/Sales multiple of 2.86 is 17.9% lower than the industry average of 3.48.
On April 22, 2024, ACAD received Priority Review from Health Canada for trofinetide, a treatment for Rett syndrome, a rare neurodevelopmental disorder.
During the fiscal fourth quarter that ended December 31, 2023, ACAD’s total revenues increased 69.3% year-over-year to $231.04 million. Moreover, its income from operations came to $34.94 million, compared to a loss from operations of $46.06 million in the prior-year quarter. Its net income and EPS stood at $45.80 million and $0.28, compared to net loss and net loss per share of $41.73 million and $0.26, respectively.
For the fiscal year 2024, ACAD projects net product sales to range between $370 and $420 million for DAYBUE and between $560 and $590 million for NUPLAZID. Additionally, they anticipate research and development expenses to fall between $305 and $325 million.
Analysts project ACAD’s revenue for the fiscal first quarter that ended March 2024 to increase 76.2% year-over-year to $208.75 million. Its EPS is expected to be $0.06 for the same quarter. The company surpassed consensus revenue estimates in three of the trailing four quarters, which is impressive.
The stock surged 2% intraday to close the last trading session at $17.05.
ACAD’s POWR Ratings reflect its robust prospects. 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.
ACAD has an A grade for Growth and a B for Value and Quality. Within the 161-stock Medical – Pharmaceuticals industry, it is ranked #30.
To see additional POWR Ratings for Momentum, Stability, and Sentiment for ACAD, click here.
Stock #2: 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. Its market capitalization is $1.89 billion.
In terms of forward EV/Sales, AMRX is trading at 1.75x, 46.6% lower than the industry average of 3.29x. The stock’s forward Price/Sales multiple of 0.72 is 79.4% lower than the industry average of 3.48.
On April 24, AMRX launched Over the Counter (OTC) Naloxone Hydrochloride (Naloxone HCI) Nasal Spray, USP, 4mg, following FDA approval. This generic equivalent to OTC NARCAN® HCI Nasal Spray helps treat opioid drug overdose, including heroin, fentanyl, and prescription opioids. With a commitment to addressing public health emergencies, ARRX aims to make this emergency treatment accessible and affordable without a prescription.
On April 16, IMRX introduced PEMRYDI RTU®, the first ready-to-use version of pemetrexed for injection, distinct from other formulations. This product streamlines administration by eliminating the need for reconstitution, dilution, or refrigeration, enhancing pharmacy efficiency and freeing up storage space.
With U.S. annual sales of pemetrexed reaching $287 million, AMRX's launch aims to provide a valuable solution for oncology care.
During the fiscal fourth quarter, which ended on December 31, 2023, AMRX’s net revenue increased 1.2% year-over-year to $616.98 million and reported a gross profit of $189.83 million. The company reported adjusted EBITDA and net income of $142.15 million and $43.57 million, respectively. Also, it reported an adjusted EPS of $0.14 for the quarter.
As of December 31, 2023, the company’s cash and cash equivalents stood at $91.54 million, compared to $25.98 million as of December 31, 2022.
For the fiscal year 2024, AMRX anticipates net revenue to range between $2.55 billion and $2.65 billion, with adjusted EBITDA projected to be in the range of $580 million to $620 million. In addition, the company’s adjusted EPS is expected to fall between $0.53 and $0.63.
Street predicts AMRX’s revenue for the first quarter (ended March 2024) to increase 11% year-over-year to $619.03 million, and its EPS for the same quarter is projected to come in at $0.09. Moreover, the company has an excellent earnings surprise history, surpassing consensus EPS estimates in each of the trailing four quarters.
Over the past nine months, shares of AMRX have surged 93.1% to close the last trading session at $6.12.
AMRX’s shiny prospects are reflected in its POWR Ratings. The stock has an overall rating of B, equating to a Buy in our proprietary rating system.
AMRX has an A grade for Value and Sentiment and a B for Growth. It is ranked #24 in the same industry.
Beyond the POWR Ratings we’ve stated above, we also have AMRX ratings for Momentum, Quality, and Stability. Get all AMRX ratings here.
Stock #1: OptiNose, Inc. (OPTN)
OPTN is a specialty pharmaceutical company that focuses on the development and commercialization of products for patients treated by ear, nose, throat, and allergy specialists. It has a market cap of $102.31 million. The company provides XHANCE, a therapeutic product, and Onzetra Xsail, a powder EDS device.
OPTN’s forward EV/Sales of 1.67x is 49.2% lower than the industry average of 3.29x. The stock’s forward Price/Sales multiple of 1.03 is 70.5% lower than the industry average of 3.48.
OPTN recently celebrated the FDA approval of its XHANCE® (fluticasone propionate) nasal spray for treating chronic rhinosinusitis without nasal polyps in patients 18 years and older. With strategic initiatives like optimized sales alignment and collaborations with specialty pharmacies, the company anticipates XHANCE's revenue peak to exceed $300 million by 2025.
OPTN reported total revenues of $19.87 million in the fiscal first quarter that ended December 31, 2023. It reduced its total cost and expenses by 23.4% year-over-year to $22.38 million. As of December 31, 2023, the company had cash and cash equivalents of $73.70 million.
For the first quarter of 2024, OPTN anticipates XHANCE net revenues to reach around $13.0 million. The company’s revenue is expected to rise 15.4% year-over-year to $13.67 million in the fiscal first quarter (ended March 2024). Its EPS is likely to rise 36.8% from the previous year's quarter. Also, the company topped the consensus revenue estimates in all four trailing quarters.
The stock rose 10.6% intraday, closing the last trading session at $0.91.
It is no surprise that the stock has an overall rating of B, which translates to a Buy in our proprietary rating system.
The stock has a B grade for Growth, Value, Sentiment, and Quality. OPTN is ranked #18 within the same industry.
Click here to access OPTN’s additional grades for Stability and Momentum.
What To Do Next?
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ACAD shares were unchanged in premarket trading Thursday. Year-to-date, ACAD has declined -45.54%, versus a 6.38% rise in the benchmark S&P 500 index during the same period.
About the Author: Kritika Sarmah
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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