The pharmaceutical industry is considered recession-proof, given the consistent demand for medicines and new treatment options. Moreover, the industry is experiencing a drastic transformation with the growing adoption of advanced and innovative digital technologies.
Given the industry’s promising prospects, it could be wise to invest in quality pharma stocks Novo Nordisk A/S (NVO), Eton Pharmaceuticals (ETON), and Pacira BioSciences, Inc. (PCRX) for substantial gains.
Medical needs are surging around the globe due to the rapidly aging population and growing prevalence of chronic diseases, such as arthritis, asthma, cancer, diabetes, ulcerative colitis, cystic fibrosis, and more. The pharmaceutical industry is expected to witness robust long-term growth, driven by an increase in drug demand amid expanding healthcare needs.
Revenue in the pharmaceuticals market is expected to reach a staggering $636.90 billion in 2024. The market’s largest segment, Oncology Drugs, is projected to total $114.60 billion this year. In global comparison, the United States is expected to generate the most revenue of nearly $636.90 billion.
During the forecast period (2024-2028), the pharmaceuticals market is anticipated to exhibit a CAGR of 6%, resulting in a market volume of $802.80 billion by 2028.
Increasing healthcare costs and the need for enhanced accessibility to medication drive high demand for generic drugs. The global generic pharmaceutical market is estimated to be worth around $740.50 billion by 2032, growing at a CAGR of 8.1% during the forecast period from 2024 to 2032.
The growing pressure in the pharma industry to reduce production costs and improve efficiency is propelling corporations to take substantial strides toward automation. That has resulted in increased adoption of digital technologies across the pharma value chain, from drug discovery to packaging.
Advanced technologies, including AI, IoT, blockchain, robotics, and big data analytics, are being adopted by pharma companies to automate repetitive and hazardous tasks, improve quality and yields and meet compliance standards.
For instance, AI techniques can analyze large-scale biomedical data to identify existing drugs that can potentially have therapeutic advantages for different diseases. By repurposing approved drugs for new indications, AI is accelerating the drug discovery process and reducing costs.
According to Coherent Market Insights, the global pharma 4.0 market is projected to hit $54.43 billion by 2031, expanding at a CAGR of 18.3% from 2024 to 2032.
Investors’ interest in pharmaceutical stocks is evident from the iShares U.S. Pharmaceuticals ETF’s (IHE) 10.4% returns over the past six months.
Given these favorable trends, let’s look at the fundamentals of the three Medical - Pharmaceuticals stocks, beginning with the third choice.
Stock #3: Pacira BioSciences, Inc. (PCRX)
PCRX offers non-opioid pain management and regenerative health solutions for healthcare practitioners and their patients. The company provides EXPAREL, ZILRETTA, and iovera system. The company also develops proprietary multivesicular liposome, a drug delivery technology that encapsulates drugs without altering their molecular structure.
On November 10, 2023, PCRX announced the U.S. Food and Drug Administration (FDA) approval for its supplemental new drug application (sNDA) to expand the EXPAREL® (bupivacaine liposome injectable suspension) label to include administration in adults as an adductor canal block and a sciatic nerve block in the popliteal fossa.
“We are thrilled that today’s approval offers clinicians and patients another option for achieving long-lasting non-opioid pain control with EXPAREL and an increased ability to transition procedures to the ambulatory environment,” said Dave Stack, chief executive officer and chairman of Pacira BioSciences.
PCRX reported preliminary total revenue of $675 million for the year ended December 31, 2023, compared with $666.80 million for the year ended December 31, 2022. The company’s full-year EXPAREL net product sales of $538.1 million, compared to $536.9 million in 2022.
Also, PCRX’s ZILRETTA and iovera° net product sales of $111.10 million and $19.70 million in 2023, compared to $105.50 million and $15.30 million in 2022, respectively.
For the third quarter that ended September 30, 2023, PCRX reported total revenues of $163.93 million, and the company’s income from operations was $17.72 million. Its non-GAAP net income and non-GAAP EPS came in at $36.63 million and $0.72, up 22.7% and 22% from the prior year’s quarter, respectively.
Street expects PCRX’s revenue for the first quarter (ending March 2024) to increase 7.3% year-over-year to $172.07 million. Further, the consensus EPS estimate for the ongoing quarter of $0.78 indicates 47.2% growth year-over-year.
Shares of PCRX have gained 17.3% over the past month to close the last trading session at $32.23.
PCRX’s robust outlook is reflected in its POWR Ratings. The stock has an overall rating of B, which translates to a Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, each weighted to an optimal degree.
The stock has a B grade for Growth, Value, and Quality. It is ranked #27 out of 161 stocks in the Medical - Pharmaceuticals industry.
Click here to access additional PCRX ratings for Sentiment, Stability, and Momentum.
Stock #2: Eton Pharmaceuticals, Inc. (ETON)
ETON is a specialty pharmaceutical company that focuses on developing, acquiring, and commercializing pharmaceutical products for rare diseases. The company’s product portfolio includes ALKINDI SPRINKLE, Carglumic Acid, Betaine Anhydrous, dehydrated alcohol injection, and Zeneo hydrocortisone autoinjector.
On October 4, ETON entered into an agreement to acquire an abbreviated new drug application for Nitisinone Capsules via Oakrum Pharma, LLC’s Chapter 11 bankruptcy proceeding. This acquired product is used to treat hereditary tyrosinemia type 1 (HT-1) in combination with dietary restriction of tyrosine and phenylalanine.
Nitisinone is ETON’s fourth FDA-approved product and advances the company toward its goal of having ten commercial rare disease products on the market by the end of 2025. Also, this product shares the same metabolic geneticist prescriber base as its Carglumic Acid and Betaine products, offering an opportunity to leverage its existing sales forces and prescribers’ base.
For the third quarter that ended September 30, 2023, ETON’s net revenue increased 118.3% year-over-year to $7.03 million. Its gross profit rose 118.2% from the prior year’s quarter to $4.40 million. The company generated 900 thousand in positive cash flow from operations.
Furthermore, the company’s cash and cash equivalents as of September 30, 2023, were $22.07 million, compared to $16.30 million as of December 31, 2022. The company’s total assets were $31.52 million, compared to $25.03 million as of December 31, 2022.
Analysts expect ETON’s revenue for the fiscal year (ended December 2023) to increase 50.5% year-over-year to $31.99 million. For the fiscal year 2024, the company’s revenue and EPS are expected to grow 29.5% and 600% from the prior year to $41.43 million and $0.07, respectively.
Moreover, the company topped the consensus revenue and EPS estimates in three of the trailing four quarters, which is impressive.
ETON’s stock has gained 37.9% over the past six months and 24.9% over the past year to close the last trading session at $4.37.
ETON’s sound fundamentals are reflected in its POWR Ratings. The stock has an overall rating of B, which translates to a Buy in our proprietary rating system.
ETON has an A grade for Quality and Sentiment and a B for Value. Within the Medical - Pharmaceuticals industry, ETON is ranked #23 of 161 stocks.
In addition to the POWR Ratings stated above, one can access ETON’s Growth, Momentum, and Stability ratings here.
Stock #1: Novo Nordisk A/S (NVO)
Headquartered in Bagsvaerd, Denmark, NVO is a healthcare company that engages in the research, development, manufacture, and marketing of pharmaceutical products internationally. The company operates in two segments: Diabetes and Obesity Care; and Rare Disease.
On January 15, NVO reported an update on the share repurchase program initiated on 6 November 2023. Under the program, NVO will repurchase B shares for an amount up to DKK 4.10 billion ($602.01 million) in the period from 7 November 2023 to 29 January 2024.
This program is a part of the overall share repurchase program of up to DKK 30 billion ($4.40 billion) to be undertaken during a 12-month period starting 1 February 2023.
On January 4, NVO entered research collaborations with Omega Therapeutics (OMGA) and Cellarity Inc. on novel treatment approaches for cardiometabolic diseases. The Omega collaboration will leverage the company’s proprietary platform technology to develop an epigenomic controller as a part of a new treatment approach for obesity management.
The Cellarity collaboration will build upon initial work and engage the company’s platform to develop a small molecule therapy in metabolic dysfunction-associated steatohepatitis (MASH). These are the first research programs signed under the existing partnership between Novo Nordisk and Flagship Pioneering.
Also, on November 23, NVO invested more than DKK 16 billion ($2.35 billion) beginning in 2023 to expand the existing production site in Chartres, France, for the current and future product portfolio within severe chronic diseases.
This investment will considerably increase the company’s capacity of the manufacturing site, adding aseptic production and finished production processes along with an extension of the current Quality Control Laboratory. The investment, which includes capacity for GLP-1 products, will boost Novo Nordisk’s ability to meet future demands for innovative medicines.
During the nine months that ended September 30, 2023, NVO’s net sales increased 29.1% year-over-year to DKK 166.40 billion ($24.45 billion). Its operating profit grew 31.3% from the year-ago value to DKK 75.81 billion ($11.13 billion). The company’s net profit rose 47.2% from the year-ago value to DKK 61.72 billion ($9.06 billion).
Also, the company’s earnings per share was DKK 13.71, up 48.9% from the prior year’s quarter.
The company raised its full-year 2023 outlook, expecting sales to grow 32-38%, and its operating profit is expected to grow 40-46% at constant exchange rates (CER).
Analysts expect NVO’s revenue and EPS for the fourth quarter (ended December 2023) to increase 24.3% and 47.9% year-over-year to $8.83 billion and $0.66, respectively. In addition, the company surpassed the consensus revenue estimates in three of the trailing four quarters, which is impressive.
Shares of NVO surged 38.5% over the past six months and 60.4% over the past year to close the last trading session at $107.16.
NVO’s POWR Ratings reflect its promising prospects. The stock has an overall rating of A, which translates to a Strong Buy in our proprietary rating system.
The stock has an A grade for Quality and a B for Sentiment, Growth, and Stability. NVO is ranked #2 of 161 stocks within the Medical - Pharmaceutical industry.
To see additional POWR Ratings of NVO for Value and Momentum, 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.
NVO shares fell $0.59 (-0.55%) in premarket trading Tuesday. Year-to-date, NVO has gained 3.59%, versus a 0.29% rise in the benchmark S&P 500 index during the same period.
About the Author: Mangeet Kaur Bouns
Mangeet’s keen interest in the stock market led her to become an investment researcher and financial journalist. Using her fundamental approach to analyzing stocks, Mangeet’s looks to help retail investors understand the underlying factors before making investment decisions.
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