The societal shift toward sedentary lifestyles and changing health preferences, coupled with substantial research and development investments and technological advances, is driving progress in the pharmaceutical industry.
To that end, let’s delve into a detailed analysis of prominent pharma stocks Neurocrine Biosciences, Inc. (NBIX) and Vaxcyte, Inc. (PCVX) to determine which holds the potential for superior returns. Let’s understand this in detail.
Increasing sedentary jobs, busy lifestyles, and evolving consumer choices are reshaping the disease profile of the world population. Prolonged work hours, reduced physical activity, and unhealthy dietary habits are expanding the worldwide patient base and stimulating progress in the pharmaceutical drug market.
Research and Development (R&D) is also a driving force behind the sector's growth. With companies allocating a substantial portion, often 20% or more of their sales revenues, to R&D projects, the industry is continually advancing through the discovery of new medicines and the enhancement of existing ones.
Additionally, generative AI is playing a pivotal role in the industry’s development. It democratizes access to transformative AI applications, simplifies implementation and result interpretation, and facilitates personalized recommendations. Also, it generates synthetic data for training medical AI algorithms while safeguarding patient privacy.
Furthermore, the cessation of China's zero-Covid policy has delivered a substantial impetus to the global pharmaceutical sector. The reopening of China's economy is not only easing the strain on worldwide supply chains but also significantly improving access to the essential Active Pharmaceutical Ingredients (APIs) manufactured in China.
As per a Research and Markets report, the global pharmaceutical drugs market is projected to increase from $1.14 trillion in 2022 to $1.20 trillion in 2023, at a CAGR of 5.6%. Furthermore, it is anticipated to grow at a CAGR of 11.4% and reach $1.85 trillion by 2027.
In terms of price performance, NBIX has gained 3.6% in the past month, while PVCX declined 8.3% during the same period. Moreover, over the past three months, NBIX witnessed a 15.7% jump, while PCVX gained 3.2% over the same duration.
However, NBIX has gained 10.1% over the past six months, closing the last trading session at $113.61, whereas PCVX has surged 38.7% during the same period, reaching a closing price of $48.07 in the last trading session.
But which Medical - Pharmaceuticals stock could be a better pick? Let’s find out.
Recent Financial Results
For the second quarter that ended June 30, 2023, NBIX’s total revenues increased 19.7% year-over-year to $452.70 million. Its non-GAAP net income and non-GAAP EPS grew 53.1% and 48.8% from the prior year’s quarter to $125.70 million and $1.25, respectively.
In addition, as of June 30, 2023, the company’s total assets stood at $2.61 billion, compared to $2.37 billion as of December 31, 2022.
For the second quarter that ended June 30, 2023, PCVX’s loss from operations widened 82% year-over-year to $87.15 million. Its net loss worsened 40.8% from the year-ago value to $68.34 million, and loss per share came in at $0.70.
Moreover, as of June 30, 2023, the company’s cash and cash equivalents amounted to $531.03 million, compared to $834.66 million as of December 31, 2022.
Past and Expected Financial Performance
Over the past three years, NBIX’s revenue increased at a CAGR of 18.5%. During the same period, the company’s total assets and levered free cash flow grew at respective CAGRs of 19.9% and 7%.
Analysts expect NBIX’s revenue to grow 23% year-over-year to $477 million for the fiscal third quarter that ended September 2023. In addition, the company’s EPS for the same quarter is estimated to rise 22.2% from the prior year’s period to $1.32.
Moreover, analysts expect NBIX’s revenue and EPS for the fourth quarter ending December 2023 to grow 23.4% and 15.7% year-over-year to $508.41 million and $1.43, respectively.
Over the past three years, PCVX’s tangible book value rose at a CAGR of 55.2%. In addition, the company’s total assets increased at a 53.4% CAGR over the same duration.
For the fiscal third quarter that ended September 2023, PCVX is expected to report a loss per share of $0.84. Likewise, the company expects to report a loss per share of $0.88 in the fiscal fourth quarter ending December 2023.
Profitability
NBIX’s trailing-12-month ROCE, ROTA, and ROTC of 10.77%, 9.31%, and 9.59% compares with PCVX’s negative 29.42%, negative 30.90% and negative 20.66%, respectively. In addition, NBIX’s trailing-12-month cash from operations of $296.20 million compare with PCVX’s negative $214.20 million.
POWR Ratings
NBIX has an overall rating of A, which equates to a Strong Buy in our proprietary POWR Ratings system. Conversely, PCVX has an overall rating of D, translating to Sell. The POWR Ratings are calculated considering 118 different factors, with each factor weighted to an optimal degree.
Our proprietary rating system also evaluates each stock based on eight distinct categories. NBIX has a Value grade of B, in sync with its forward non-GAAP PEG of 0.64x, 67.1% lower than the industry average of 1.94x, while its trailing-12-month PEG of 0.05x is 95.4% lower than the 1.13x industry average.
On the other hand, PCVX has a Value grade of C, consistent with its trailing-12-month Price/Book of 3.15x, which is 72.3% higher than the 1.83x industry average but 27.8% lower than the five-year industry average of 4.36x.
In addition, NBIX has a B grade for Sentiment, justified by its favorable analyst estimates. Whereas, PCVX has a C grade for Sentiment, in sync with its comparatively less optimistic analyst estimates.
Of the 157 stocks in the Medical - Pharmaceuticals industry, NBIX is ranked #8, while PCVX is ranked #132.
Beyond what we’ve stated above, we have also rated both stocks for Growth, Momentum, Stability, and Quality. Click here to view NBIX’s ratings. Get all PCVX ratings here.
The Winner
Amid shifting health choices, substantial investments in research and development are driving innovation. Simultaneously, generative AI is revolutionizing the landscape, granting access to transformative applications, crafting data, and preserving patient privacy.
Given the industry’s growth trajectory, leading pharma stocks NBIX and PCVX are well-positioned to capitalize on industry growth. However, NBIX’s stronger financial performance and higher probability could make it a better buy compared to PCVX.
Our research shows that the odds of success increase when one invests in stocks with an overall rating of Strong Buy. View all the top-rated stocks in the Medical – Pharmaceuticals industry here.
What To Do Next?
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NBIX shares were trading at $111.77 per share on Thursday afternoon, down $1.84 (-1.62%). Year-to-date, NBIX has declined -6.42%, versus a 15.54% rise in the benchmark S&P 500 index during the same period.
About the Author: Aanchal Sugandh
Aanchal's passion for financial markets drives her work as an investment analyst and journalist. She earned her bachelor's degree in finance and is pursuing the CFA program. She is proficient at assessing the long-term prospects of stocks with her fundamental analysis skills. Her goal is to help investors build portfolios with sustainable returns.
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