Even though macroeconomic challenges plagued the overall economy, pharmaceutical firms have fared well because of the solid demand for their products. Given the resilience, investing in quality pharmaceutical stocks Astellas Pharma Inc. (ALPMY), Ono Pharmaceutical Co., Ltd. (OPHLY), and Santen Pharmaceutical Co., Ltd. (SNPHY) could be wise, which are currently trading under $15.
Last month, despite the meltdown in the banking sector, the Federal Reserve raised interest rates by a quarter point, in line with market expectations. This raised the lending rates to a range of 4.75% to 5%, marking the highest level since September 2007.
While the other sectors have been marred by the Fed’s aggressive rate hikes over the past year to stem the stubborn inflation, the medical industry has shielded itself due to its robust innovation pipeline.
Strong catalysts such as positive results from a clinical trial, approval from a governmental regulatory agency, and groundbreaking innovations are expected to continue to bolster healthcare companies’ R&D pipelines. This, in turn, stimulates the interest and growth of pharma companies, which can soar even if the overall market is tanking.
On the backs of robust global demand, total expenditure on medicines is projected to increase over the next five years to approximately $1.90 trillion by 2027. The expected growth rate of 3-6% is expected to be supported by new drug launches and wider use.
Moreover, the worldwide e-pharmacy market is anticipated to grow at a 14.2% CAGR through 2028. The growing trend for e-commerce and the availability of drugs that are not easily available in conventional pharmaceutical stores are contributing toward the market’s growth during the forecast period.
With these factors in mind, the industry prognosis is optimistic for this year and beyond. Therefore, investors looking to buy fundamentally sound pharmaceutical stocks under $15 could consider ALPMY, OPHLY, and SNPHY this month. Moreover, these stocks have an overall A rating which translates to a ‘Strong Buy’ in our proprietary POWR Ratings system.
Astellas Pharma Inc. (ALPMY)
Headquartered in Tokyo, Japan, ALPMY is primarily engaged in the manufacture, marketing, import, and export of pharmaceutical products. Its main products include XTANDI, BETANIS, MIRABETRIC, BETMIGA, and new products ZOSPATA, EVERENZO, and ENHOLTUMAB VEDOTIN, among others.
On April 4, ALPMY and Seagen Inc. (SGEN) announced that the U.S. Food and Drug Administration (FDA) had granted accelerated approval to PADCEV® (enfortumab vedotin-ejfv) in combination with KEYTRUDA® (pembrolizumab) for the treatment of adult patients with locally advanced or metastatic urothelial cancer who are ineligible for cisplatin-containing chemotherapy.
Ahsan Arozullah, M.D., M.P.H., Senior Vice President, Head of Oncology Development at ALPMY, believes this approval is an important milestone for approximately 8,000 to 9,000 patients in the United States as an additional treatment option to treat advanced bladder cancer at first diagnosis of metastatic disease.
On March 28, the company signed an agreement with Roche Diabetes Care Japan Co., Ltd. To develop and commercialize the world-renowned Accu-Chek® Guide Me blood glucose monitoring system as a combined medical product with BlueStar®, which is being jointly developed by ALPMY and Welldoc in Japan.
This innovation is expected to assist patients' diabetic self-management through the use of a proprietary AI algorithm and targeted digital coaching messages aimed at developing better habits over time. Such novel digital solutions should help these companies in gaining traction.
In terms of forward EV/Sales, ALPMY is trading at 1.94x, 46.7% lower than the industry average of 3.64. Its forward Price/Sales multiple of 2.21 is 46.1% lower than the industry average of 4.11. In addition, its forward EV/EBITDA of 8.84 is 32.5% lower than the industry average of 13.09.
The stock’s trailing-12-month EBITDA margin of 24.41% is 796.8% higher than the 2.72% industry average. Likewise, its trailing-12-month asset turnover ratio of 0.60x is 72% higher than the industry average of 0.35x.
For the nine-month period that ended on December 31, 2022, ALPMY’s revenue rose 17.3% year-over-year to ¥1.16 trillion ($8.86 billion). The company’s core operating profit increased 6.2% year-over-year to ¥233.67 billion ($1.78 billion). In addition, its core profit stood at ¥188.92 billion ($1.44 billion), up 11.3% year-over-year, while its EPS increased 13.1% from the prior-year value to ¥103.61.
Analysts expect ALPMY’s revenue to grow 13.9% year-over-year to $2.70 billion in the fourth quarter that ended on March 31, 2023. EPS and revenue are expected to increase by 65.4% and 2% year-over-year to $0.89 and $11.69 billion for the fiscal year 2024, respectively. It surpassed the revenue estimates in three of the trailing four quarters.
Shares of ALPMY have gained 4.4% over the past six months to close the last trading session at $14.27.
ALPMY’s POWR Ratings reflect this promising outlook. The stock has an overall A rating, which translates to a Strong Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
It has an A grade for Value and Quality and a B for Growth and Stability. In the 164-stock Medical – Pharmaceuticals industry, it is ranked #2. To see additional POWR Ratings for ALPMY for Sentiment and Momentum, click here.
Ono Pharmaceutical Co., Ltd. (OPHLY)
Based in Osaka, Japan, OPHLY is engaged in the manufacture and sale of pharmaceuticals and diagnostic reagents globally.
On March 23, OPHLY announced a global drug discovery partnership agreement with Macomics Ltd, a leader in macrophage drug discovery, to develop macrophage-targeting antibody therapeutics for cancer treatment.
On the same day, it collaborated with MOLCURE Inc. to discover and develop novel antibody therapeutics for multiple targets using MOLCURE's AI-driven platform technology.
Through such collaborations, the company is expected to obtain rights for further development and commercialization of these therapeutic antibody drug candidates.
In terms of forward EV/EBIT, OPHLY is trading at 7.55, 53.9% lower than the industry average of 16.37. Its forward EV/EBITDA multiple of 6.78 is 48.2% lower than the industry average of 13.09. In addition, its forward EV/Sales of 2.62x compares to the industry average of 3.64x.
OPHLY’s trailing-12-month EBITDA margin of 39.36% is significantly higher than the 2.72% industry average. Likewise, its trailing-12-month assets turnover ratio of 0.55x is 55.9% higher than the industry average of 0.35x.
OPHLY’s net operating revenues rose 24.9% year-over-year during the nine-month period that ended December 31, 2022, to ¥339.02 billion ($2.58 billion). The company’s operating profit increased 49.2% year-over-year to ¥122.59 billion ($933.13 million). In addition, its profit attributable to owners of the company stood at ¥95.66 billion ($728.11 million), up 48% year-over-year. Also, its earnings per share increased 51.2% from the year-ago value to ¥195.88.
Street expects OPHLY’s revenue for the fourth quarter (ended March 31, 2023) to increase 17.8% year-over-year to $815.24 million. Shares of OPHLY have lost marginally over the past month to close the last trading session at $6.89.
OPHLY’s strong fundamentals are reflected in its POWR Ratings. It has an overall rating of A, which equates to a Strong Buy in our proprietary rating system.
It also has an A grade for Value, Stability, and Quality. In the same industry, it is ranked #7. Click here to see the other ratings of OPHLY for Growth, Momentum, and Sentiment.
Santen Pharmaceutical Co., Ltd. (SNPHY)
SNPHY is a Japan-based pharmaceutical company engaged in the research, development, manufacturing, and sales of pharmaceutical and medical devices. The company has a medical pharmaceutical business, an OTC drugs business, and a medical devices business, among other businesses.
In terms of forward EV/Sales, SNPHY is trading at 1.26x, 65.5% lower than the industry average of 3.64x. Its forward Price/Sales multiple of 1.49 is 63.8% lower than the industry average of 4.11. In addition, its forward EV/EBITDA of 11.70x is 10.6% lower than the industry average of 13.09x.
The stock’s trailing-12-month EBITDA margin of 6.29% is 131.2% higher than the 2.72% industry average. Likewise, its trailing-12-month assets turnover ratio of 0.64x is 81.5% higher than the industry average of 0.35x.
For the nine-month period, which ended on December 31, 2022, SNPHY’s revenue increased 2% year-over-year to ¥199.79 billion ($1.52 billion). Its gross profit grew marginally from the year-ago value to ¥114.34 billion ($870.31 million), while its core net profit for the period amounted to ¥21.15 billion ($161.02 million) for the same period.
In addition, its current liabilities came in at ¥74.94 billion ($570.43 million) for the period that ended December 31, 2022, compared to ¥95.82 billion ($729.37 million) for the period that ended March 31, 2022.
Analysts expect SNPHY’s revenue for the fourth quarter (ended March 31, 2023) to increase 6.5% year-over-year to $575.26 million. It also surpassed the consensus revenue estimates in each of the trailing four quarters, which is promising. The stock has gained 23.1% over the past six months to close the last trading session at $8.40.
SNPHY’s POWR Ratings reflect its solid prospects. The stock has an overall A rating, which translates to a Strong Buy in our proprietary rating system.
It also has an A grade for Value and Stability. Within the same industry, it is ranked #12 out of 164 stocks. Click here to see the additional ratings for SNPHY (Growth, Momentum, Sentiment, and Quality).
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ALPMY shares were trading at $14.62 per share on Thursday afternoon, up $0.34 (+2.38%). Year-to-date, ALPMY has declined -3.56%, versus a 7.43% rise in the benchmark S&P 500 index during the same period.
About the Author: Shweta Kumari
Shweta's profound interest in financial research and quantitative analysis led her to pursue a career as an investment analyst. She uses her knowledge to help retail investors make educated investment decisions.
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