Retail prescription drug spending has picked up in the past few years, and the Centers for Medicare & Medicaid Services (CMS) expects national health spending to increase 4.9% annually over the next three years and grow 5.3% from 2025 to 2030, driven by higher drug prices and pharmaceutical launches.
In addition, according to IQVIA, the global market for pharmaceuticals could surpass $1.50 trillion by 2023. The U.S. is expected to be the primary spender, with more than $600 billion in projected spending on drugs in 2023.
Given this backdrop, we think pharmaceutical stocks with solid fundamentals—Bausch Health Companies Inc. (BHC), Procaps Group, S.A. (PROC), and Catalyst Pharmaceuticals, Inc. (CPRX)—might be solid bets now. These stocks are currently trading under $11.
Click here to checkout our Healthcare Sector Report for 2022
Bausch Health Companies Inc. (BHC)
BHC in Laval, Canada, develops, manufactures, and markets pharmaceuticals, medical devices, and over-the-counter products, mainly in therapeutic areas. The company operates through the Bausch + Lomb; Salix; International Rx; Ortho Dermatologics; and Diversified Products segments.
On May 10, Bausch + Lomb Corporation and BHC closed the initial public offering of Bausch + Lomb, a wholly-owned subsidiary of BHC. The common shares of the subsidiary started trading on the New York Stock Exchange on May 6 under the ticker ‘BLCO.’ The company intends to use the net proceeds from the IPO for repayment of BHC’s existing term loans and to fund the company’s conditional redemption of its 6.125% notes due 2025.
On March 29, BHC announced that it would reduce its debt by $200 million through the paydown of its senior secured term loans on March 31, 2022. The repayment was funded using the cash generated from operations.
BHC’s operating income came in at $285 million, up substantially from its negative year-ago value for its fiscal first quarter, ended March 31, 2022. The company’s adjusted net income attributable to BHC and adjusted EBITDA for the quarter came in at $263 million and $732 million, respectively.
The $5.78 consensus EPS estimate for its fiscal year 2022 indicates a 1.9% year-over-year increase. Likewise, the $11.05 billion consensus revenue estimate for the same year reflects a 3% improvement from the prior year.
The stock has gained 14.6% in price over the past five days to close yesterday’s trading session at $10.77.
BHC’s strong fundamentals are reflected in its POWR Ratings. The POWR Ratings are calculated by considering 118 distinct factors, with each factor weighted to an optimal degree. The stock has a Value grade of A and a Growth grade of B. In the 166-stock Medical – Pharmaceuticals industry, it is ranked #42.
Click here to see the additional POWR Ratings for BHC (Momentum, Stability, Sentiment, and Quality).
Procaps Group, S.A. (PROC)
Based in Luxembourg City, Luxembourg, PROC is a global healthcare and pharmaceutical company. It engages in formulating, manufacturing, and selling branded prescription drugs in various therapeutic areas.
On February 2, PROC announced its plans for capacity expansion in the U.S. and Canada for its Fontrition business through a new gummy manufacturing facility and increased manufacturing capabilities.
On January 12, PROC announced an asset purchase agreement to acquire a pharmaceutical production facility located in West Palm Beach, Fla. "This acquisition is an important milestone for our strategy of bringing soft gelatine-based innovations to all corners of the globe both via integrated CDMO solutions and our own developments," said Ruben Minski, CEO of PROC.
For its fiscal year ended Dec. 31, 2022, PROC’s revenue increased 23.6% year-over-year to $409.74 million. Its gross profit rose 23.2% from the prior year to $235.71 million, while its adjusted EBITDA improved 17.8% from the same period in the prior year to $99.70 million.
The Street’s $0.45 EPS estimate for its fiscal year 2022 indicates a 381.3% year-over-year improvement. Likewise, the Street’s $461.20 million revenue estimate for the same year reflects a 12.6% rise from the prior year.
Over the past five days, the stock has gained 2.8% in price, and 6.4% intraday to close yesterday’s trading session at $7.70.
It is no surprise that PROC has an overall B rating, which translates to Buy in our POWR Rating system. The stock has an A grade for Sentiment and a B grade for Growth and Value. It is ranked #25 in the Medical – Pharmaceuticals industry.
To see the additional POWR Ratings for Momentum, Stability, and Quality for PROC, click here.
Catalyst Pharmaceuticals, Inc. (CPRX)
CPRX is a commercial-stage biopharmaceutical company that develops and commercializes therapies for patients with rare debilitating, chronic neuromuscular, and neurological diseases. The Coral Gables, Florida company offers Firdapse, a treatment for the lambert-eaton myasthenic syndrome (LEMS), and Ruzurgi, a treatment for pediatric LEMS patients.
On March 2, CPRX announced that the United States Patent and Trademark Office (USPTO) had notified the company that an additional patent covering FIRDAPSE (amifampridine) Tablets 10 mg would be issued on March 8, with two other patents following on March 15. The patents are expected to solidify the intellectual property of the company’s flagship product.
For its fiscal first quarter, ended March 31, 2022, CPRX’s total revenues increased 42.7% year-over-year to $43.09 million. Its operating income rose 77.2% from the prior-year quarter to $17.37 million. Its non-GAAP net income and non-GAAP net income per share came in at $19.40 million and $0.18, respectively, up 67.9% and 63.6% from the prior-year period.
Analysts expect CPRX’s EPS to increase 54.5% year-over-year to $0.17 for the fiscal quarter ending June 30, 2022. And the Street expects its revenue for the same quarter to improve 55.6% from the prior-year period to $49.02 million.
CPRX’s shares have gained 27% in price over the past year and 3.4% year-to-date to close yesterday’s trading session at $7.00.
Its promising prospects are reflected in CPRX’s POWR Ratings. The stock has an overall A rating, which equates to Strong Buy in our proprietary rating system. CPRX has a Value and Quality grade of A and a Growth grade of B. It is ranked #8 in the Medical – Pharmaceuticals industry.
In addition to the POWR Rating grades we have stated above, one can see CPRX ratings for Momentum, Stability, and Sentiment here.
Click here to checkout our Healthcare Sector Report for 2022
BHC shares were trading at $10.98 per share on Tuesday morning, up $0.21 (+1.95%). Year-to-date, BHC has declined -60.23%, versus a -14.39% rise in the benchmark S&P 500 index during the same period.
About the Author: Anushka Dutta
Anushka is an analyst whose interest in understanding the impact of broader economic changes on financial markets motivated her to pursue a career in investment research.
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