The pharmaceutical industry is poised for long-term growth due to the growing global population, aging demographics, technological advancements, and innovative drug development. However, I think it could be wise to wait for a better entry point in Procaps Group S.A. (PROC), Voyager Therapeutics, Inc. (VYGR) and Organon & Co. (OGN).
Before delving deeper into their fundamentals, let’s discuss what’s happening in the pharma industry.
The pharmaceutical industry is expected to maintain its strong performance in the coming months due to the high demand for healthcare products and medications, driven by ongoing research and development efforts.
Also, the global pharmaceutical market is expected to reach $1.48 trillion by 2028, exhibiting a CAGR of 5.8%. The industry’s largest segment is oncology drugs, with a projected market volume of $188.20 billion in 2023.
Moreover, the global drug discovery market is expected to reach $181.40 billion by 2032, with a CAGR of 8.5%. Also, technological breakthroughs such as artificial intelligence and high-throughput screening are likely to accelerate innovation in the drug discovery process.
However, the US pharmaceutical industry faces issues like growing competition, FDA regulations, growing research expenses, patent expirations, and continuous discussions about cost and accessibility. These issues cause the industry to lose its market exclusivity and put more pressure on innovation.
So, let’s take a look at the fundamentals of the three Medical - Pharmaceuticals stocks, starting with number 3.
Stock #3: Procaps Group S.A. (PROC)
Based in Luxembourg, Luxembourg, PROC develops, produces, and markets pharmaceutical solutions worldwide. The company formulates, manufactures, and markets branded prescription drugs in various therapeutic areas, including feminine care products, pain relief, skin care, digestive health, growth and development, cardiology, vision care, central nervous system, and respiratory.
PROC’s trailing-12-month EBIT margin of 13.02% is significantly higher than the industry average of 0.77%. However, its 55.91% trailing-12-month gross profit margin is marginally lower than the 56.39% industry average.
For the second quarter ended June 30, 2023, PROC reported revenue of $110.06 million, down 2.1% year-over-year. Also, its gross profit decline 15.7% year-over-year to $61.19 million for the same period.
However, PROC’s income for the period came in at $26.96 billion, compared to loss for the period $6.92 million. Also, its EPS came in at $0.27, compared to loss per share of $0.07 for the same period.
Analysts expect PROC’s revenue to increase 5.6% year-over-year to $432.65 million for the quarter ending December 2023. Its EPS is expected to decrease 64.3% year-over-year to $0.26 for the same period. Shares of PROC have slumped 12.7% over the past month to close the last trading session at $2.40.
PROC’s POWR Ratings reflect this optimistic outlook. The stock has an overall rating of C, equating to a Neutral in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
PROC also has a C grade for Stability and Quality. It is ranked #44 out of 167 stocks in the Medical - Pharmaceuticals industry. Click here for the additional POWR Ratings for Momentum, Growth, Value and Sentiment for PROC.
Stock #2: Voyager Therapeutics, Inc. (VYGR)
VYGR, a gene therapy company, focuses on developing treatments and next-generation platform technologies. The company’s lead clinical candidate is the VY-AADC, which is in an open-label Phase 1 clinical trial for treating Parkinson’s disease.
VYGR’s trailing-12-month EBIT margin of 27.39x is significantly higher than the 0.77x industry average. However, its trailing-12-month CAPEX / Sales of 2.17% is 49.6% lower than the 4.30% industry average.
During the nine month that ended September 30, 2023, VYGR’s collaboration revenue increased 276.7% year-over-year to $159.95 million. The company’s net income and net income per share amounted to $75.94 million and $1.78, compared to a loss of $22.78 million and $0.59 in the year-ago period.
However, its total liabilities came in at $118.43 million for the period that ended September 30, 2023, compared to $100.34 million for the period that ended December 31, 2022. Also, its cash and cash equivalents came in at $65.27 million, compared to $98.96 million for the same period.
Street expects VYGR’s revenue to increase 304.5% year-over-year to $165.48 million for the year ending December 2023. Its EPS is expected to come in at $1.15 for the same period. It surpassed EPS estimates in all four trailing quarters. The stock has gained 23.1% over the past year to close the last trading session at $7.26.
VYGR’s mixed fundamentals are reflected in its POWR Ratings. The stock has an overall rating of C, which equates to a Neutral in our proprietary rating system.
VYGR has a C grade for Sentiment. The stock is ranked #37 within the same industry. Beyond what is stated above, we’ve also rated VYGR for Growth, Value Momentum, Quality, and Stability. Get all VYGR ratings here.
Stock #1: Organon & Co. (OGN)
OGN develops and delivers health solutions through a portfolio of prescription therapies and medical devices for women’s health in the United States and internationally.
OGN’s trailing-12-month EBIT margin of 21.22x is significantly higher than the 0.77x industry average. However, its trailing-12-month CAPEX / Sales of 3.82% is 11.1% lower than the 4.30% industry average.
For the fiscal third quarter that ended September 30, 2023, OGN’s revenues stood at $1.52 billion, down marginally year-over-year. Its adjusted EBITDA came in at $447 million, decreased 18.1% year-over-year.
However, its cash and cash equivalents came in at $414 million for the period that ended September 30, 2023, compared to $706 million for the period that ended December 31, 2022. Its non-GAAP net income and EPS came in at $223 million and $0.87.
The consensus revenue estimate of $6.22 billion for the year ending December 2023 represents a marginal increase year-over-year. Its EPS is expected to decline 18.95% year-over-year to $4.08 for the same period. It has lost 24.3% over past month to close the last trading session at $11.32.
OGN’s uncertain fundamentals are reflected in its POWR Ratings.
It is ranked #35 in the same industry. It has a C grade for Growth. To see additional OGN’s ratings for Value, Quality, Sentiment, Stability 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.
PROC shares were trading at $2.48 per share on Friday morning, up $0.03 (+1.22%). Year-to-date, PROC has declined -52.76%, versus a 20.57% rise in the benchmark S&P 500 index during the same period.
About the Author: Rashmi Kumari
Rashmi is passionate about capital markets, wealth management, and financial regulatory issues, which led her to pursue a career as an investment analyst. With a master's degree in commerce, she aspires to make complex financial matters understandable for individual investors and help them make appropriate investment decisions.
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