With rapidly increasing medical needs amid a growing aging population and the prevalence of chronic diseases, the pharmaceutical industry continues to experience steady growth. Further, pharma 4.0 is potentially revolutionizing the industry by leveraging innovative digital technologies.
Given the industry’s tailwinds, investors could consider investing in fundamentally solid pharma stocks Ipsen S.A. (IPSEY), Bristol-Myers Squibb Company (BMY), and Taro Pharmaceutical Industries Ltd. (TARO) for potential gains. These stocks are rated A (Strong Buy) in our POWR Ratings system.
The pharma market is crucial to healthcare and the economy. With an increasing prevalence of chronic conditions like diabetes and cardiovascular disorders, the demand for new and innovative medicines and therapies is on the rise. The overall market growth is further driven by advancements in medical technology and expanding access to medical services.
The revenue in the pharmaceuticals market is expected to reach $1.16 trillion in 2024. The revenue in the pharma segment is anticipated to expand at a CAGR of 6.2% during the forecast period (2024-2028), resulting in a market volume of $1.47 trillion by 2028. The revenue in the U.S. is expected to generate the highest revenue of $636.90 billion in 2024.
Moreover, the pharma industry's prospects look bright with technological advancements accelerating drug discovery and development, enhanced clinical trials, and lesser regulatory approval duration. Further, generative AI is revolutionizing the industry, reshaping companies’ operations, enhancing efficiency, and improving patient outcomes.
The global pharma 4.0 market size is expected to reach $54.43 billion by 2031, growing at a notable CAGR of 18.3% during the forecast period.
Moreover, investors’ interest in pharma stocks is evident from the Vanguard Health Care ETF (VHT) 12.1% returns over the past six months.
Given these favorable trends, let’s look at the fundamentals of the top three Medical - Pharmaceuticals stocks, beginning with the third choice.
Stock #3: Ipsen S.A. (IPSEY)
Headquartered in Boulogne-Billancourt, France, IPSEY operates as a biopharmaceutical company globally. It offers drugs in the areas of oncology, neuroscience, and rare diseases. The company provides Somatuline, Dysport, Decapeptyl, Cabometyx, Onivyde, and Tazverik. It also offers NutropinAq for growth failure in children.
On April 2, 2024, IPSEY and Sutro Biopharma, Inc. (STRO) entered into an exclusive global licensing agreement for STRO-003, an antibody-drug conjugate in the final stages of pre-clinical development targeting ROR1 tumor antigen.
The agreement authorizes IPSEY exclusive worldwide rights to develop and commercialize STRO-003, and it will be the first ADC candidate to join its expanding portfolio. This reinforces IPSEY’s commitment to offering new medicines to patients with few treatment options.
On February 13, Ipsen announced that the FDA approved its supplemental new drug application for Onivyde® (irinotecan liposome injection) plus oxaliplatin, fluorouracil, and leucovorin as a first-line treatment in adults living with metastatic pancreatic adenocarcinoma.
The approval is based on the Phase III NAPOLI 3 clinical trial in which the Onivyde® regimen (NALIRIFOX) demonstrated statistically significant superiority and clinically meaningful improvements, potentially offering a new standard-of-care treatment option.
For the fiscal year that ended December 31, 2023, IPSEY’s revenue increased 4.7% year-over-year to €3.31 billion ($3.59 billion). The company’s operating income grew 11.8% from the prior year to €816 million ($886.11 million). Its net profit from continuing operations of €619.90 million ($673.16 million) indicates growth of 4.7% year-over-year.
In addition, the company’s consolidated net profit and EPS came in at €647.20 million ($702.81 million) and €7.73, respectively.
Analysts expect IPSEY’s revenue for the fiscal year (ended December 2024) to increase 11.3% year-over-year to $3.75 billion. For the fiscal year 2025, the company’s revenue is expected to grow 6.7% year-over-year to $4 billion.
IPSEY’s stock has gained 2.7% over the past month and 7.4% over the past year to close the last trading session at $29.80.
IPSEY’s robust outlook is reflected in its POWR Ratings. The stock has an overall rating of A, which translates to a Strong 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 an A grade for Value and a B for Quality and Stability. IPSEY is ranked #9 out of 161 stocks in the Medical - Pharmaceuticals industry.
Click here to access additional IPSEY ratings for Growth, Sentiment, and Momentum.
Stock #2: Bristol-Myers Squibb Company (BMY)
BMY is a global company that discovers, develops, licenses, manufactures, markets, distributes, and sells biopharmaceutical products. The company offers products for hematology, oncology, cardiovascular, immunology, fibrotic, and neuroscience diseases. Its products include Eliquis, Opdivo, Pomalyst/Imnovid, Orencia, and Sprycel.
On April 5, 2024, BMY and 2Seventy Bio, Inc. (TSVT) announced that the FDA approved Abecma® for treating adult patients with relapsed or refractory multiple myeloma after two or more prior lines of therapy.
This approval expanded Abecma’s indication, increasing its availability from earlier lines to patients who have relapsed or become refractory after exposure to these three main classes of treatment (triple-class exposed). The approval will expand BMY’s operations and scope for the future.
On April 3, 2024, BMY announced that the European Commission (EC) expanded the approval of Reblozyl® to include the first-line treatment of adult patients with transfusion-dependent anemia due to very low, low, and intermediate-risk myelodysplastic syndromes (MDS).
The approval study showed that Reblozyl nearly doubled the percentage of patients achieving transfusion independence and hemoglobin increase. It reflects BMY’s commitment to developing new options for patients with disease-related anemia.
For the fourth quarter that ended December 31, 2023, BMY’s total revenues increased marginally year-over-year to $11.48 billion. The company’s non-GAAP gross profit for the quarter was $8.77 billion. Its net earnings came in at $1.76 billion and $0.87 per share for the quarter, respectively.
In addition, the company’s cash and cash equivalents stood at $11.46 billion as of December 31, 2023, compared to $9.12 billion as of December 31, 2022.
As per the company’s full-year 2024 guidance, BMY expects non-GAAP EPS to range between $7.10 and $7.40.
Analysts expect BMY’s revenue and EPS for the second quarter (ending June 2024) to increase 2.6% and 0.6% year-over-year to $11.52 billion and $1.76, respectively. Furthermore, the company has surpassed the consensus EPS estimates in three of the trailing four quarters.
BMY’s stock has surged marginally over the past three months to close the last trading session at $51.60.
BMY’s sound fundamentals are reflected in its POWR Ratings. The stock has an overall rating of A, which translates to a Strong Buy in our proprietary rating system.
BMY has an A grade for Value. The stock also has a B grade for Quality. Within the Medical - Pharmaceuticals industry, BMY is ranked #8 of 161 stocks.
In addition to the POWR Ratings stated above, one can access BMY’s ratings for Growth, Stability, Sentiment, and Momentum here.
Stock #1: Taro Pharmaceutical Industries Ltd. (TARO)
Based in Haifa, Israel, TARO is a science-based pharmaceutical company that develops, manufactures, and markets prescription and over-the-counter pharmaceutical products internationally. It also develops and manufactures active pharmaceutical ingredients for application in its finished dosage form products.
In terms of forward EV/Sales, TARO is trading at 0.45x, 87.5% lower than the industry average of 3.63x. Likewise, the stock’s forward Price/Sales multiple of 2.57 is 31.2% lower than the industry average of 3.73.
TARO’s trailing-12-month EBIT margin and levered FCF margin of 5.76% and 13.25% are significantly higher than the respective industry averages of 1.06% and 0.87%. Likewise, the stock’s trailing-12-month CAPEX/Sales of 8.94% is 126.4% higher than the industry average of 3.95%.
For the fiscal 2024 third quarter that ended December 31, 2023, TARO’s sales increased 12.9% year-over-year to $157.14 million. The company’s gross profit grew 24.7% from the year-ago value to $79.88 million. Its operating income of $15.88 million indicates a growth of 1141.8% year-over-year.
In addition, the company’s net income came in at $20.21 million and $0.54 per ordinary share, up 178.1% and 184.2% from the prior year’s quarter, respectively. Its cash and cash equivalents were $382.41 million as of December 31, 2023, compared to $154.49 million as of March 31, 2023.
Street expects TARO’s revenue for the fourth quarter (ended March 2024) to increase 6.5% year-over-year to $156.06 million, while its EPS for the same period is expected to grow 72.2% year-over-year to $0.31, respectively.
Shares of TARO have gained 14.3% over the past six months and 72.6% over the past year to close the last trading session at $42.19.
TARO’s POWR Ratings reflect its promising prospects. The stock has an overall rating of A, equating to a Strong Buy in our proprietary rating system.
The stock has an A grade for Value and a B for Sentiment, Growth, and Stability. TARO is ranked #4 out of 162 stocks within the same industry.
To see additional POWR Ratings of TARO for Quality, and Momentum, click here.
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BMY shares fell $0.15 (-0.29%) in premarket trading Wednesday. Year-to-date, BMY has gained 2.72%, versus a 8.21% 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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