The pharmaceutical industry was in the limelight during the pandemic as it came up with therapies and vaccines. The industry has seen significant growth across multiple areas over the past few years, aided by research and development.

The industry’s growth is expected to be driven by a rapidly aging population and the rise of various lifestyle diseases spawning out of poor health choices. According to Statista, worldwide pharmaceutical revenue is expected to grow at a CAGR of 5.4%, reaching $1.44 trillion by 2027.

Moreover, thanks to the inelastic demand for medicines, the pharmaceutical industry is known to weather turbulent times relatively well. With concerns of a recession looming large, investing in pharmaceutical stocks could offer a safe haven for investors.

In addition, investors’ interest in pharma stocks is evident from iShares U.S. Pharmaceuticals ETF’s (IHE) 5.4% returns over the past three months.

To that end, it could be wise for investors to buy fundamentally strong pharmaceutical stocks AstraZeneca PLC (AZN) and Novartis AG (NVS) to garner big gains this year.

AstraZeneca PLC (AZN)

Headquartered in Cambridge, the United Kingdom, AZN, a biopharmaceutical company, focuses on the discovery, development, manufacturing, and commercialization of prescription medicines. It markets products for cardiovascular, renal, and metabolism diseases, oncology, respiratory, and immunology, as well as rare diseases.

On November 16, 2022, Alexion and AZN group AstraZeneca Rare Disease announced the completion of its acquisition of LogicBio Therapeutics, Inc. (LOGC), a genomic medicine company. The acquisition is expected to boost the company’s operative capability.

AZN’s total revenue for the third quarter that ended September 30, 2022, increased 11.3% year-over-year to $10.98 billion. The company’s gross profit increased 31% year-over-year to $8 billion. Its operating profit increased 174.4% year-over-year to $1.25 billion. Additionally, its EPS came in at $1.06, compared to a loss per share of $1.10 in the year-ago period.

Analysts expect AZN’s EPS and revenue for the quarter ending June 30, 2023, to increase 11.6% and 5.9% year-over-year to $0.96 and $11.40 billion, respectively. The stock has gained 20.1% over the past three months to close the last trading session at $66.28. 

AZN’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall rating of B, equating to Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.

Within the Medical – Pharmaceuticals industry, it is ranked #18 out of 169 stocks. It has a B grade for Growth and Sentiment.  

In total, we rate AZN on eight different levels. Beyond what we stated above, we have also given AZN grades for Value, Momentum, Stability, and Quality. Get all AZN ratings here. 

Novartis AG (NVS)

Headquartered in Basel, Switzerland, NVS researches, develops, manufactures, and markets healthcare products worldwide. The company operates through two segments, Innovative Medicines and Sandoz.

On December 6, 2022, NVS and MorphoSys AG’s (MOR), a fully-owned subsidiary of Constellation Pharmaceuticals, Inc., entered a global licensing agreement. The agreement aims to enhance research and develop and commercialize pre-clinical inhibitors of a novel cancer target. This partnership in oncology is expected to be beneficial for NVS.

For the fiscal third quarter that ended September 30, 2022, NVS’ total liabilities declined 10% to $57.57 billion, compared to $63.97 million for the fiscal year ended December 31, 2021. Its cash and cash equivalents came in at $8.73 billion, representing an increase of 21% year-over-year. Also, its net income came in at $1.57 billion. 

Analysts expect NVS’ EPS for the quarter that ended December 31, 2022, to increase 3.8% year-over-year to $1.45. Its revenue for the fiscal year 2023 is expected to increase 1.5% year-over-year to $52.01 billion. Over the past three months, the stock has gained 18.4% to close the last trading session at $92.02. 

NVS’ POWR Ratings reflect this promising outlook. NVS has an overall rating of A, which translates to a Strong Buy in our proprietary rating system. It is ranked #11 in the same industry. It has an A grade for Stability and a B for Value, Sentiment, and Quality.

Click here to see NVS’ POWR Ratings for Growth and Momentum.

AZN shares were trading at $66.84 per share on Wednesday afternoon, up $0.56 (+0.84%). Year-to-date, AZN has declined -1.42%, versus a 4.39% rise in the benchmark S&P 500 index during the same period.

About the Author: Malaika Alphonsus

Malaika's passion for writing and interest in financial markets led her to pursue a career in investment research. With a degree in Economics and Psychology, she intends to assist investors in making informed investment decisions. More...

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