Apellis Pharmaceuticals, Inc. (APLS) is a Crestwood, Ky.-based clinical-stage biopharmaceutical company that is focused on developing therapeutic compounds through the inhibition of the complement system for autoimmune and inflammatory diseases. In comparison, Novartis AG (NVS) researches, develops, manufactures, and markets healthcare products worldwide. The company operates through two segments, Innovative Medicines and Sandoz, and is based in Switzerland.
The pharmaceutical industry is expected to remain in the limelight as companies race to develop new medicines catering to mild diseases and critical ailments. The industry has been attracting rising investments for the development of personalized or precision drugs, and continued innovation in the industry should drive its growth in the coming years. The global pharmaceutical market is expected to reach $1.7 trillion in 2025, growing at an 8% CAGR. So, Pharma stocks, APLS and NVS are expected to benefit from the industry tailwinds.
NVS has gained 1.3% in price over the past six months, while APLS has shed 31% over the period. In addition, NVS’ 9.7% retreat year-to-date compares with APLS’ 43.7% dive. However, in terms of their past year’s performance, APLS is the clear winner with 12.4% gains versus NVS’ 5.1% slump.
But which stock is a better buy now? Let’s find out.
On September 9, APLS reported top-line results from its Phase 3 DERBY and OAKS studies evaluating 1,258 adults with geographic atrophy (GA) secondary to age-related macular degeneration (AMD). APLS plans to submit the New Drug Application (NDA) for GA to the U.S. Food and Drug Administration (FDA) in the first half of 2022. If approved, the company should benefit significantly from this development.
On September 8, Sandoz, an NVS division, announced a commercialization agreement with Bio-Thera Solutions, Ltd. for biosimilar bevacizumab, a key oncology medicine. This marks a prominent addition to the company’s product pipeline and should help the company to garner significant revenues.
Recent Financial Results
APLS’ net operating loss increased 68.2% year-over-year to $194.29 million in its fiscal second quarter, ended June 30. Its net loss stood at $219.19 million, up 84.8% from the same period last year. The company’s net loss per share increased 73.2% year-over-year to $2.72.
NVS’ net sales increased 14% year-over-year to $12.96 billion in its fiscal second quarter, ended June 30. Its operating income grew 48% from its year-ago value to $3.48 billion, while its net income improved 55% year-over-year to $2.90 billion. The company’s EPS improved 57% year-over-year to $1.29.
Expected Financial Performance
Analysts expect APLS’ revenue to decline 94.2% in the next quarter and 89.6% in the current year. In addition, the company’s EPS is expected to decline 264.5% in the next quarter and 76.7% in the current year.
The Street expects the NVS’ revenue to increase 5.7% in the current quarter, 4.5% in the next quarter, and 6.6% in the current year. The company’s EPS is expected to grow 7.9% in the current quarter, 14.2% in the next quarter, and 9.2% in the current year.
NVS is more profitable, with a gross profit margin and EBITDA margin of 71.22% and 36.98%, respectively, compared to APLS’ negative 38.72% and 126.21%.
Furthermore, NVS’ 16.64%, 6.94% and 9.62% respective ROE, ROA and ROTC compares with APLS’ negative 1,016.41%, 25.34% and 46.13%.
Thus, NVS is more profitable compared to APLS.
In terms of forward EV/Sales, APLS is currently trading at 109.21x, which is 96.1% higher than NVS, which is currently trading at 4.25x. Also, APLS’ 9.98 trailing-12-months Price/Sales ratio is 62.5% higher than NVS’ 3.74.
Thus, NVS is a relatively affordable stock here.
NVS has an overall A rating, which equates to Strong Buy in our proprietary POWR Ratings system. In comparison, APLS has an overall D rating, which translates to Sell. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
NVS has an A Stability grade , owing to its relatively low 0.52 beta value. In contrast, APLS has a 1.48 beta value of 1.48, which justifies its D Stability grade.
NVS has a B grade for Sentiment, which is in sync with the company’s optimistic revenue growth estimates. APLS, on the other hand, has a D grade for Sentiment. This is justified because analysts expect the company’s revenue to decline 94.2% in the next quarter and 89.6% in the current year.
Of the 216 stocks in the Medical – Pharmaceuticals industry, NVS is ranked #1, while APLS is ranked #118.
The pharmaceutical industry is growing, driven by substantial investments in the development of new medicines. As a result, both APLS and NVS are expected to grow over the long term. However, higher profit margins and stable financials we think make NVS the better Buy here.
Our research shows that odds of success increase when one invests in stocks with an Overall Rating of Strong Buy or Buy. View all the top-rated stocks in the Medical – Pharmaceuticals industry here.
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NVS shares were unchanged in after-hours trading Tuesday. Year-to-date, NVS has declined -7.49%, versus a 19.58% rise in the benchmark S&P 500 index during the same period.
About the Author: Subhasree Kar
Subhasree’s keen interest in financial instruments led her to pursue a career as an investment analyst. After earning a Master’s degree in Economics, she gained knowledge of equity research and portfolio management at Finlatics. More...
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