The pharmaceutical industry continues to witness steady growth and expansion owing to the rising adoption of biologics, increasing demand for personalized medicine, and consistent research and development (R&D) efforts. Further, Pharma 4.0 has the potential to revolutionize the industry by leveraging cutting-edge technologies.

Given the industry’s tailwinds, investors could consider buying fundamentally solid pharma stocks Perrigo Company plc (PRGO), OptiNose, Inc. (OPTN), and Teva Pharmaceutical Industries Limited (TEVA) for potential gains.

The pharmaceutical industry continues to thrive, driven by growing demand for medical care amid the aging population, rising prevalence of chronic diseases, and rapid urbanization. According to IQVIA, the world’s use of medicines rose by 14% over the past five years, and a further 12% rise is expected through 2028, bringing annual usage to 3.80 trillion defined daily doses.

Some of the key trends that will promote significant growth of the pharma market in 2024 include continued dominance of small molecule drugs, rising adoption of biologics, high demand for personalized medicine, outsourcing of drug development and manufacturing, and several technological advancements.

The projected revenue in the pharmaceuticals market is expected to reach $1.15 trillion in 2024. The market is estimated to attain a volume of $1.47 trillion by 2028, expanding at a CAGR of 6.2% during the forecast period (2024-2028). Also, the oncology drugs market is projected to be the largest segment, with a projected market volume of $214.10 billion in 2024.

With its advanced healthcare infrastructure and strong R&D capabilities, the United States will be leading the world in terms of revenue, with an expected revenue of $636.90 billion in 2024.

The pharmaceutical industry is increasingly adopting digital technology across various aspects of its operations, from R&D to marketing and sales. Adoption of emerging technologies, such as AI, machine learning, automation, and robotics, helps industry players drive innovation, improve efficiency, and enhance the quality of care for patients.

As per McKinsey Global Institute (MGI), Generative AI could generate $60 billion to $110 billion a year in economic value for the pharma and medical-product industries, primarily because it can boost productivity by accelerating the process of identifying compounds for new drugs, speeding their development and approval, and enhancing the way they are marketed.

With prospects of offering innovative technologies to potentially transform the pharmaceutical industry, the global pharma 4.0 market size is expected to reach $54.43 billion by 2031, exhibiting a CAGR of 18.3% during the forecast period.

Moreover, investors’ interest in pharma stocks is evident from the Invesco Dynamic Pharmaceuticals ETF’s (PJP) 9.6% returns over the past three months.

Given these favorable trends, let’s look at the fundamentals of the top Medical – Pharmaceuticals stocks, beginning with the third choice.

Stock #3: Perrigo Company plc (PRGO)

Based in Dublin, Ireland, PRGO provides over-the-counter health and wellness solutions to enhance individual well-being in the United States, Europe, and worldwide. The company operates through Consumer Self-Care Americas and Consumer Self-Care International segments.

On February 26, 2024, PRGO’s Board of Directors approved a 1% increase in the company’s quarterly dividend to $0.276 per share, or $1.10 per share on an annual basis, up from $0.273 per share. The cash dividend is payable on March 26, 2024, to shareholders of record on March 8, 2024.

PRGO pays an annual dividend of $1.10, which translates to a yield of 4.04% at the current share price. Its four-year average dividend yield is 2.50%. Moreover, the company’s dividend payouts have increased at a CAGR of 7.5% over the past five years. Perrigo has raised its dividends for 20 consecutive years.

For the fourth quarter that ended December 31, 2023, PRGO’s net sales increased marginally year-over-year to $1.15 billion. The company’s adjusted gross profit grew 3.8% from the prior year’s quarter to $460.30 million. Its adjusted operating income from the Consumer Self-Care Americas segment came in at $464.40 million, up 5.4% from the prior year’s period.

Furthermore, the company’s cash and cash equivalents and restricted cash stood at $751.30 million as of December 31, 2023, compared to $600.70 million as of December 31, 2022.

As per the fiscal 2024 outlook, PRGO expects organic net sales and total net sales growth of 1% – 3% and flat, respectively. It also expects its adjusted diluted EPS to range between $2.50 and $2.65, resulting in mid-teens adjusted diluted EPS growth, excluding infant formula.

Analysts expect PRGO’s revenue for the third quarter (ending September 2024) to increase 3.7% year-over-year to $1.17 billion. For the same period, the company’s EPS is expected to grow 26% year-over-year to $0.81. Furthermore, the company has surpassed the consensus EPS estimates in each of the trailing four quarters.

PRGO’s stock has declined 20.9% over the past month to close the last trading session at $26.41.

PRGO’s robust outlook is reflected in its POWR Ratings. The stock has an overall rating of B, which translates to a 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 Growth and a B for Value. PRGO is ranked #42 out of 164 stocks in the Medical – Pharmaceuticals industry.

Click here to access additional PRGO ratings for Sentiment, Quality, Stability, and Momentum.

Stock #2: OptiNose, Inc. (OPTN)

OPTN is a specialty pharmaceutical company that focuses on the development and commercialization of products for patients treated by ear, nose, throat, and allergy specialists. The company provides XHANCE, a therapeutic product, and Onzetra Xsail, a powder EDS device.

On January 18, 2024, OPTN announced the peer-reviewed publication of results from both ReOpen1 and ReOpen2 in the Journal of Allergy and Clinical Immunology: In Practice. The ReOpen program examined XHANCE for the treatment of adults with chronic sinusitis (chronic rhinosinusitis).

As per the publication, XHANCE considerably reduced both symptoms and sinus opacification in participants with chronic sinusitis (chronic rhinosinusitis) evaluated in two randomized controlled Phase 3 Clinical Trials (ReOpen1 and ReOpen2). The trials also showed that XHANCE reduced the incidence of acute disease exacerbations by more than half.

On December 6, 2023, OPTN announced that the U.S. FDA extended the review period of its supplemental new drug application (sNDA), requesting approval of XHANCE as a treatment for chronic rhinosinusitis by three months. The updated Prescription Drug User Fee Act (PDUFA) goal date is March 16, 2024.

For the third quarter that ended September 30, 2023, OPTN reported total revenues of $19.82 million. The company’s net loss for the quarter came in at $9.29 million and $0.08 per share, respectively. Also, its cash and cash equivalents and total assets totaled $66.84 million and $101.41 million as of September 30, 2023, respectively.

As per the corporate guidance for the full year of 2023, OPTN expects XHANCE net revenues to be between $66 million and $70 million. Also, it expects XHANCE average net revenue per prescription to be approximately $200.

Street expects OPTN’s revenue for the first quarter (ending March 2024) to increase 52% year-over-year to $18 million. For the fiscal year 2024, the company’s revenue is expected to grow 36.1% year-over-year to $95.71 million. Also, the company topped the consensus revenue estimates in all four trailing quarters, which is impressive.

Shares of OPTN have surged 27.8% over the past month and 45.2% over the past six months to close the last trading session at $1.82.

OPTN’s POWR Ratings reflect its promising prospects. The stock has an overall rating of B, which translates to a Buy in our proprietary rating system.

The stock has an A grade for Sentiment and a B for Growth. OPTN is ranked #33 of 164 stocks within the Medical – Pharmaceutical industry.

To see additional POWR Ratings of OPTN for Value, Quality, Stability, and Momentum, click here.

Stock #1: Teva Pharmaceutical Industries Limited (TEVA)

Headquartered in Tel Aviv, Israel, TEVA develops, manufactures, markets, and distributes generic medicines, specialty medicines, and biopharmaceutical products in North America, Europe, Israel, and globally. It provides generic medicines, sterile products, and generic products. It focuses on the central nervous system (CNS), respiratory, and oncology areas.

On February 26, TEVA’s subsidiary, Teva Pharmaceutical Investments Singapore Pte Ltd, and Jiangsu Nhwa Pharmaceutical Co., Ltd announced their partnership for the marketing and distribution of Teva’s AUSTEDO for treating neurodegenerative and movement disorders – chorea associated with Huntington’s disease (HD) and tardive dyskinesia (TD) in adults.

This strategic partnership intends to increase patients’ access to Teva’s AUSTEDO, leveraging Nhwa’s leadership in China’s neuro-psychiatric health sector.

Also, on February 24, Teva Pharmaceuticals, a U.S. affiliate of Teva and Alvotech (ALVO), announced that the U.S. FDA approved SIMLANDI injection as an interchangeable biosimilar to Humira for treating adult rheumatoid arthritis, juvenile idiopathic arthritis, adult psoriatic arthritis, adult ankylosing spondylitis, and Crohn’s disease.

“The approval of SIMLANDI marks the first high-concentration, citrate-free biosimilar to Humira with IC status,” said Dr. Eric Hughes, Executive Vice President of Global R&D and Chief Medical Officer at Teva.

For the fourth quarter that ended December 31, 2023, TEVA’s net revenues increased 14.7% year-over-year to $4.46 billion. The company’s non-GAAP gross profit grew 23.1% from the year-ago value to $2.59 billion. Its non-GAAP operating income was $1.55 billion, up 36.8% from the prior year’s quarter.

In addition, non-GAAP net income attributable to TEVA and non-GAAP EPS of $1.13 billion and $1 indicates growth of 43.5% and 40.8% year-over-year, respectively. Its adjusted EBITDA increased 33.9% from the prior year’s quarter to $1.66 billion.

As per the 2024 business outlook, TEVA expects its revenue to range between $15.70 billion and $16.30 billion, while its non-GAAP operating income is expected to reach $4 billion to $4.50 billion. Also, the company’s adjusted EBITDA and non-GAAP EPS for the same period are estimated to be $4.50 – $5 billion and $2.20 – $2.50, respectively.

Analysts expect TEVA’s revenue and EPS for the first quarter (ending March 2024) to increase 3% and 29.1% year-over-year to $3.77 billion and $0.52, respectively. Moreover, the company topped the consensus revenue estimates in each of the trailing four quarters, which is remarkable.

TEVA’s stock has climbed 35.4% over the past six months and 32.1% over the past year to close the last trading session at $13.09.

TEVA’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.

The stock has an A grade for Growth and Value. The stock also has a B grade for Sentiment. TEVA is ranked #10 of 164 stocks in the same industry.

To access additional ratings of TEVA for Quality, Stability, and Momentum, click here.

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TEVA shares rose $0.09 (+0.69%) in premarket trading Thursday. Year-to-date, TEVA has gained 25.38%, versus a 6.51% 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. More...

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