Pharma Stock Analysis: Buy, Hold, or Sell These 4?

A rapidly aging population, rising rates of chronic illnesses, growing healthcare needs, and advancements in technology are all contributing to the long-term growth of the pharmaceutical sector.

Despite the favorable conditions, not all pharma stocks are expected to deliver. Hence, it could be wise to avoid Madrigal Pharmaceuticals, Inc. (MDGL). Meanwhile, investors could wait for a better entry point in Pfizer Inc. (PFE). On the other hand, one could consider buying Astellas Pharma Inc. (ALPMY) and Novo Nordisk A/S (NVO), given their strong fundamentals and growth prospects.

Before diving deeper into the fundamentals of these stocks, let’s understand what’s shaping the industry’s prospects.

The pharmaceutical industry plays a crucial in meeting the unmet medical needs of the global population. The sector makes continuous investments in research and development (R&D) to come out with effective drugs and therapies.

The industry’s rapid expansion will be marked by factors like the rising number of older people, the increasing prevalence of chronic diseases, the growing popularity of personalized medicine, high healthcare spending, and robust research and development.

The IQVIA Institute predicts that global pharma spending and demand for medicines will increase over the next five years to approximately $1.9 trillion by 2027. The launch of new drugs will drive medical spending at an annual growth of between 3 to 6%.

The U.S. pharmaceutical market is projected to grow at a CAGR of 6% to reach $903 billion by 2030.

Additionally, Pharma 4.0 is expected to revolutionize pharmaceutical manufacturing by utilizing advanced technologies like artificial intelligence (AI), the Internet of Things (IoT), big data analytics, collaborative robots, and distributed cloud-based service architectures. By utilizing these advanced technologies, Pharma 4.0 will help increase efficiency and productivity and drive automation.

By 2032, the global pharma 4.0 market is projected to grow at a CAGR of 18% to reach $63.17 billion. Investors’ interest in pharmaceutical stocks can be gauged from the iShares U.S. Pharmaceutical ETF’s (IHE) 14.6% returns over the past three months.

Let’s now take a closer look at the fundamentals of the four stocks from the Medical – Pharmaceuticals industry.

Stock #4: Madrigal Pharmaceuticals, Inc. (MDGL)

MDGL is a clinical-stage biopharmaceutical company that focuses on the development of therapeutics for the treatment of non-alcoholic steatohepatitis (NASH) in the United States. Its lead product candidate is resmetirom and it is also developing MGL-3745, a backup for resmetirom.

For the fiscal third quarter, which ended September 30, 2023, MDGL’s net loss widened 21.6% year-over-year to $98.74 million. Its loss from operations widened 22.5% year-over-year to $98.53 million. The company’s net loss per common share widened 12.4% over the prior year quarter to $5.34.

Analysts expect MDGL’s EPS for the quarter ended December 31, 2023, is expected to remain negative. Over the past nine months, the stock has declined 29.1% to close the last trading session at $221.07.

MDGL’s weak fundamentals are reflected in its POWR Ratings. It has an overall F rating, equating to a Strong Sell in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.

Within the Medical - Pharmaceuticals industry, it is ranked #149 out of 162 stocks. It has a D grade for Growth, Momentum, Stability, and Sentiment. To access MDGL’s ratings for Value and Quality, click here.

Stock #3: Pfizer Inc. (PFE)

PFE discovers, develops, manufactures, markets, distributes, and sells biopharmaceutical products worldwide. It offers medicines and vaccines in various therapeutic areas, infectious diseases, and COVID-19 prevention and treatment, and potential future mRNA and antiviral products under the Comirnaty and Paxlovid brands. It also provides medicines and vaccines in various therapeutic areas.

PFE’s total revenues for the fiscal fourth quarter, which ended December 31, 2023, declined 41% year-over-year to $14.25 billion. Its loss from continuing operations came in at $3.34 billion. The company’s adjusted net income came in at $593 million, representing a decline of 91% year-over-year. Also, its adjusted EPS declined 91% year-over-year to $0.10.

On the other hand, its Specialty Care revenues rose 11% year-over-year to $3.95 billion.

For the quarter ending June 30, 2024, PFE’s revenue is expected to increase 4.3% year-over-year to $13.28 billion. Its EPS for the quarter ending March 31, 2024, is expected to decline 56.1% year-over-year to $0.54. It surpassed the Street EPS estimates in each of the trailing four quarters, which is impressive. Over the past year, the stock has declined 38% to close the last trading session at $27.02.

PFE’s bleak prospects are reflected in its POWR Ratings. It has an overall rating of C, which translates to Neutral in our proprietary rating system.

It has a C grade for Stability, Sentiment, and Quality. Within the same industry, it is ranked #69. Click here for the additional ratings of PFE for Growth, Value, and Momentum.

Stock #2: Astellas Pharma Inc. (ALPMY)

Based in Tokyo, Japan, ALPMY manufactures, markets, and imports and exports pharmaceuticals globally. The company provides XTANDI, XOSPATA, PADCEV, Evrenzo, Betanis/Myrabetriq/BETMIGA, and Progaaf and Advagraf/Graceptor/ASTAGRAF XL immunosuppressants.

On January 31, 2024, ALPMY announced that it had submitted a Supplemental New Drug Application (sNDA) for PADCEV with KEYTRUDA as a combination therapy for first-line treatment of urothelial cancer in Japan.

If approved, this combination could provide an alternative to platinum-containing chemotherapy, potentially positively impacting ALPMY's business by expanding treatment options for patients with urothelial cancer in the Japanese market.

For the six months ended September 30, 2023, ALPMY’s revenue grew marginally year-over-year to ¥767.14 billion ($5.20 billion). Its gross profit increased 2.2% year-over-year to ¥623.78 billion ($4.23 billion). The company’s operating profit came in at ¥51.02 billion ($345.93 million). Also, its profit attributable to owners of the parent came in at ¥31.67 billion ($214.73 million).

Street expects ALPMY’s revenue for the quarter ending March 31, 2024, to increase 10.5% year-over-year to $2.92 billion. Its EPS for the fiscal 2025 is expected to increase 46.3% year-over-year to $0.44. It has surpassed consensus EPS estimates in three out of the trailing four quarters, which is impressive. Over the past month, the stock has declined 2.8% to close the last trading session at $11.57.

ALPMY’s positive outlook is reflected in its POWR Ratings. It has an overall rating of B, equating to a Buy in our proprietary rating system.

It is ranked #37 in the Medical - Pharmaceuticals industry. It has an A grade for Stability and a B for Value and Quality. One can see the additional ratings for ALMPY for Growth, Momentum, and Sentiment here.

Stock #1: Novo Nordisk A/S (NVO)

Headquartered in Bagsvaerd, Denmark, NVO is a healthcare company that engages in the research, development, manufacture, and marketing of pharmaceutical products internationally. The company operates in two segments: Diabetes and Obesity Care and Rare Disease.

On January 4, 2024, NVO entered into separate research collaborations with Omega Therapeutics (OMGA) and Cellarity Inc. on novel treatment approaches for cardiometabolic diseases. The Omega collaboration will leverage the company’s proprietary platform technology to develop an epigenomic controller to enhance metabolic activity as a part of a new treatment approach for obesity management.

The Cellarity collaboration will build upon initial work and engage the company’s platform to develop a small molecule therapy in metabolic dysfunction-associated steatohepatitis (MASH). These are the first research programs signed under the existing partnership between Novo Nordisk and Flagship Pioneering.

NVO’s net sales for the fourth quarter that ended December 31, 2023, increased 37% year-over-year to DKK65.86 billion ($9.57 billion). Its operating profit increased 57% over the prior year quarter to DKK26.77 billion ($3.89 billion). The company’s net profit rose 62% year-over-year to DKK21.96 billion ($3.19 billion). Also, its EPS came in at DKK4.91, registering an increase of 63.1% year-over-year.

Analysts expect NVO’s revenue for the quarter ending March 31, 2024, to increase 20.8% year-over-year to $9.53 billion. Its EPS for fiscal 2024 is expected to increase 20.3% year-over-year to $3.26. It surpassed the consensus EPS estimates in three of the trailing four quarters. Over the past year, the stock has gained 57.9% to close the last trading session at $109.02.

It’s no surprise that NVO has an overall rating of A, which translates to a Strong Buy in our POWR Ratings system.

It has an A grade for Quality and a B for Growth, Stability, and Sentiment. It is ranked first in the same industry. To see NVO's additional ratings for Value and Momentum, click here.

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NVO shares were trading at $115.08 per share on Wednesday afternoon, up $6.06 (+5.56%). Year-to-date, NVO has gained 11.24%, versus a 2.53% rise in the benchmark S&P 500 index during the same period.

Since he was in grade school, Dipanjan was interested in the stock market. This led to him obtaining a master’s degree in Finance and Accounting. Currently, as an investment analyst and financial journalist, Dipanjan has a strong interest in reading and analyzing emerging trends in financial markets.

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