Despite Pfizer Inc. (PFE) grappling with financial turbulence and a performance downturn, the pharmaceutical sector at large is surging due to increasing demand and innovation. Consequently, solid pharma stocks Zoetis Inc. (ZTS), Horizon Therapeutics Public Limited Company (HZNP), and Novartis AG (NVS) could offer superior returns this month.
Let’s understand this in detail.
Boasting a substantial market capitalization of $188.07 billion, PFE stands as a preeminent manufacturer, distributor, and seller of biopharmaceutical products. Nonetheless, the company finds itself contending with formidable financial difficulties.
In its fiscal second quarter, PFE’s revenues declined 54.1% year-over-year to $12.73 billion. Its income from operations decreased 76.3% from the year-ago value to $2.34 billion. Moreover, its adjusted income and adjusted EPS declined 67.1% and 67.2% from the prior year’s quarter to $3.84 billion and $0.67, respectively.
Shares of PFE have declined 18.6% over the past six months and 25.1% year-to-date to close the last trading session at $33.31. Furthermore, its trading below is 50-day and 200-day moving averages of $34.95 and $39.67, respectively.
On the flip side, the broader pharmaceutical sector is undergoing rapid transformation, marked by the widespread prevalence of chronic illnesses. The World Health Organization (WHO) projects that by approximately 2050, chronic ailments will contribute to 86% of the annual 90 million global deaths, a 90% rise compared to 2019.
Moreover, a paradigm shift known as Pharma 4.0 is underway, ushering in an era of heightened digital integration in drug discovery and production. According to a report by Transparency Market Research, the global pharma 4.0 market is projected to reach $46.90 million in 2031, growing at a CAGR of 17.7%.
Moreover, within the industry, an escalating appetite for novel pharmaceuticals is met with a game-changing force - Artificial Intelligence (AI). The incorporation of generative AI algorithms has sparked a revolution in drug discovery and development, yielding manifold advantages and avenues for advancement.
By 2032, the market for generative AI in drug discovery is anticipated to reach $1.13 billion, expanding at a CAGR of 27.1%, demonstrating the sector's great potential and continuous growth.
Considering the outlined factors, ZTS, HZNP, and NVS could offer more favorable investment opportunities compared to PFE, capitalizing on the prevailing industry growth trajectories. To that end, let us dive into the fundamentals of these three Medical - Pharmaceuticals industry picks, beginning with number three.
Stock #3: Zoetis Inc. (ZTS)
ZTS discovers, develops, manufactures, and commercializes animal health medicines, vaccines, and diagnostic products. Furthermore, it extends its portfolio to include parasiticides, anti-infectives, dermatology solutions, medicated feed additives, as well as animal health diagnostics and other non-pharmaceutical offerings.
On May 5, ZTS announced the FDA approval of Librela™, an anti-NGF monoclonal antibody for canine osteoarthritis (OA) pain control. The monthly treatment enhances dogs' mobility and quality of life. The approval could boost ZTS’ market presence and revenue growth.
For the second quarter that ended June 30, 2023, ZTS’ revenue increased 6.2% year-over-year to $2.18 billion. Its adjusted gross profit grew 10.2% from the year-ago value to $1.58 billion. Also, net income and earnings per common share attributable to ZTS rose 15% and 17.5% from the prior year’s period to $652 million and $1.41, respectively.
For the fiscal year ending December 2023, ZTS’ revenue is expected to increase 6.4% year-over-year to $8.60 billion. The company’s EPS for the ongoing year is estimated to grow 11.4% from the previous year to $5.44. Also, the company surpassed the consensus EPS estimates in three of the trailing four quarters.
Shares of ZTS have gained 16.4% year-to-date to close the last trading session at $170.99.
ZTS’ sound fundamentals are apparent in its POWR Ratings. The stock has an overall rating of B, equating to Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, each weighted to an optimal degree.
ZTS has a B grade for Growth, Stability, Sentiment, and Quality. It is ranked #13 in the 159-stock Medical - Pharmaceuticals industry.
In addition to the POWR Ratings I’ve just highlighted, you can see ZTS’ ratings for Value and Momentum here.
Stock #2: Horizon Therapeutics Public Limited Company (HZNP)
Headquartered in Dublin, Ireland, HZNP discovers, develops, and commercializes medications catering to individuals affected by rare, autoimmune, and severe inflammatory conditions. The company's diverse portfolio encompasses 12 medicines spanning rare diseases, gout, ophthalmology, and inflammation.
On June 26, HZNP announced the Brazilian Health Regulatory Agency's (ANVISA) approval of TEPEZZA, the sole remedy for active TED in Brazil, addressing a critical unmet requirement for those affected by this vision-threatening autoimmune ailment.
This milestone could significantly expand HZNP's global market presence and strengthen its position as a provider of essential treatments for autoimmune diseases, fostering both patient well-being and corporate growth.
For the second quarter that ended June 30, 2023, HZNP’s net sales increased 7.8% year-over-year to $944.96 million. Its adjusted EBITDA rose 4.5% from the year-ago value to $320.38 million. Also, the company’s non-GAAP net income and non-GAAP EPS grew 10.4% and 12.1% from the prior year’s period to $280.06 million and $1.20, respectively.
For the fiscal year ending December 2024, analysts expect HZNP’s revenue to increase 13.5% year-over-year to $4.31 billion. The company’s EPS for next year is expected to grow 28.9% from the prior year to $5.84 billion. Moreover, the company surpassed the consensus revenue and EPS estimates in three of the trailing four quarters.
The stock has gained 75.7% over the past year, closing the last trading session at $116.25.
HZNP’s robust prospects 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.
HZNP has a B grade for Growth, Value, and Quality. It is ranked #8 out of 159 stocks within the same industry.
Click here to access the additional HZNP ratings (Momentum, Stability, and Sentiment).
Stock #1: Novartis AG (NVS)
Based in Basel, Switzerland, NVS researches, develops, manufactures, and markets healthcare products. Its Innovative Medicines arm delivers prescription medicines for patients and physicians, while the Sandoz segment focuses on producing and marketing finished dosage forms of small-molecule pharmaceuticals for third-party distribution.
On October 2, NVS reported the Phase III APPLAUSE-IgAN study's success, highlighting iptacopan's superiority over a placebo in reducing proteinuria. Iptacopan, as an innovative complement system inhibitor, holds the potential to enhance NVS' pharmaceutical portfolio, fostering its reputation as a leader in groundbreaking treatments.
On September 26, Sandoz, a division of NVS renowned for generic and biosimilar medicines, reported that the European Commission (EC) had approved the marketing of Tyruko® (natalizumab), the first and only biosimilar by Polpharma Biologics.
The authorization marks a significant stride for NVS towards alleviating the plight of multiple sclerosis patients in Europe by providing accessible, top-tier healthcare solutions.
For the second quarter that ended June 30, NVS’ net sales increased 6.6% year-over-year to $13.62 billion. Its operating income rose 31.1% from the year-ago value to $2.92 billion. Furthermore, the company’s net income and EPS grew 36.7% and 44.2% from the prior year’s quarter to $2.32 billion and $1.11, respectively.
The consensus revenue estimate of $54.44 billion for the fiscal year ending December 2023 indicates a 7.7% year-over-year improvement. Likewise, the consensus EPS estimate of $6.74 exhibits a 10.2% rise from the previous year. Furthermore, the company surpassed the consensus EPS estimate in three of four trailing quarters.
Over the past year, the stock has gained 22.9%, closing the last trading session at $96.16.
NVS’ strong outlook is apparent in its POWR Ratings. The stock has an overall rating of A, translating to a Strong Buy in our proprietary rating system.
NVS has an A grade for Growth and Stability and a B for Value and Quality. It has topped the Medical – Pharmaceuticals industry.
Click here to access additional NVS ratings for Momentum and Sentiment.
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NVS shares were trading at $95.74 per share on Thursday afternoon, down $0.42 (-0.44%). Year-to-date, NVS has gained 8.50%, versus a 12.09% rise in the benchmark S&P 500 index during the same period.
About the Author: Aanchal Sugandh
Aanchal's passion for financial markets drives her work as an investment analyst and journalist. She earned her bachelor's degree in finance and is pursuing the CFA program. She is proficient at assessing the long-term prospects of stocks with her fundamental analysis skills. Her goal is to help investors build portfolios with sustainable returns.
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