The pharmaceutical industry is well-positioned for robust growth, driven by growing healthcare expenditure globally and the rapid adoption of digital technologies. Given the industry’s tailwinds, fundamentally strong pharma stocks, Collegium Pharmaceutical (COLL), Eton Pharmaceuticals (ETON), and GSK plc (GSK) could be ideal buys this month. Continue Reading….
The pharmaceutical industry is growing at a rapid pace with a significant surge in healthcare expenditure worldwide due to the rising geriatric population and increasing prevalence of chronic illnesses. Also, consistent research and development (R&D) efforts and rapid technological advancements boost the industry’s prospects.
Given the industry’s promising outlook, it could be wise to buy quality pharma stocks Collegium Pharmaceutical, Inc. (COLL), Eton Pharmaceuticals, Inc. (ETON), and GSK plc (GSK) in December for solid gains.
As per Statista, revenue in the pharmaceutical market is projected to reach $1.12 trillion in 2023. Further, the market is expected to grow at a CAGR of 5.8% during the forecast period (2023-2028), resulting in a market volume of $1.48 trillion by 2028. In a global comparison, the United States will generate the majority of revenue (approximately $603.40 billion this year).
In recent years, the pharma industry has undergone a swift transformation with a greater focus on research and development. On average, pharma companies spend more than 21% of their revenues on R&D for the formation and discovery of new drugs and solutions. Last year, the R&D expenditure of PhRMA members within the U.S. pharmaceutical industry totaled $101 billion.
The global pharmaceutical manufacturing market is estimated to reach $929.90 billion, expanding at a CAGR of 7.6% from 2023 to 2030. The market experienced significant growth due to numerous technological advancements, cost-effective manufacturing methods, and increased R&D spending.
Advanced technologies like AI, genetic editing, big data analysis, and additive manufacturing are rapidly being adopted to improve efficiency and productivity in pharmaceutical manufacturing processes. The global AI in pharmaceutical market is expected to reach $11.81 billion by 2032, growing at a CAGR of 29.30% during the forecast period (2023–2032).
With these encouraging trends in mind, let’s look at the fundamentals of the three best Medical – Pharmaceuticals stocks, beginning with the third choice.
Stock #3: Collegium Pharmaceutical, Inc. (COLL)
COLL is a specialty pharmaceutical company that develops and commercializes pain management medicines. The company’s portfolio includes Xtampza ER, an abuse-deterrent and oil formulation of oxycodone; Nucynta ER and Nucynta IR, which are formulations of tapentadol; Belbuca, a buccal film that contains buprenorphin; and Symproic.
On November 9, COLL entered into an Accelerated Share Repurchase (ASR) agreement with Jefferies LLC to repurchase $25 million of the company’s common stock. The company is executing the ASR as part of the $100 million share repurchase program authorized by its Board of Directors in January 2023.
“Our record financial performance in 2023 year-to-date puts Collegium on track to deliver a banner year. Our financial strength, underscored by robust cash generation, enables us to execute on our capital deployment strategy,” said Joe Ciaffoni, President and Chief Executive Officer of Collegium.
On August 24, COLL was granted New Patient Population exclusivity for Nucynta®, an immediate-release formulation of tapentadol, by the U.S. Food and Drug Administration (FDA). This grant extends the period of U.S. exclusivity for Nucynta from June 27, 2025, to July 3, 2026.
The grant of additional exclusivity recognizes the importance of Nucynta in treating acute, severe pain.
COLL’s net product revenues increased 7.6% year-over-year to $136.71 million in the third quarter that ended September 30, 2023. Its gross profit grew 36.5% from the year-ago value to $80.31 million. Its income from operations rose 119.9% year-over-year to $45.01 million. Its adjusted EBITDA was $89.40 million, up 19.4% from the prior year’s quarter.
In addition, COLL’s adjusted net income rose 29.3% from the prior year’s quarter to $55 million, and its adjusted EPS came in at $1.34, an increase of 21.9% year-over-year.
The company updated its full-year 2023 guidance. COLL reaffirmed net product revenues to $565.0 million-$570.0 million, and it expects its adjusted EBITDA to be in the range of $360 million and $365 million.
Street expects COLL’s revenue for the fourth quarter (ending December 2023) to increase 14% year-over-year to $147.80 million. Further, the consensus EPS estimate for the current quarter of $1.40 indicates an improvement of 28.8% year-over-year.
Shares of COLL have gained 27.1% over the past six months and 24.3% over the past year to close the last trading session at $27.18.
COLL’s solid prospects are 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 Quality and B for Growth and Value. COLL is ranked #14 out of 157 stocks in the Medical – Pharmaceuticals industry.
Click here to access additional COLL ratings for Stability, Sentiment, and Momentum.
Stock #2: Eton Pharmaceuticals, Inc. (ETON)
ETON is a specialty pharmaceutical company focusing on developing, acquiring, and commercializing pharmaceutical products for rare diseases. The company’s product portfolio includes ALKINDI SPRINKLE, Carglumic Acid, Betaine Anhydrous, dehydrated alcohol injection, and Zeneo hydrocortisone autoinjector.
On October 4, ETON announced the acquisition of the FDA-approved ultra-rare disease product Nitisinone Capsules via Oakrum Pharma, LLC’s Chapter 11 bankruptcy proceeding. This acquired product will treat hereditary tyrosinemia type 1 (HT-1) in combination with dietary restriction of tyrosine and phenylalanine.
Nitisinone is ETON’s fourth FDA-approved product and advances the company toward its goal of having ten commercial rare disease products on the market by 2025. Additionally, this product shares the same metabolic geneticist prescriber base as its Carglumic Acid and Betaine products, allowing the company to leverage its existing sales forces and prescribers’ base.
In the third quarter that ended September 30, 2023, ETON’s net revenue increased 118.3% year-over-year to $7.03 million. Its gross profit rose 118.2% from the year-ago value to $4.40 million. The company generated $1.32 million in positive cash flow from operating activities against the negative $9.93 in the prior year’s quarter.
Furthermore, the company’s cash and cash equivalents as of September 30, 2023, were $22.07 million, compared to $13.38 million as of September 30, 2022. Its total assets stood at $31.52 million, compared to $25.03 million as of December 31, 2022.
Analysts expect ETON’s revenue for the fiscal year (ending December 2023) to increase 43.9% year-over-year to $30.58 million. Similarly, for the fiscal year 2024, the company’s revenue is expected to grow 63.9% year-over-year to $50.12 million. Also, the company topped the consensus revenue estimates and EPS estimates in three of the trailing four quarters.
ETON’s stock gained 25.6% year-to-date and 23.1% over the past year to close the last trading session at $3.63.
ETON’s sound fundamentals are reflected in its POWR Ratings. 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 Quality and B for Growth and Value. ETON is ranked #13 of 157 stocks in the Medical- Pharmaceuticals industry.
To access additional ratings of ETON for Momentum, Stability, and Sentiment, click here.
Stock #1: GSK plc (GSK)
Headquartered in Brentford, the United Kingdom, GSK operates in the research, development, and manufacturing of vaccines and specialty medicines in the United Kingdom, the U.S., and internationally. The company functions through four segments: Pharmaceuticals; Pharmaceuticals R&D; Vaccines; and Consumer Healthcare.
On November 27, GSK announced positive results from a planned interim efficacy analysis of the DREAMM-7 head-to-head phase III trial evaluating belantamab mafodotin as a second-line treatment for relapsed or refractory multiple myeloma.
The trial showed that belantamab mafodotin when combined with bortezomib plus dexamethasone (BorDex) extended the time to disease progression or death.
On October 31, GSK and Arrowhead Pharmaceuticals Inc. (ARWR) entered an agreement with Janssen Pharmaceuticals, Inc. (Janssen) to transfer exclusive worldwide rights to further develop and commercialize JNJ-3989 to GSK.
JNJ-3989 is an investigational hepatitis B virus-targeted small interfering ribonucleic acid (siRNA) therapeutic that GSK intends to evaluate in a sequential regimen with bepirovirsen. This deal is expected to benefit GSK significantly.
Also, on September 18, GSK announced the FDA approval of Ojjaara (momelotinib), a drug developed for treating intermediate or high-risk myelofibrosis in adults with anaemia. Ojjaara was acquired by GSK in a $1.90 billion buyout of Sierra Oncology (SRRA).
The drug is currently the only approved medicine for both newly diagnosed and previously treated myelofibrosis patients with anaemia.
GSK’s turnover increased 4.1% year-over-year to £8.15 billion ($10.28 billion) for the third quarter that ended September 30, 2023. Its adjusted operating profit rose 6.4% from the year-ago value to £2.77 billion ($3.50 billion). Cash generated from operations for the quarter was £2.51 billion ($3.15 billion).
In addition, the company’s adjusted profit before taxation rose 7.8% from the year-ago value to £2.62 billion ($3.29 billion). Also, its adjusted earnings per share from continuing operations was 50.40p, up 7.5% from the prior year’s quarter.
The company updated its full-year 2023 guidance. GSK affirmed its turnover growth of 12%-13%, compared with the previously forecasted 8-10%. Further, its adjusted operating profit is expected to grow between 13%-15%, previously predicted to be 11%-13%.
Also, GSK updated EPS growth to 17%-20%, compared to the previous guidance of 14%-17%.
Analysts expect GSK’s revenue and EPS for the fourth quarter (ending December 2023) to increase 3.7% and 20.3% year-over-year to $9.47 billion and $0.76, respectively. Also, the company surpassed the consensus EPS and revenue estimates in all of the trailing four quarters, which is impressive.
GSK’s stock gained 4.7% over the past six months and 2% year-to-date to close the last trading session at $36.
GSK’s POWR Ratings reflect this robust outlook. 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 Value and a B for Quality. It is ranked #9 of 157 stocks within the same industry.
Click here to see additional POWR Ratings of GSK for Sentiment, Growth, Stability, and Momentum.
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GSK shares fell $0.13 (-0.36%) in premarket trading Friday. Year-to-date, GSK has gained 6.47%, versus a 21.15% 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.
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