With surging healthcare demand worldwide, rising R&D spending, and advanced technologies like AI, data analytics, and IoT transforming drug discovery and development, the pharmaceutical industry is expected to witness significant growth and expansion.
Given the industry’s bright prospects, investors could consider buying fundamentally sound pharma stocks MEI Pharma, Inc. (MEIP), Hypera S.A. (HYPMY), Aurinia Pharmaceuticals Inc. (AUPH), and Bayer Aktiengesellschaft (BAYRY) for substantial gains.
The pharma industry is booming with the constant demand to develop new and innovative products, leading to greater investment in research and development by drug manufacturers. Last year, the R&D spending in the pharmaceutical sector stood at more than $260 billion worldwide.
The pharmaceuticals market revenue is expected to reach $1.16 trillion in 2024. It is estimated to grow at a CAGR of 6.2% during the forecast period (2024-2028), resulting in a volume of $1.47 trillion by 2028. Moreover, given its advanced healthcare infrastructure and strong R&D capabilities, the U.S. will lead pharmaceutical innovation worldwide.
Further, Generative AI is transforming nearly all aspects of the pharma industry, resulting in accelerated drug discovery, efficient clinical trials, and quicker regulatory approvals. The McKinsey Global Institute (MGI) expects this technology to generate $60 billion to $110 billion a year by identifying compounds for possible new drugs, speeding development, and approvals.
Besides, the Pharma 4.0 market is expected to reach $54.43 billion by 2031, growing at a CAGR of 18.3%. The market growth is driven by the rising need for personalized and precision medicine, advancements in fields like AI, data analytics, robotics, and IoT are opening new avenues for innovative drug discovery and development.
Moreover, investors’ interest in pharma stocks is evident from the iShares U.S. Pharmaceutical ETF’s (IHE) 13.6% returns over the past six months.
Considering the favorable market trends, let’s delve into the fundamentals of the top Medical - Pharmaceuticals stocks, beginning with the fourth choice.
Stock #4: MEI Pharma, Inc. (MEIP)
MEIP is a clinical-stage pharmaceutical company that focuses on the development and commercialization of various therapies for the treatment of cancer. It develops Zandelisib, an oral phosphatidylinositol 3-kinase delta inhibitor, and Voruciclib, an oral cyclin-dependent kinase 9 inhibitor. It also develops ME-344, a mitochondrial inhibitor.
In terms of forward non-GAAP P/E, MEIP is trading at 0.70x, 96.5% lower than the industry average of 19.81x. Likewise, the stock’s forward Price/Sales multiple of 0.31 is 91.2% lower than the industry average of 3.50.
MEIP’s trailing-12-month gross profit margin and EBITDA margin of 149.62% and 32.35% are 163.5% and 446.6% higher than the respective industry averages of 56.78% and 5.92%. Likewise, the stock’s trailing-12-month levered FCF margin of 8.76% is significantly higher than the industry average of 1.01%.
On April 11, MEIP reported initial data from a clinical study evaluating ME-344 in combination with Bevacizumab in relapsed metastatic colorectal cancer patients. The study reported that 25% of evaluable patients with relapsed metastatic colorectal cancer had no disease progression at Week 16.
The stated data, including progression-free survival, overall survival, and safety results of the combination, represent an important development supporting the potential of ME-344 in combination with Avastin.
During the nine months that ended March 31, 2024, MEIP’s revenues increased 37.9% from the prior year’s period to $65.30 million, and its income from operations was $33.52 million. Its net income came in at $36.18 million, or $5.43 per share, against a net loss of $21.81 million, or $3.27 per share during the year-ago period, respectively.
In addition, the company’s cash and cash equivalents and total assets totaled $2.37 million and $71.26 million as of March 31, 2024, respectively.
Street expects MEIP’s revenue for the fiscal year (ending June 2024) to increase 33.8% year-over-year to $65.30 million, and its EPS for the same period is estimated to be $3.62. Further, MEIP topped the consensus EPS estimates in three of the trailing four quarters.
MEIP’s stock declined 20.9% over the past month to close the last trading session at $3.02.
MEIP’s bright 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 Value and a B for Quality and Sentiment. MEIP is ranked #36 among 161 stocks in the Medical - Pharmaceuticals industry.
Click here to access additional MEIP ratings for Stability, Momentum, and Growth.
Stock #3: Hypera S.A. (HYPMY)
Headquartered in São Paulo, Brazil, HYPMY operates as a pharmaceutical company. It offers prescription products under brands including Adacne, Addera, apri, AmpliumG, Celestamine, Celestone, Celestone Soluspan, Cizax, deciprax, and Derive C Micro. It also offers sun protection and moisturizing skin care products under the Mantecorp Skincare brands.
In terms of forward EV/Sales, HYPMY is trading at 3.03x, 11.7% lower than the industry average of 3.43x. Further, the stock’s forward EV/EBITDA multiple of 8.70 is 32.8% lower than the industry average of 12.94. Similarly, its forward Price/Sales of 2.16 is 38.2% lower than the industry average of 3.50x.
HYPMY’s trailing-12-month EBIT margin and levered FCF margin of 31.56% and 9.96% are considerably higher than the respective industry averages of 1.21% and 1.01%. Also, the stock’s trailing-12-month gross profit margin of 62.47% is 10% higher than the 56.78% industry average.
In the first quarter that ended March 31, 2024, HYPMY’s net revenue increased 7.6% year-over-year to R$1.83 billion ($354.08 million). Its gross profit grew 2.7% from the year-ago value to R$1.11 billion ($216.19 million). The company’s EBIT from continuing operations was R$579.40 million ($112.31 million), indicating a growth of 8.1% from the previous year’s quarter.
In addition, the company’s income for the period and EPS came in at R$388.91 million ($75.39 million) and R$0.62, up 14.6% and 14.8% year-over-year, respectively.
Street expects HYPMY’s revenue to increase 6.6% year-over-year to $456.91 million for the third quarter ending September 2024. For the fiscal year 2024, the company’s revenue is expected to grow 7.2% year-over-year to $1.70 billion. Moreover, HYPMY topped the consensus revenue estimates in three of the trailing four quarters, which is impressive.
HYPMY’s stock plunged 5.3% over the past month to close the last trading session at $5.83.
HYPMY’s sound fundamentals are reflected in its POWR Ratings. The stock has an overall rating of B, translating to a Buy in our proprietary rating system.
The stock has a B grade for Value. Within the Medical - Pharmaceuticals industry, HYPMY is ranked #30 out of 161 stocks.
In addition to the POWR Ratings I’ve just highlighted, you can see HYPMY’s ratings for Stability, Sentiment, Momentum, Growth, and Quality here.
Stock #2: Aurinia Pharmaceuticals Inc. (AUPH)
Based in Edmonton, Canada, AUPH is a commercial-stage biopharmaceutical company that focuses on developing and commercializing therapies to treat various diseases with unmet medical needs. It offers LUPKYNIS for treating adult patients with active lupus nephritis.
On April 30, AUPH announced the U.S. FDA approval for an updated lupkynis® (voclosporin) label to include long-term data from the AURORA clinical program. The label now includes three-year data from the AURORA 2 double-blind, placebo-controlled extension study.
On December 20, 2023, AUPH submitted its Investigational New Drug (IND) application to the FDA for AUR200, a potential next-generation therapy for B-cell-mediated autoimmune diseases. Upon clearance, AUPH plans to initiate a Phase 1 study in the first half of 2024 to evaluate the safety, tolerability, pharmacokinetic and pharmacodynamic properties.
For the first quarter that ended on March 31, 2024, AUPH’s net revenue rose 46.2% year-over-year to $50.30 million, of which its License, collaboration, and royalty revenue increased 40% year-over-year to $48.07 million. Its interest income grew 18.7% from the year-ago value to $4.53 million.
Furthermore, the company’s cash, cash equivalents, and restricted cash came in at $64.46 million as of March 31, 2024, compared to $48.87 million as of December 31, 2023.
As per the guidance for the fiscal year 2024, the company expects net product revenue in a range of $200 to $220 million.
Analysts expect AUPH’s revenue for the fiscal year (ending December 2025) to increase 24.3% year-over-year to $283.31 million. Its EPS is estimated to grow 716.1% year-over-year to $0.47 in the same period. Also, the company surpassed the consensus revenue and EPS estimates in three of the trailing four quarters.
The stock has gained marginally over the past month to close the last trading session at $5.02.
AUPH’s promising outlook is reflected in its POWR Ratings. The stock has an overall rating of B, which equates to a Buy in our proprietary rating system.
The stock has an A grade for Growth. It also has a B grade for Quality and Value. Within the Medical - Pharmaceuticals industry, AUPH is ranked #29 out of 161 stocks.
Click here to access additional ratings of AUPH for Momentum, Stability, and Sentiment.
Stock #1: Bayer Aktiengesellschaft (BAYRY)
BAYRY is a global life science company headquartered in Leverkusen, Germany. The company operates in Pharmaceuticals; Consumer Health; and Crop Science segments. It offers prescription products primarily for cardiology and women's health care, specialty therapeutics, and diagnostic imaging equipment and digital solutions.
On April 30, BAYRY and German-based life science company Evotec updated the focus of their strategic collaboration to developing innovative precision treatments for cardiovascular diseases (CVDs). The partnership aims to identify and validate novel targets to build a portfolio of precision cardiology therapeutics by using human induced pluripotent stem cells (iPSCs).
On March 14, BAYRY and Aignostics GmbH entered into a strategic multi-year research collaboration on several artificial intelligence (AI)-powered approaches with applications in precision oncology drug research and development.
The collaboration aims to identify novel targets with strong disease links and to accelerate clinical development, strengthening BAYRY’s precision oncology development portfolio
During the fourth quarter that ended December 31, 2023, BAYRY reported sales of €11.86 billion ($12.77 billion), of which its sales from the North America region were €3.79 billion ($4.08 billion). The company’s EBIT grew 52.9% from the year-ago value to €2.19 billion ($2.36 billion).
Furthermore, the company’s net income and EPS came in at €1.34 billion ($1.44 billion) and €1.36 per share, up 118.8% and 119.3% year-over-year, respectively. Its free cash flow increased 200% from the prior year’s quarter to €4.26 billion ($4.59 billion).
For the third quarter ending December 2024, Street expects BAYRY’s EPS to increase 217.6% year-over-year to $0.32, and its revenue is expected to grow marginally year-over-year to $11.08 billion. Also, the company has topped the consensus EPS estimates in three of the trailing four quarters.
Shares of BAYRY have surged 5.7% over the past month to close the last trading session at $7.81.
BAYRY’s robust 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 stock has an A grade for Value and a B for Growth. BAYRY is ranked #28 out of 161 stocks in the same industry.
To access additional BAYRY’s ratings for Sentiment, Stability, Quality, and Momentum, click here.
What To Do Next?
43 year investment veteran, Steve Reitmeister, has just released his 2024 market outlook along with trading plan and top 11 picks for the year ahead.
BAYRY shares rose $0.11 (+1.41%) in premarket trading Monday. Year-to-date, BAYRY has declined -15.13%, versus a 10.25% rise in the benchmark S&P 500 index during the same period.
About the Author: Rjkumari Saxena
Rajkumari started her career as a writer but gradually shifted her focus to financial journalism, leveraging her educational background in Commerce. Fascinated by the interplay of business and economic shifts in equities, she aspires to evolve as an analyst. With a knack for simplifying complex financial concepts, her mission is to empower investors with insights that lead to profitable decisions.
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