The increasing prevalence of chronic diseases, rising healthcare expenditures, and the rapid adoption of technological innovations transforming different aspects of drug discovery, development, and distribution are expected to position the pharmaceutical industry for continued growth and expansion.
Given this backdrop, it could be wise to consider fundamentally strong pharma stocks Collegium Pharmaceutical, Inc. (COLL), Green Thumb Industries Inc. (GTBIF), and Bristol-Myers Squibb Company (BMY), primed for investment opportunities this month.
The growth of the pharmaceutical sector is propelled by the uptick in workplace-related ailments, an expansion in pharmaceutical manufacturing capabilities, a rise in demand for precision medicines and targeted therapies, and growing investments in research and development (R&D) to bring new drugs to market.
Looking ahead, the U.S. pharmaceutical market is expected to experience a steady annual growth rate of 6% from 2024 to 2028, resulting in a market volume of $802.80 billion by 2028.
Moreover, pharmaceutical manufacturing companies are adopting digitization and automation techniques to ensure better quality and compliance with regulations, minimizing manual errors and variability. Therefore, the global pharma 4.0 market is expected to reach $62.70 billion by 2032, growing at a CAGR of 18.6%.
Further, IQVIA reports that U.S. medicine spending is expected to grow between 6-9% on a list price basis over the next five years. This expansion will be fuelled by the uptake of recently introduced innovative products, with an anticipated average of 50-55 new medications hitting the market annually over the next five years.
Additionally, investors’ interest in pharma stocks is evident from iShares U.S. Pharmaceutical ETF’s (IHE) 15.1% returns over the past six months.
Given these favorable industry trends, let’s look at the fundamentals of the top Medical – Pharmaceuticals stocks, beginning with the third choice.
Stock #3: Collegium Pharmaceutical, Inc. (COLL)
COLL is a specialty pharmaceutical company that develops and commercializes medicines for pain management. Its portfolio includes Xtampza ER, an abuse-deterrent and oral formulation of oxycodone; Nucynta ER and Nucynta IR, extended-release and immediate-release formulations of tapentadol; and Belbuca, a buccal film that contains buprenorphine.
On May 13, COLL entered into an Accelerated Share Repurchase agreement (ASR) with Jefferies LLC to repurchase $35 million of the company’s common stock. COLL will execute the ASR as part of the $150 million share repurchase program authorized by its Board of Directors in January 2024. COLL will have $115 million remaining under the program upon its completion.
On April 29, COLL announced an authorized generic agreement with Hikma Pharmaceuticals USA Inc., under which COLL will manufacture and supply Hikma with all authorized generic products Nucynta® and Nucynta® ER for sale exclusively.
“Our agreement with Hikma bolsters the value of the Nucynta Franchise through 2025 and beyond,” said Joe Ciaffoni, President and CEO of COLL. “Collegium is pleased to work with Hikma, an industry leader, to ensure that these important products continue to be manufactured to the highest quality standards and remain broadly and consistently accessible to appropriate patients.”
COLL’s trailing-12-month gross profit margin of 86.08% is 52.5% higher than the industry average of 56.43%. Further, the stock’s trailing-12-month EBIT margin of 34.71% is significantly higher than the industry average of 1.19%. Also, COLL’s trailing-12-month EBITDA margin of 60.53%% is higher than the industry average of 5.29%.
For the first quarter that ended March 31, 2024, COLL’s net product revenues increased marginally year-over-year to $144.92 million. The company’s adjusted EBITDA grew 5.4% from the prior year’s quarter to $92.38 million. Its adjusted net income was $58.83 million, up 13.9% from the previous year’s period.
Furthermore, the company’s adjusted earnings per share increased 9.8% year-over-year to $1.45.
Analysts expect COLL’s revenue for the second quarter (ending June 2024) to increase 5.3% year-over-year to $142.76 million. The company’s EPS is expected to grow 16% year-over-year to $1.46 for the same period. Furthermore, the company has surpassed the consensus EPS estimates in three of the trailing four quarters, which is impressive.
COLL’s solid 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 POWR Ratings are calculated by considering 118 different factors, each weighted to an optimal degree.
The stock has an A grade for Quality and Value and a B for Growth. COLL is ranked #20 among 160 stocks in the Medical - Pharmaceuticals industry.
Click here to access additional COLL ratings (Momentum, Sentiment, and Stability).
Stock #2: Green Thumb Industries Inc. (GTBIF)
GTBIF manufactures, distributes, markets, and sells cannabis products for medical and adult use. It operates through two segments: Retail and Consumer Packaged Goods.
On February 29, 2024, GTBIF announced the opening of its 15th retail location in Florida and 92nd nationwide, RISE Dispensary Dunnellon. The new store will offer medical cannabis patients high-quality THC and CBD products, like RYTHM premium flower and full spectrum vapes, Dogwalkers pre-rolls, Good Green flower, and &Shine flower, pre-rolls, vapes, and chews.
The new store openings are expected to expand GTBIF’s retail footprint, positioning the company for robust growth and profitability in the cannabis market.
GTBIF’s trailing-12-month EBIT margin of 20.02% is significantly higher than the industry average of 1.19%. Likewise, the stock’s trailing-12-month EBITDA and levered FCF margin of 29.49% and 4.03% are 457.4% and 296.2% higher than the industry averages of 5.29% and 1.02%, respectively.
For the fiscal first quarter, which ended on March 31, 2024, GTBIF’s revenues increased 11% year-over-year to $275.81 million, and its gross profit grew 16.2% year-over-year to $144.93 million. Net income attributable to GTBIF increased 240% from the prior year’s quarter to $31.08 million.
Furthermore, its net income per share grew 225% year-over-year to $0.13. Its adjusted EBITDA increased 18.8% from the year-ago value to $90.55 million.
Analysts predict GTBIF’s revenue for the second quarter (ending June 2024) to increase 10% year-over-year to $277.69 million, and its EPS for the same quarter is projected to grow 3.5% year-over-year to $0.05. Moreover, the company has an excellent earnings surprise history, surpassing consensus revenue and EPS estimates in three of the trailing four quarters.
Shares of GTBIF have surged 95% over the past nine months to close the last trading session at $13.03.
GTBIF’s bright prospects are reflected in its POWR Ratings. The stock has an overall rating of B, equating to a Buy in our proprietary rating system.
GTBIF has an A grade for Sentiment and a B for Stability and Quality. It is ranked #18 in the same industry.
In addition to the POWR Ratings we’ve stated above, we also have GTBIF ratings for Momentum, Growth, and Value. Get all GTBIF ratings here.
Stock #1: Bristol-Myers Squibb Company (BMY)
BMY discovers, develops, licenses, manufactures, markets, distributes, and sells biopharmaceutical products globally. The company provides products for hematology, oncology, immunology, cardiovascular, fibrotic, and neuroscience diseases. Its products include Eliquis, Pomalyst/Imnovid, Orencia, Empliciti, and Sprycel.
On May 6, 2024, BMY received accelerated approval from the U.S. Food and Drug Administration (FDA) for Breyanzi (lisocabtagene maraleucel), a CD19-directed chimeric antigen receptor (CAR) T cell therapy, for treating adult patients with relapsed or refractory follicular lymphoma (FL) who have received at least two prior lines of systemic therapy.
On May 1, BMY and Editas Medicine, Inc. (EDIT), a clinical-stage gene editing company, announced a two-year extension to their partnership under which the parties may research, develop, and commercialize autologous and allogeneic alpha-beta T cell medicines for treating cancer and autoimmune diseases.
Under the collaboration, BMY had opted into 13 distant programs across 11 gene targets.
BMY’s trailing-12-month gross profit margin of 76.03% is 34.7% higher than the 56.43% industry average. Its 18.30% trailing-12-month EBIT margin is significantly higher than the 1.19% industry average. Likewise, the stock’s 39.91% trailing-12-month EBITDA margin is 39.9% higher than the 5.29% industry average.
During the first quarter that ended March 31, 2024, BMY’s total revenues increased 4.7% year-over-year to $11.87 billion, and its net product sales were $1156 billion, up 4.6% from the prior year’s quarter. Its gross profit rose 1.8% year-over-year to $8.93 billion. In addition, the company’s cash and cash equivalents were $9.33 billion as of March 31, 2024.
Street expects BMY’s revenue for the fiscal year ending December 2025 to increase marginally year-over-year to $46.15 billion. Its EPS is expected to increase 1,211.4% year-over-year to $6.94 for the same year. In addition, the company surpassed consensus EPS and revenue estimates in three of the trailing four quarters.
BMY’s stock has declined 8.2% over the past month to close the last trading session at $44.55.
BMY’s POWR Ratings reflect its promising outlook. The stock has an overall rating of B, which translates to a Buy in our proprietary rating system.
The stock has a B grade for Value and Growth. Within the same industry, BMY is ranked #15.
Click here to access additional ratings of BMY for Stability, Quality, Momentum, and Sentiment.
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.
BMY shares rose $0.05 (+0.11%) in premarket trading Thursday. Year-to-date, BMY has declined -11.11%, versus a 11.93% rise in the benchmark S&P 500 index during the same period.
About the Author: Nidhi Agarwal
Nidhi is passionate about the capital market and wealth management, which led her to pursue a career as an investment analyst. She holds a bachelor's degree in finance and marketing and is pursuing the CFA program. Her fundamental approach to analyzing stocks helps investors identify the best investment opportunities.
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