The pharmaceutical market is expected to grow significantly in the coming years, due to technological innovation and the growing demand for personalized medicines. To that end, affordable pharmaceutical stocks ACADIA Pharmaceuticals (ACAD), Astellas Pharma (ALPMY), and Spero Therapeutics (SPRO), trading below $20, could be solid buys now. Continue reading….
The pharmaceutical industry is experiencing a transformative boom, leveraging digital platforms, big data analytics, cloud computing and artificial intelligence to drive innovation. Furthermore, the growing demand for personalized medicines and increased research and development activities are expected to further boost the already thriving sector.
Therefore, fundamentally sound pharmaceutical stocks ACADIA Pharmaceuticals Inc. (ACAD), Astellas Pharma Inc. (ALPS) and Spero Therapeutics, Inc. (PRO), trading below $20, could be a wise addition to your portfolio now.
Global use of medicines has increased by 14% in the last five years and a It is expected to increase by 12% until 2028, bringing annual usage to 3.80 trillion defined daily doses. The increasing prevalence of chronic diseases and the growing demand for medical care in a context of an increasing aging population have contributed to the future resilience of the pharmaceutical market.
With the increase in demand for the treatment of chronic diseases such as cancer, diabetes and others, along with increased research and development activity for new drugs and treatments, the drug discovery computing market is expected to increase reach $7.90 billion by 2032, growing at a CAGR of 10.5%. These growing trends also include the growth and demand for personalized medicines, which have strengthened the pharmaceutical market.
According to the American Society of Health-System Pharmacists, the continuing drug shortages in the United States reached an all-time high since 2001, with 323 drugs at the end of the first quarter of this year. With the growing demand for drugs, this shortage will potentially increase prices.
Additionally, pharmaceutical companies are adopting technologies for customized drug manufacturing, which require adaptable facilities. In 2023, AI has proven crucial in drug discovery and is expected to continue improving research efficiency in 2024.
Considering these favorable trends, let’s take a look at the fundamentals of the three Medical – Pharmaceutical actions, starting from the third choice.
Action no. 3: ACADIA Pharmaceuticals Inc. (ACAD)
ACAD develops and commercializes innovative medicines that address unmet medical needs related to central nervous system (CNS) disorders and rare diseases in the United States
In terms of EV/future sales, ACAD trades at 2.62x, 25.9% lower than the industry average of 3.54x. The stock’s forward price/sales multiple of 3.02 is 17.8% lower than the industry average of 3.67.
Over the past three and five years, its revenues have grown at a CAGR of 18% and 26.6%, respectively, while its total assets have grown at a CAGR of 6.8% over the past five years.
For the fiscal fourth quarter ended December 31, 2023, ACAD’s total revenue increased 69.3% year-over-year to $231.04 million. Furthermore, its operating income was $34.94 million, compared to loss arising from operations of $46.06 million in the prior-year quarter.
For the same quarter, net income and earnings per share were $45.80 million and $0.28, compared to net loss and net loss per share of $41.73 million and 0 $.26, respectively.
Street expects ACAD’s revenue for the fiscal first quarter ending March 2024 to increase 76.3% year-over-year to $208.82 million. Its EPS is expected to be $0.06 for the same quarter. The company has topped consensus revenue estimates in three of the trailing four quarters, which is impressive.
The stock fell 1.8% intraday to close the latest trading session at $17.41.
ACAD POWR Ratings reflect his positive outlook. The stock has an overall rating of B, equivalent to Buy in our proprietary rating system. POWR Ratings are calculated by considering 118 distinct factors, each optimally weighted.
ACAD is rated A for Growth and B for Value and Quality. Inside the Medical – Pharmaceutical sector, is in 28th place out of 160 stocks.
To view additional POWR ratings for Momentum, Stability, and Sentiment for ACAD, Click here.
Stock no. 2: Astellas Pharma Inc. (ALPS)
Headquartered in Tokyo, Japan, ALPMY manufactures, markets, imports and exports pharmaceutical products in Japan and internationally. The company mainly operates in the pharmaceutical products sector.
On March 28, ALPMY announced that the Center for Drug Evaluation (CDE) of the China National Medical Products Administration (NMPA) accepted the Supplemental Biologics License Application (sBLA) for enfortumab vedotin with KEYTRUDA (pembrolizumab) as a combination therapy for first-line treatment of adult patients with previously untreated locally advanced or metastatic urothelial cancer (la/mUC).
If approved, enfortumab vedotin with KEYTRUDA has the potential to change the therapeutic paradigm, becoming the first combination treatment to offer an alternative to platinum-containing chemotherapy, the current standard of care in first-line treatment of LA/mUC.
On March 26, ALPMY announced that the U.S. Centers for Medicare and Medicaid Services has assigned a unique, permanent Healthcare Common Procedure Coding System (HCPS) J-code for IZERVAY (avacincaptad pegol intravitreal solution) for the treatment of atrophy Geographic secondary to age-related macular degeneration. The new J code, J2782, is effective April 1.
Its annualized dividend rate of $0.47 per share translates to a dividend yield of 4.62% on the current share price. Its four-year average return is 2.76%.
In terms of EV/future sales, ALPMY trades at 2.17x, 38.7% lower than the industry average of 3.54x. The stock’s forward price/sales multiple of 1.80 is 51.1% lower than the industry average of 3.67.
Over the past three and five years, its revenues have grown at a CAGR of 7.2% and 3.4%, respectively, while its total assets have grown at a CAGR of 13.6% and 11.8% in the same periods.
For the nine months ended December 31, 2023, ALPMY’s revenue and gross profit increased 2.1% and 3.4% year-over-year to 1.19 trillion yen (7.77 billion yen), respectively dollars) and 969.81 billion yen (6.33 billion dollars). Additionally, its core operating profit stood at 149.62 billion yen ($977.26 million).
In the same period, core earnings and basic earnings per share were 120.51 billion yen ($787.09 million) and 67.20 yen, respectively.
Street expects ALPMY’s revenue for the fiscal year ending March 2024 to increase 124.2% year-over-year to $10.27 billion. Its EPS is expected to be $0.24 for the same period. The company topped consensus revenue estimates in three of the trailing four quarters.
The stock gained marginally intraday to close the latest trading session at $10.29.
ALPMY’s POWR ratings reflect this promising outlook. It has an overall rating of B, which translates to Buy in our proprietary rating system.
ALPMY is graded A for stability and B for value. Within the same industry, it is ranked 21st.
For ALPMY’s other ratings (growth, momentum, sentiment and quality), Click here.
Action no. 1: Spero Therapeutics, Inc. (PRO)
SPRO identifies, develops and commercializes new treatments for multidrug-resistant (MDR) bacterial infections and rare diseases in the United States
On February 28, SPRO received clearance from the U.S. Food and Drug Administration (FDA) for its Investigational New Drug Application to evaluate SPR206 in a Phase 2 clinical trial. SPR206 is a new, next-generation polymyxin antibiotic , administered intravenously (IV), for the treatment of hospital-acquired, ventilator-associated bacterial pneumonia caused by MDR Gram-negative bacterial infections.
On January 2, SPRO announced the first patient, first visit for PIVOT-PO, a pivotal global Phase 3 clinical trial of tebipenem HBr in patients with complicated urinary tract infections, including acute pyelonephritis.
In terms of EV/future sales, SPRO trades at 0.43x, 87.8% lower than the industry average of 3.54x. The stock’s forward price/sales multiple of 1.90 is 48.3% lower than the industry average of 3.67.
Over the past three and five years, its revenues have grown at a CAGR of 123.2% and 92.1%, respectively, while its total assets have grown at a CAGR of 5.9% and 7.2% over the same periods .
For the fiscal fourth quarter ended December 31, 2023, SPRO’s total revenue and net income attributable to SPRO common stockholders increased 55% and 91.2% year over year to $73.52 million and 51.19 million dollars.
As of December 31, 2023, SPRO’s total current assets, accrued liabilities and other current liabilities were $131.21 million and $6.56 million, respectively, compared to $113.57 million and $8.97 million as of December 31 December 2022.
Street expects SPRO’s revenue for the fiscal first quarter ending March 2024 to increase 940.8% year-over-year to $21.53 million. The company beat consensus revenue estimates in each of the trailing four quarters and consensus EPS estimates in three of the trailing four quarters.
The stock gained 46.2% over the past six months to close the latest trading session at $1.71. In the last three months it has gained 17.1%.
SPRO’s strong outlook is reflected in its POWR Ratings. The stock has an overall rating of B, equivalent to Buy in our proprietary rating system.
SPRO is rated A for Value and B for Feel and Quality. It is ranked 18th in the same industry.
Click here for additional POWR ratings for SPRO (Growth, Momentum and Stability).
What to do next?
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ALPMY shares were unchanged in premarket trading Friday. Year to date, ALPMY has fallen -13.53%, compared to a 9.32% rise in the benchmark S&P 500 index over the same period.
About the author: Neha Panjwani
Since her school days, Neha had a deep fascination for finance, a passion that drove her towards a career as an investment analyst after completing her bachelor’s degree in commerce. Currently enrolled in the CFA program, Neha is dedicated to further enriching her understanding of investment fundamentals. Neha’s primary focus is to help retail investors identify optimal investment opportunities by diligently evaluating crucial aspects of financial instruments, with a focus on stocks and ETFs. She is committed to empowering people to make informed and strategic investment decisions in the dynamic world of finance.
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