The pharmaceutical sector is on an upward trajectory, fuelled by the incorporation of advanced technologies and new drug discoveries. Moreover, the growing prevalence of chronic health conditions, an increasingly elderly population, and a heightened awareness of healthcare needs combine to fortify the promise for this sector’s continued growth.
To that end, attractively valued stocks of fundamentally strong pharma companies Voyager Therapeutics, Inc. (VYGR), Sanofi (SNY), and Pacira BioSciences, Inc. (PCRX), with an overall rating of B (Buy) in our proprietary POWR Ratings system could be solid buys now.
The pharma industry’s long-term prospects look promising, with the continual expansion of the global market for quality medicinal solutions and therapies. The industry’s robust growth underlines the escalating global health needs and reaffirms the innovative wave of drug development. The global drug discovery market is projected to reach $181.40 billion by 2032, growing at a CAGR of 8.5%.
Global spending on medicine grew 35% over the past five years, and it is projected to surge around 38% by 2028, reflecting the growing demand for medicinal products. An increased need for medicines inevitably presents an opportunity for potential price increases, providing a reliable revenue stream and enhancing profit margins for companies within the industry. Moreover, pharma firms generally maintain profitable margins due to the constant demand for their products, making the sector more resistant to economic downturns.
The pharma companies’ emphasis on precision medicine and personalized treatment promises improved response rates for patients, minimized side effects, and reduced treatment durations. Precision medicine caters to factors such as patient age, genetic profile, and individual characteristics.
An amplified incidence of chronic illnesses like cancer and diabetes, along with a growing elderly demographic vulnerable to serious diseases, will invariably work as catalysts driving the growth of the pharma industry.
Furthermore, scientific pursuits are expected to yield new treatment options through the application of cutting-edge technology, improving healthcare standards for Americans and reshaping the future of the pharmaceutical landscape.
Considering these conducive trends, let's take a look at the fundamentals of the three Medical - Pharmaceuticals stocks, starting with number 3.
Stock #3: Voyager Therapeutics, Inc. (VYGR)
VYGR, a gene therapy company, focuses on developing treatments and next-generation platform technologies. The company’s lead clinical candidate is the VY-AADC, which is in an open-label Phase 1 clinical trial for treating Parkinson’s disease.
In January, VYGR announced a strategic collaboration and capsid license agreement with Novartis Pharma AG, a subsidiary of Novartis AG (NVS), to advance potential gene therapies for Huntington’s disease (HD) and spinal muscular atrophy (SMA).
Combining the proven capabilities of NVS in gene therapy development and commercialization with VYGR’s next-generation TRACER capsids and payloads could enable the advancement of important new therapies for patients. In addition, the consideration received by VYGR from this collaboration will strengthen its balance sheet and extend its runway into mid-2026.
In terms of forward EV/Sales, VYGR is trading at 1.20x, 68.3% lower than the 3.79x industry average. Likewise, its forward EV/EBITDA of 2.22x is 83.5% lower than the 13.47x industry average.
VYGR’s trailing-12-month EBIT and levered FCF margins of 27.39% and 20.50% are significantly higher than the industry averages of 0.53% and 0.19%, respectively. Its 0.66x trailing-12-month asset turnover ratio is 68.9% higher than the 0.39x industry average.
During the nine months that ended September 30, 2023, VYGR’s collaboration revenue increased 276.7% year-over-year to $159.95 million. Its operating income for the period amounted to $67.95 million, compared to operating of $26.27 million in the year-ago period.
The company’s net income and net income per share amounted to $75.94 million and $1.78, respectively, compared to a net loss and loss per share of $22.78 million and $0.59 in the year-ago period. Moreover, as of September 30, 2023, its cash, cash equivalents, and marketable debt securities came at $252.94 million, compared to $118.85 million as of December 31, 2022.
Street expects VYGR’s revenue to come in at $45.31 million for the fiscal year ending December 2024.
The stock has gained 4% intraday to close the last trading session at $7.56. Over the past three months, it gained 15.1%.
VYGR’s POWR Ratings reflect its positive prospects. The stock has an overall B rating, equating to Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 distinct factors, with each factor weighted to an optimal degree.
The stock has an A grade for Value and a B for Quality. It is ranked #32 out of 163 stocks within the Medical – Pharmaceuticals industry.
Beyond what is stated above, we’ve also rated VYGR for Growth, Momentum, Stability, and Sentiment. Get all VYGR ratings here.
Stock #2: Sanofi (SNY)
SNY, headquartered in Paris, France, engages in the research, development, manufacture, and marketing of therapeutic solutions in the United States, Europe, and internationally. It operates through Pharmaceuticals, Vaccines, and Consumer Healthcare segments.
On January 23, SNY and Inhibrx, Inc., a publicly traded clinical-stage biopharma company focused on developing a broad pipeline of novel biologic therapeutic candidates, have entered into a definitive agreement under which SNY has agreed to acquire Inhibrx following the spin-off of non-INBRX-101 assets into New Inhibrx.
The addition of INBRX-101 as a high-potential asset to its rare disease portfolio reinforces SNY’s strategy to commit to differentiated and potential best-in-class products. With its expertise in rare diseases and growing presence in immune-mediated respiratory conditions, INBRX-101 will complement SNY’s approach to deploying R&D efforts in key areas of focus and addressing the needs of underserved AATD patients and communities.
SNY's board of directors proposed a dividend of €3.76 per share, which could be the 29th consecutive year of dividend growth. Its annualized dividend translates to a dividend yield of 3.81%.
Its four-year average dividend yield is 3.71%. The company’s dividend payouts have grown at a CAGR of 3.8% over the past three years and 1.2% over the past five years.
In terms of forward EV/Sales, SNY is trading at 2.79x, 26.4% lower than the 3.79x industry average. Likewise, its forward EV/EBIT of 10.52x is 38.8% lower than the 17.20x industry average.
SNY’s trailing-12-month EBIT and levered FCF margins of 21.99% and 19.13% are significantly higher than the industry averages of 0.53% and 0.19%, respectively. Moreover, its trailing-12-month cash from operations came at $11.20 billion, compared to the industry average of negative $18.08 million.
For the fiscal year that ended December 31, 2023, SNY’s net sales amounted to €43.07 billion ($46.63 billion), up marginally year-over-year, while its gross profit grew 1.6% from the year-ago quarter to €32.21 billion ($34.87 billion). Its operating income stood at €7.88 billion ($8.53 billion). Moreover, net income attributable to SNY and earnings per share came at €5.40 billion ($5.85 billion) and €4.31 per share, respectively.
Street expects SNY’s revenue and EPS to come at $46.98 billion and $4.31, respectively, for the fiscal year ending December 2024.
Over the past three months, the stock has gained 7% to close the last trading session at $48.41.
SNY’s solid fundamentals are reflected in its POWR Ratings. The stock has an overall rating of B, which equates to a Buy in our proprietary rating system.
It has an A grade for Stability and a B for Value. It is ranked #31 within the same industry.
To see SNY’s additional Growth, Momentum, Sentiment, and Quality ratings, click here.
Stock #1: Pacira BioSciences, Inc. (PCRX)
PCRX provides non-opioid pain management and regenerative health solutions for healthcare practitioners and their patients.
On November 10, 2023, PCRX received the U.S. Food and Drug Administration (FDA) approval for its supplemental new drug application (sNDA) to expand the EXPAREL (bupivacaine liposome injectable suspension) label to include administration in adults as an adductor canal block and a sciatic nerve block in the popliteal fossa.
PCRX’s CEO and chairman, Dave Stack, said, “In line with our corporate mission to provide a non-opioid to as many patients as possible, this new indication provides additional flexibility in the use of EXPAREL as a regional analgesic for more than 3 million lower extremity procedures annually, further increasing the utility of EXPAREL for major orthopedic procedures.”
In terms of forward non-GAAP P/E, PCRX is trading at 11.30x, 40.4% lower than the 18.95x industry average. Likewise, its forward EV/EBIT of 9.40x is 45.3% lower than the 17.20x industry average.
PCRX’s trailing-12-month cash per share of $2.13 is 68.7% higher than the industry average of $1.27. Its trailing-12-month levered FCF and EBIT margins of 18.41% and 11.73% are significantly higher than the industry averages of 0.19% and 0.53%, respectively.
PCRX reported preliminary total revenue of $675 million for the year ended December 31, 2023, compared with $666.80 million for the year ended December 31, 2022. The company’s full-year EXPAREL net product sales amounted to $538.10 million, compared to $536.90 million in 2022.
Also, PCRX’s ZILRETTA and iovera° net product sales were $111.10 million and $19.70 million in 2023, compared to $105.50 million and $15.30 million in 2022, respectively.
For the fiscal third quarter that ended September 30, 2023, PCRX’s total revenues and income from operations stood at $163.93 million and $17.72 million, respectively. Moreover, its adjusted EBITDA stood at $52.94 million.
For the same quarter, its non-GAAP net income and non-GAAP net income per common share increased 22.7% and 22% year-over-year to $36.63 million and $0.72, respectively.
Street expects PCRX’s revenue and EPS for the fiscal first quarter ending March 2024 to increase 6.2% and 42.4% year-over-year to $170.28 million and $0.75, respectively.
The stock has gained 12.4% over the past three months to close the last trading session at $31.78.
PCRX’s robust prospects are reflected in its POWR Ratings. The stock has an overall B rating, equating to Buy in our proprietary rating system.
The stock has a B grade for Growth, Value, and Quality. It is ranked #30 within the same industry.
Click here for the additional POWR Ratings for PCRX (Momentum, Stability, and Sentiment).
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SNY shares . Year-to-date, SNY has declined -2.65%, versus a 2.92% rise in the benchmark S&P 500 index during the same period.
About the Author: Sristi Suman Jayaswal
The stock market dynamics sparked Sristi's interest during her school days, which led her to become a financial journalist. Investing in undervalued stocks with solid long-term growth prospects is her preferred strategy. Having earned a master's degree in Accounting and Finance, Sristi hopes to deepen her investment research experience and better guide investors.
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