Given growing healthcare expenditure globally owing to the aging population and increasing prevalence of chronic and rare diseases, the sustained demand for innovative drugs and treatments positions the pharma industry for continued growth and expansion. Further, advanced technologies are transforming drug discovery and development.
Given the industry’s promising prospects, investors could consider investing in fundamentally sound pharmaceutical stocks CytomX Therapeutics, Inc. (CTMX), Eton Pharmaceuticals, Inc. (ETON), and GSK plc (GSK) to strengthen their portfolio.
Demand for innovative pharmaceutical drugs is expected to remain robust in the foreseeable future, driven by the growing prevalence of chronic diseases such as cancer, diabetes, and arthritis, the aging population worldwide, and discoveries of rare, uncommon disorders such as achondrogenesis, stoneman syndrome, pompe disease, and more.
As per Statista, revenue in the pharmaceuticals market is expected to reach $1.12 trillion in 2023. In global comparison, most of the revenue will be generated in the U.S. (nearly $603.40 billion). The global pharmaceuticals market’s revenue is projected to grow at a CAGR of 5.8%, reaching $1.48 trillion by 2028.
There is an increased demand for specialty drugs to treat complex or severe chronic and rare conditions. The global specialty pharmaceuticals market is estimated to reach $965.54 billion by 2030, expanding at a CAGR of 39.8%. Further, rising R&D activities, new drug launches and approvals, and strategic initiatives by key players contribute to the market’s significant growth.
Advanced digital technologies, like AI, genetic editing, big data, additive manufacturing, AR/VR, and machine learning, are revolutionizing the pharmaceutical industry. For instance, industry players are boosting investments in the implementation of AI to drive drug development.
The global AI in the pharmaceutical market is anticipated to reach more than $11.81 billion by 2032, growing at a CAGR of 29.3% from 2023 to 2032.
With these encouraging trends in mind, let’s delve into the fundamentals of the three best Medical – Pharmaceuticals stocks, beginning with number 3.
Stock #3: CytomX Therapeutics, Inc. (CTMX)
CTMX is a clinical-stage, oncology-focused biopharmaceutical company that focuses on developing novel conditionally activated biologics localized to the tumor microenvironment. Its pipeline comprises therapeutic candidates across treatment modalities like antibody-drug conjugates (ADCs), T-cell-engaging bispecific antibodies, and immune modulators.
On June 30, CTMX entered an agreement with BVF Partners L.P. (BVF) for a private placement expected to result in initial gross proceeds of nearly $30 million. This financing is expected to extend the cash runway into the second half of 2025 based on current operating plans, enabling CTMX to reach multiple clinical milestones.
“This strategic financing with BVF is based upon an aligned vision that the localization of potent biologic therapies will continue to be a foundational area of oncology research and development and that CytomX’s pipeline has the potential to deliver meaningful products to cancer patients over time,” said Sean McCarthy, D.Phil., CEO and Chairman of CytomX Therapeutics.
He added, “Building on business development transactions with Regeneron and Moderna last year, this transaction further strengthens our financial position by extending cash runway into the second half of 2025 and should enable our next-generation pipeline to reach inflection points over this period.”
For the third quarter that ended September 30, CTMX’s revenues grew 136.7% year-over-year to $26.38 million. The company’s income from operations came in at $3.12 million, compared to a loss from operations of $29.71 million in the same period of 2022.
In addition, CTMX’s EBITDA was $3.60 million versus an EBITDA loss of $23.31 million in the prior year’s quarter. Its net income was $2.99 million, or $0.04 per share, compared to a net loss of $29.06 million, or $0.44 per share a year ago, respectively.
Street expects CTMX’s revenue for the fourth quarter (ending December 2023) to increase 1,944.2% year-over-year to $19.34 million. Further, the consensus EPS estimate for the ongoing quarter is $0.02. Moreover, the company surpassed the consensus revenue estimates in three of the trailing four quarters.
Shares of CTMX have gained 24.3% over the past month to close the last trading session at $1.33.
CTMX’s robust outlook is 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 a B grade for Growth, Value, Sentiment and Quality. CTMX is ranked #16 out of 152 stocks in the Medical - Pharmaceuticals industry.
Click here to access additional CTMX ratings for Stability and Momentum.
Stock #2: Eton Pharmaceuticals, Inc. (ETON)
ETON is a specialty pharmaceutical company that emphasizes on developing, acquiring, and commercializing pharmaceutical products for rare diseases. The company’s product portfolio includes ALKINDI SPRINKLE, Carglumic Acid, Betaine Anhydrous, dehydrated alcohol injections, 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) 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 the end of 2025. Also, this product shares the same metabolic geneticist prescriber base as its Carglumic Acid and Betaine products, offering an opportunity to leverage its existing sales forces and prescribers’ base.
For 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% year-over-year to $4.40 million. The company generated $900 thousand in positive cash flow from operations.
Further, the company’s cash and cash equivalents as of September 30, 2023, were $22.07 million, compared to $16.30 million as of December 31, 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. Likewise, the company’s EPS for the fiscal year 2023 is estimated to grow 63.9% from the prior year to $50.12 million. Also, the company topped the consensus revenue estimates in three of the trailing four quarters.
ETON’s stock gained 33% year-to-date and 25.4% over the past year to close the last trading session at $3.75.
ETON’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 Quality and B for Growth and Value. ETON is ranked #15 of 152 stocks in the Medical- Pharmaceuticals industry.
Click here to access additional ratings of ETON for Momentum, Stability, and Sentiment.
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 operates through four segments: Pharmaceuticals; Pharmaceuticals R&D; Vaccines; and Consumer Healthcare.
On October 31, GSK and Arrowhead Pharmaceuticals Inc. (ARWR) announced 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 drive GSK’s growth and profitability.
On September 18, GSK announced the FDA approval of Ojjaara (momelotinib), a drug developed to treat intermediate or high-risk myelofibrosis in adults with anemia. GSK acquired Ojjaara in a $1.90 billion buyout of Sierra Oncology (SRRA). The drug is currently the only approved medicine for newly diagnosed and previously treated myelofibrosis patients with anemia.
During the third quarter that ended September 30, 2023, GSK’s turnover increased 4.1% year-over-year to £8.15 billion ($10.28 billion). Its adjusted operating profit grew 6.4% from the year-ago value to £2.77 billion ($3.50 billion). The company’s adjusted profit before taxation rose 7.8% from the prior year’s quarter to £2.62 billion ($3.31 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, affirming turnover growth of 12%-13%, compared with the 8-10% it had previously forecasted. Further, its adjusted operating profit is expected to grow between 13%-15%, which was earlier predicted between 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 4.4% and 19.5% year-over-year to $9.53 billion and $0.76, respectively. Also, the company surpassed the consensus EPS estimates in each of the trailing four quarters, which is impressive.
GSK’s stock gained 4.1% over the past six months and 4.8% over the past year to close the last trading session at $35.63.
GSK’s POWR Ratings reflect its promising outlook. The stock has an overall rating of A, which translates to a Strong Buy in our proprietary rating system.
GSK has an A grade for Value and a B for Quality. It is ranked #7 of 152 stocks within the same industry.
To see additional POWR Ratings of GSK for Stability, Sentiment, Growth, Stability, 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.
GSK shares were trading at $35.75 per share on Tuesday morning, up $0.12 (+0.34%). Year-to-date, GSK has gained 5.73%, versus a 20.45% 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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