The pharmaceutical industry is expected to expand due to increased chronic diseases and an aging population. Therefore, fundamentally strong pharma stocks Ipsen S.A. (IPSEY) and Collegium Pharmaceutical, Inc. (COLL) could be wise additions to your portfolio now. However, SNDL Inc. (SNDL) might be best avoided, given its weak fundamentals.
The global pharmaceutical market is expected to reach $1.48 trillion by 2028, exhibiting a CAGR of 5.8%. The industry’s largest segment is oncology drugs, with a projected market volume of $188.20 billion in 2023.
The US generic drug market is expected to grow at 4% CAGR until 2028. The aging population, rising healthcare expenditure, a large number of patent-expired branded medications, and increased demand for generic medicines are some of the factors driving this industry.
Investors’ interest in pharma stocks is evident from SPDR S&P Pharmaceuticals ETF (XPH) 5.2% returns over the past month.
However, the pharma industry has significant research and development costs, which can prevent smaller companies from joining the market. Also, the growing prevalence of counterfeit medications poses a substantial threat to both patient safety and corporate reputation, necessitating strong measures.
Let’s delve deeper into the fundamentals of the featured stocks.
Stocks to Buy:
Ipsen S.A. (IPSEY)
Based in Boulogne-Billancourt, France, IPSEY is a biopharmaceutical company specializing in oncology, neuroscience, and rare diseases. It operates through two segments, Specialty Care and Consumer Healthcare. The company also excels in neurotoxin research.
IPSEY’s forward EV/EBIT multiple of 10.56 is 37.9% lower than the industry average of 16.99. Its forward Price/Sales multiple of 3.11 is 24.1% lower than the industry average of 4.10.
IPSEY’s trailing-12-month EBITDA margin of 32.43% is 520.4% higher than the industry average of 5.2%. Its trailing-12-month EBIT margin of 26.54% is significantly higher than the 0.24% industry average.
IPSEY’s sales during the for the first half that ended June 30, 2023, increased 7.2% year-over-year to €1.54 billion ($1.68 billion). Its other revenues rose 34.7% from the year-ago value to €86.50 million ($94.53 million).
Also, its total assets came in at €6.09 billion ($6.66 billion) for the period that ended June 30, 2023, compared to €5.61 trillion ($6.13 billion) for the period that ended December 30, 2022.
The consensus revenue estimate of $3.52 billion for the year ending December 2023 represents a 8.5% increase year-over-year. IPSEY’s shares have gained 31.2% over the past year to close the last trading session at $33.20.
IPSEY’s POWR Ratings reflect this promising outlook. The stock has an overall rating of B, equating to a Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
IPSEY has an A grade for Value and Stability and a B for Quality. It is ranked #16 out of 166 stocks Medical – Pharmaceuticals industry. Click here for the additional POWR Ratings for Sentiment, Growth and Momentum for IPSEY.
Collegium Pharmaceutical, Inc. (COLL)
COLL is a specialty pharmaceutical company that develops and commercializes medicines for pain management.
COLL’s forward EV/EBITDA multiple of 3.48 is 74.3% lower than the industry average of 13.54. Its forward non- GAAP P/E multiple of 4.43% is 78.2% lower than the industry average of 20.29%.
COLL’s trailing-12-month EBITDA margin of 42.78x is 293.5% higher than the industry average of 5.23x. Its trailing-12-month EBIT margin of 13.39% is significantly higher than the industry average of 0.24%.
COLL’s net product revenue increased 9.7% year-over-year to $135.55 million for the second quarter that ended June 30, 2023. Its adjusted net income increased 27.9% year-over-year to $52.45 million. Also, its adjusted EPS increased 17.8% year-over-year to $1.26. The company’s adjusted EBITDA came in at $85.80 million, up 21% year-over-year.
COLL’s revenue is expected to increase by 22.6% year-over-year to $568.86 million for the year ending December 2023. Its EPS is expected to grow 33.6% year-over-year to $5.29 for the same period. The stock has gained 26.7% over the past year to close the last trading session at $23.80.
It’s no surprise that COLL has an overall B rating, equating to a Buy in our POWR Ratings system. It has a B grade for Growth, Value and Quality. It is ranked #24 in the same industry.
Beyond what is stated above, we’ve also rated COLL for Momentum, Stability and Sentiment. Get all COLL ratings here.
Stock to Sell:
SNDL Inc. (SNDL)
Headquartered in Calgary, Canada, SNDL engages in the production, distribution, and sale of cannabis products, operating through the Cannabis Operations and Retail Operations segments.
SNDL’s trailing-12-month gross profit margin of 19.43% is 64.9% lower than the 55.37% industry average. Its trailing-12-month net income margin of negative 31.81% compares to the negative 5.71% industry average.
SNDL’s loss from operations amounted to CAD29.49 million ($21.86 million) in the fiscal second quarter that ended June 30, 2023. Its net loss amounted to CAD33.16 million ($24.58 million).
Also, its total current liabilities came in at CAD459.72 million ($340.73 million) for the period that ended June 30, 2023, compared to CAD501.48 million ($371.68 million) for the period that ended December 31, 2022. Its total assets came in at CAD1.57 billion ($1.17 billion), compared to CAD1.56 billion ($1.16 billion) for the same period.
Analysts expect SNDL’s EPS to be negative $0.04 for the year ending December 2023. The company missed EPS estimates in each of the trailing four quarters. Over the past year, the stock has lost 50.2% to close the last trading session at $1.58.
SNDL has an overall rating of F, which equates to Strong Sell in our POWR Ratings system.
The stock has a D grade for Momentum, Stability and Quality. It is ranked #156 in the same industry. For additional SNDL ratings for Growth, Value, and Sentiment, click here.
What To Do Next?
Discover 10 widely held stocks that our proprietary model shows have tremendous downside potential. Please make sure none of these “death trap” stocks are lurking in your portfolio:
IPSEY shares were trading at $33.20 per share on Wednesday morning, down $0.10 (-0.30%). Year-to-date, IPSEY has gained 26.81%, versus a 16.85% rise in the benchmark S&P 500 index during the same period.
About the Author: Rashmi Kumari
Rashmi is passionate about capital markets, wealth management, and financial regulatory issues, which led her to pursue a career as an investment analyst. With a master's degree in commerce, she aspires to make complex financial matters understandable for individual investors and help them make appropriate investment decisions.
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