Given the increasing demand for healthcare products and services amid a growing population and healthcare awareness coupled with numerous technological advancements, the pharmaceutical industry is well-poised for significant long-term growth. According to Statista, the revenue in the pharmaceuticals market is projected to reach $1.16 trillion in 2024.
When comparing worldwide, the U.S. is estimated to generate the highest revenue of $636.90 billion this year. Further, the market revenue is anticipated to increase at a CAGR of 6.2% from 2024 to 2028, resulting in a volume of $1.47 trillion by 2028.
Moreover, key trends, including breakthroughs in genomics and personalized medicine, immunotherapy advances, the introduction of biologic drugs, and the widespread availability of biosimilars, are significantly revolutionizing the pharma sector.
Besides, the integration of digitalization, AI, machine learning, and data analytics enables efficient processes, predictive analytics for drug development, and improved patient outcomes. The McKinsey Global Institute (MGI) predicted that artificial intelligence could generate $60 billion to $110 billion per year in economic value for the pharma and medical-product industries.
Given this backdrop, let’s compare two Medical - Pharmaceuticals stocks, Eli Lilly and Company (LLY) and Pfizer Inc. (PFE), to determine which stock holds greater potential for investors.
The Case for Eli Lilly and Company Stock
Eli Lilly and Company (LLY) focuses on discovering, developing, and marketing various human pharmaceuticals worldwide. The company provides treatments for diabetes, obesity, cancer, immune system disorders, and mental health illnesses. Its market capitalization currently stands at $718.42 billion.
On January 4, 2024, LLY launched LillyDirect, a new digital healthcare platform for patients with obesity, diabetes, and migraine. It provides disease management resources like access to independent healthcare professionals, tailored support, and direct home delivery of select Lilly medicines via third-party pharmacy dispensing services.
On December 27, 2023, LLY completed the acquisition of POINT Biopharma Global Inc., a radiopharmaceutical company with a pipeline of clinical and preclinical-stage radioligand therapies in development for treating cancer. This acquisition offers Lilly access to POINT’s radiopharmaceutical manufacturing campus in Indianapolis, Ind., and the radiopharmaceutical R&D center in Toronto.
LLY’s trailing-12-month gross profit margin of 80.16% is 41.9% higher than the industry average of 56.47%. Likewise, the stock’s trailing-12-month EBIT margin of 32.86% is significantly higher than the 0.37% industry average. Also, its trailing-12-month net income margin of 17.08% compares to the industry average of negative 5.55%.
For the first quarter that ended March 31, 2024, LLY’s revenue increased 26% year-over-year to $8.77 billion. Its non-GAAP gross margin rose 32.5% from the year-ago value to $7.23 billion. Also, the company’s non-GAAP net income and non-GAAP EPS were $2.34 billion and $2.58, up 59.5% and 59.3% from the previous year’s quarter, respectively.
According to its updated 2024 financial guidance, LLY expects revenue to range between $42.40 and $43.60 billion, up from the prior guidance of $40.40 to $41.60 billion. Its non-GAAP earnings per share are expected to be from $13.50 to $14, compared to the previous guidance of $12.20-$12.70.
Analysts expect LLY’s revenue for the second quarter (ending June 2024) to increase 20.1% year-over-year to $9.98 billion. Its EPS for the current quarter is expected to grow 32.8% year-over-year to $2.80. Moreover, the company surpassed the consensus EPS estimates in each of the trailing four quarters, which is impressive.
LLY’s stock has gained 30.3% over the past six months and 87% over the past year to close the last trading session at $755.91.
LLY’s POWR Ratings reflect this robust outlook. 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, with each factor weighted to an optimal degree.
LLY has a B grade for Growth and Sentiment. It is ranked #32 of 161 in the Medical - Pharmaceuticals industry.
To see additional POWR Ratings of LLY for Value, Stability, Quality, and Momentum, click here.
The Case for Pfizer Inc. Stock
With a $156.85 billion market cap, Pfizer Inc. (PFE) discovers, develops, manufactures, markets, and sells biopharmaceutical products. It offers medicines and vaccines in therapeutic areas such as cardiovascular metabolic, migraine, and women's health under the Eliquis, Nurtec ODT/Vydura, Zavzpret, and Premarin family brands.
On April 30, PFE and Genmab A/S (GMAB) announced that the FDA approved the supplemental Biologics License Application (sBLA) for TIVDAK® for treating patients with recurrent or metastatic cervical cancer with disease progression on or after chemotherapy. This FDA action converts the September 2021 accelerated approval of TIVDAK to full approval.
In terms of forward non-GAAP P/E, PFE is trading at 11.95x, 40% lower than the industry average of 19.91x. Its forward Price/Sales multiple of 2.61 is 24.4% lower than the industry average of 3.45. However, the stock’s forward EV/Sales of 3.65x is 11.1% higher than the 3.29x industry average.
PFE’s trailing-12-month gross profit margin of 58.99% is 4.5% higher than the industry average of 56.47%. Further, the stock’s trailing-12-month EBIT margin of 8.99% is significantly higher than the industry average of 0.37%.
In the first quarter that ended March 31, 2024, PFE’s sales decreased 19.5% year-over-year to $14.88 billion. Its adjusted income declined 33.6% from the year-ago value to $4.67 billion. The company’s adjusted EPS was $0.82, down 33.3% from the prior year’s quarter.
For the fiscal year 2024, Pfizer raised its adjusted EPS guidance to $2.15 to $2.35. The company expects full-year revenue to be in the range of $58.50 to $61.50 billion, which includes nearly $8 billion in revenues for Comirnaty and Paxlovid (approximately $5 billion and $3 billion, respectively) and around $3.10 billion in revenues from legacy Seagen.
Analysts expect PFE’s revenue for the second quarter (ending June 2024) to increase 2.4% year-over-year to $13.03 billion. However, its EPS is expected to decline 31.4% year-over-year to $0.46 for the ongoing quarter. Pfizer missed the consensus revenue estimates in three of the trailing four quarters.
For the fiscal year 2024, the company’s revenue and EPS are expected to increase 2.8% and 25.9% year-over-year to $60.13 billion and $2.32, respectively.
PFE’s stock has surged 7.3% over the past five days to close the last trading session at $27.70. However, the stock has plunged 29.1% over the past year.
PFE’s mixed fundamentals are reflected in its POWR Ratings. The stock has an overall rating of C, which translates to a Neutral in our proprietary rating system.
The stock has a C grade for Value, Growth, Stability, Momentum, Quality, and Sentiment. PFE is ranked #81 out of 161 stocks in the Medical - Pharmaceuticals industry. Click here to access all PFE ratings.
Eli Lilly (LLY) or Pfizer (PFE): Which Stock Can Surge From Earnings?
The pharma industry is expected to witness continued growth thanks to increasing medical needs amid high disease burden and health awareness, regulatory initiatives, and advancements in medical science. Further, the rising adoption of emerging digital technologies such as AI, machine learning, and data analytics is fueling the industry’s expansion.
Leading pharma companies LLY and PFE are expected to benefit from the industry’s tailwinds significantly. However, LLY’s higher profitability, solid financials, and promising near-term growth prospects make it the better pharma stock pick.
Our research shows that the odds of success increase when one invests in stocks with an Overall Rating of Strong Buy or Buy. View all the top-rated stocks in the Medical - Pharmaceuticals industry 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.
LLY shares fell $11.91 (-1.58%) in premarket trading Friday. Year-to-date, LLY has gained 28.03%, versus a 7.80% 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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