The COVID-19 pandemic highlighted the need for significant research and development in the pharmaceutical space. And even though the virus seems to be on the decline in some parts of the world, companies in this industry are expected to see steady demand for their products and services because they are focused on developing treatments for other rare and/or chronic diseases. Investors’ interest in the pharmaceutical space is evident in SPDR S&P Pharmaceuticals ETF’s (XPH) 26.8% returns over the past year.
According to a report by Research and Markets, the global pharmaceuticals market is expected to grow to $1250.24 billion in 2021 from $1228.45 billion in 2020. While the price of some pharmaceutical companies’ stocks has already factored in industry tailwinds, some are still trading cheaper than their peers.
Bristol-Myers Squibb Company (BMY), Sanofi (SNY), GlaxoSmithKline PLC (GSK), and Astellas Pharma Inc. (ALPMY) look undervalued at their current price levels given their immense growth potential and a promising product pipeline. So, we think it could be wise to bet on these stocks now.
Bristol-Myers Squibb Company (BMY)
Biopharmaceutical Company BMY delivers products in hematology, oncology, cardiovascular, and immunology. Its popular products include Revlimid, Opdivo, Eliquis, and Orencia.The company sells its products to wholesalers, distributors, pharmacies, retailers, hospitals, clinics, and government agencies. It has collaboration agreements with several companies, including Pfizer, Inc. (PFE).
On April 16, the U.S. Food and Drug Administration (FDA) approved BMY’s Opdivo, which is used for the treatment of patients with advanced or metastatic gastric cancer, gastroesophageal junction cancer, and esophageal adenocarcinoma. The European Commission (EC) also approved the use of Opdivo in April, in combination with Cabometyx for the first-line treatment of adults with advanced renal cell carcinoma (RCC). These approvals are expected to drive greater sales of Opdivo.
In February, BMY announced the construction of a 244,000 square foot state-of-the-art cell therapy manufacturing facility in Devens, Massachusetts, as part of its latest investment to support clinical and commercial manufacturing of transformative cell therapies for patients with aggressive hematological cancers. This is expected to increase the company’s global footprint.
BMY’s total revenues increased 39.3% year-over-year to $11.07 billion in the fourth quarter, ended December 31, 2020. Its gross margin for the quarter came in at 73.7% compared to 68.6% in the fourth quarter of 2019. The company’s non-GAAP EPS increased 19.7% from its year-ago value to $1.46.
In terms of forward non-GAAP price/earnings ratio, BMY’s 8.75x is 64.5% lower than the industry average 24.65x. In terms of forward price/sales ratio, the stock’s 3.16x is 56% lower than the industry average 7.18x.
For the quarter ending June 30, 2021, analysts expect BMY’s EPS to be $1.90, which represents a 16.6% year-over-year increase. It surpassed the Street’s EPS estimates in each of the trailing four quarters. The company’s revenue is expected to increase 8.9% in its fiscal year 2021 to $46.32 billion. The stock has gained 10.4% over the past nine months and closed Friday’s trading session at $65.46.
BMY’s POWR Ratings reflect this promising outlook. The company has an overall rating of B, which translates to Buy in our proprietary ratings system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
The stock has an A grade for Value, and a B grade for Growth. Within the Medical – Pharmaceuticals industry, BMY is ranked #20 of 234 stocks.
To see additional POWR Ratings for BMY (Stability, Sentiment, Quality, and Momentum), Click here.
Headquartered in Paris, France, SNY is a healthcare company that researches, develops, manufactures, and markets therapeutic solutions. With a presence in more than 90 countries, it operates through three segments—Pharmaceuticals, Vaccines, and Consumer Healthcare (CHC). The company provides various specialty care products and has several pharmaceutical products and vaccines in development.
Earlier this month, SNY completed the acquisitions of Kiadi, a clinical-stage biopharmaceutical company that develops next generation, ‘off-the-shelf’, NK cell-therapies, and Tidal Therapeutics, a preclinical biotech company with a novel mRNA-based approach for in vivo reprogramming of immune cells. These acquisitions are expected to help SNY expand its research capabilities in immuno-oncology and inflammatory diseases and to develop new solutions.
On April 12, the company announced a €400 million investment to create a vaccine production center in Singapore to expand and strengthen its vaccine manufacturing capabilities.
For the fourth quarter, ended December 31, 2020, SNY’s net sales increased 4.2% year-over-year to €9.38 billion. Its operating income increased 9.9% year-over-year to €2.05 billion. The company’s net income increased 9.4% year-over-year to €1.53 billion, while its EPS grew 9.8% year-over-year to €1.22.
In terms of forward non-GAAP price/earnings ratio, SNY’s 9.86x is 60% lower than the industry average of 24.65x. Its forward price/sales ratio of 2.87x is also 60% lower than the industry average of 7.18x.
For the quarter ending June 30, 2021, analysts expect SNY’s EPS and revenue to increase 17.1% and 11%, respectively, year-over-year. It has surpassed consensus EPS estimates in three of the trailing four quarters. The stock has gained 11.21% over the past year and closed Friday’s trading session at $51.30.
SNY’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall B rating, which equates to Buy in our proprietary rating system. It has an A grade for Value and Stability as well.
We have also graded SNY for Sentiment, Growth, Quality, and Momentum. Click here to access all SNY’s ratings.
SNY is ranked #24 in the same industry.
GlaxoSmithKline plc (GSK)
Based in Brentford in the United Kingdom, GSK is a healthcare company that operates through Pharmaceuticals and Vaccines segments. The company’s main research areas include respiratory diseases, human immunodeficiency virus (HIV)/infectious diseases, vaccines, immuno-inflammation, oncology and rare diseases.
GSK and Vir Biotechnology, Inc. (VIR) announced on April 15, 2021 the European Medicines Agency (EMA) has commenced a review of VIR-7831 (GSK4182136), an investigational dual-action SARS-CoV-2 monoclonal antibody. If approved, the therapy could help in the early treatment of COVID-19, thus leading to increasing demand for the product.
In March, the company also reached an agreement with Novavax, Inc. (NVAX) to support the manufacture of up to 60 million doses of NVAX’s COVID-19 vaccine. This also expands GSK’s market reach.
The company’s respiratory segment sales came in at £1.02 billion for the fourth quarter, ended December 31, 2020, up 15% year-over-year. Its vaccines turnover grew 16% year-over-year to £2.01 billion, driven primarily by double-digit growth in Shingrix and strong demand across all regions for its influenza vaccine.
In terms of forward enterprise value/sales ratio, GSK’s 2.79x is 58.4% lower than the industry average 6.70x. In terms of forward price/sales ratio, the stock’s 2x is 72.2% lower than the industry average 7.18x.
GSK’s EPS and revenue are expected to increase 13.1% and 5% year-over-year, respectively, in fiscal 2022. The stock closed Friday’s trading session at $37.75.
It’s no surprise that GSK has an overall B rating, which equates to Buy in our POWR Ratings system. The stock has an A grade for Value, and a B grade for Stability and Quality.
Click here to see GSK’s ratings for Growth, Sentiment, and Momentum as well.
GSK is ranked #22 in the same industry.
Astellas Pharma Inc. (ALPMY)
Headquartered in Tokyo, Japan, ALPMY manufactures, markets, imports, and exports pharmaceutical products worldwide. Its products include XTANDI, BETANIS, MIRABETRIC, BETMIGA, ZOSPATA, EVERENZO and ENHOLTUMAB VEDOTIN. Also, the company has clinical trial collaborations with Merck & Company, Inc. (MRK) and CytomX Therapeutics, Inc. (CTMX).
On April 19, ALPMY and Seattle Genetics, Inc. (SGEN) announced that they had filed with the U.S. FDA two supplemental Biologics License Application (sBLA) submissions for PADCEV for review, as part of the Real-Time Oncology Review (RTOR) pilot program. The applications were granted Priority Review, with a target action date of August 17, 2021. If the reviews are successful, ALPMY should witness increased demand.
For the fiscal year 2020 nine months ended December 31, 2020, ALPMY’s sales from its XTANDI segment increased 15% year-over-year to ¥342.70 billion. Its XOSPATA sales increased 80.7% year-over-year to ¥17.60 billion. The company’s revenue from the greater China region for BETMIGA increased 85.1% year-over-year to ¥3.20 billion.
In terms of forward enterprise value/sales ratio, ALPMY’s 2.19x is 67.4% lower than the industry average 6.70x. In terms of forward price/sales ratio, its 2.45x is 66% lower than the industry average of 7.18x.
The company’s revenue is expected to increase 105.6% year-over-year to $11.51 billion in fiscal 2021, ended March 31, 2021. The stock has gained 7.4% over the past six months to close Friday’s trading session at $15.14.
ALPMY’s POWR Ratings reflect this promising outlook. The company has an overall rating of A, which translates to Strong Buy in our proprietary ratings system. It has an A grade for Value, and a B grade for Growth, Stability, and Quality.
To see additional POWR Ratings for ALPMY (Sentiment and Momentum), Click here.
ALPMY is ranked #5 in the same industry.
The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
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BMY shares were trading at $65.30 per share on Monday afternoon, down $0.16 (-0.24%). Year-to-date, BMY has gained 6.09%, versus a 11.27% rise in the benchmark S&P 500 index during the same period.
About the Author: Nimesh Jaiswal
Nimesh Jaiswal's fervent interest in analyzing and interpreting financial data led him to a career as a financial analyst and journalist. The importance of financial statements in driving a stock’s price is the key approach that he follows while advising investors in his articles.4 Undervalued Pharmaceutical Stocks to Buy Now appeared first on StockNews.com