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Analyzing December Profit Potential for the Top 4 Pharma Stocks

The global pharmaceutical market is witnessing robust growth, fueled by an escalating demand for healthcare services amid a burgeoning and aging population. Hence, fundamentally solid pharma stocks Novartis (NVS), Bristol-Myers Squibb (BMY), AbbVie (ABBV), and Taro Pharmaceutical (TARO) might be solid buys for gains this month. Read more...

The broader pharmaceutical sector is undergoing rapid transformation, marked by the widespread prevalence of chronic illnesses, the aging population, and advancements in technology. So, quality pharma stocks Novartis AG (NVS), Bristol-Myers Squibb Company (BMY), AbbVie Inc. (ABBV), and Taro Pharmaceutical Industries Ltd. (TARO) could be ideal investments for profits this month.

The growing global population, coupled with aging demographics in many regions, is leading to an increased demand for healthcare services and pharmaceutical products to address various health conditions. Moreover, robust growth characterizes the pharmaceutical market, propelled by the introduction of innovative drugs and a rising demand for healthcare, particularly in emerging economies.

This year, the global pharmaceutical market is poised to achieve revenues of $1.12 trillion. Looking to the future, the global pharmaceutical market is expected to reach $1.48 trillion by 2028, exhibiting a CAGR of 5.8%.

In addition, the growth of biopharmaceuticals and specialty medicines, including biologics and orphan drugs, contributes significantly to the pharma industry's overall revenue.

Besides, AI is transforming the pharmaceutical sector, revolutionizing drug discovery, improving manufacturing processes, and fostering strategic partnerships. By 2032, the market for generative AI in drug discovery is anticipated to reach $1.13 billion, expanding at a CAGR of 27.1%, demonstrating the sector’s great potential and continuous growth.

Furthermore, Pharma 4.0 technology, driven by processing interconnectivity, big data analytics, artificial intelligence, collaborative robotics, and distributed cloud-based services, is poised for rapid growth. Global pharmaceutical manufacturers increasingly adopt Pharma 4.0 for enhanced workflow and productivity, transforming traditional laboratories into smart facilities.

The global pharma 4.0 market is expected to reach $63.17 billion by 2032, increasing at an 18% CAGR.

Given these encouraging trends and projections, let’s take a closer look at the four stocks of the Medical – Pharmaceuticals industry, starting with number four.

Stock #4: Novartis AG (NVS)

Based in Basel, Switzerland, NVS researches, develops, manufactures, and markets healthcare products. Its Innovative Medicines arm delivers prescription medicines for patients and physicians, while the Sandoz segment focuses on producing and marketing finished dosage forms of small-molecule pharmaceuticals for third-party distribution.

NVS’ trailing-12-month EBIT and EBITDA margins of 29.83% and 39.83% are favorably higher than the 0.81% and 5.41% industry averages.

On December 5, 2023, NVS received FDA approval for Fabhalta® (iptacopan), making it the first oral monotherapy for adults with paroxysmal nocturnal hemoglobinuria (PNH). Fabhalta, a Factor B inhibitor, acts in the alternative complement pathway, effectively controlling red blood cell destruction both within and outside blood vessels.

On October 31, NVS announced that the US FDA had approved Cosentyx® (secukinumab) for the treatment of moderate to severe hidradenitis suppurativa (HS) in adults. Cosentyx is the sole FDA-approved fully human biologic that directly inhibits interleukin-17A (IL-17A), a cytokine implicated in HS inflammation.

The company distributes an annual dividend of $3.31, resulting in a yield of 3.35% based on the current price. Over the past three years, it has consistently increased its dividend payments at a CAGR of 4.3%.

During the fiscal third quarter that ended September 30, NVS’ net sales increased 12.3% year-over-year to $11.78 billion. The company’s net income and EPS grew 13.8% and 19.7% from the prior year’s quarter to $1.51 billion and $0.73, respectively. Its free cash flow rose 24.4% year-over-year to $5.04 billion.

The consensus revenue estimate of $47.43 billion for the fiscal year 2024 indicates a 2.6% year-over-year improvement. The consensus EPS estimate of $7.19 for the same year exhibits a 7.9% rise from the previous year. Furthermore, the company surpassed the consensus EPS and revenue estimate in three of four trailing quarters.

Over the past nine months, the stock has gained 14.5%, closing the last trading session at $96.97. It has soared 4.5% over the past month.

NVS’ POWR Ratings reflect this promising outlook. The stock has an overall rating of A, equating to a Strong Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, each weighted optimally.

NVS has an A grade for Quality and a B for Growth, Value, and Stability. It is ranked #6 in the 158-stock Medical – Pharmaceuticals industry.

Click here to access additional NVS ratings for Momentum and Sentiment.

Stock #3: Bristol-Myers Squibb Company (BMY)

BMY discovers, develops, licenses, manufactures, markets, distributes, and sells biopharmaceutical products. It offers products for hematology, oncology, cardiovascular, immunology, fibrotic, and neuroscience diseases.

BMY’s trailing-12-month EBIT and EBITDA margins of 18.85% and 40.65% are notably higher than the industry averages of 0.81% and 5.41%.

On December 5, BMY announced that its application for Opdivo (nivolumab) in combination with cisplatin-based chemotherapy for the first-line treatment of unresectable or metastatic urothelial carcinoma had been accepted by the FDA for Priority Review.

On November 28, BMY and Avidity Biosciences Inc. (RNA) entered into a global licensing and research collaboration to focus on discovering, developing, and commercializing multiple cardiovascular targets using Antibody Oligonucleotide Conjugates (AOCs).

The company pays an annual dividend of $2.28, which translates to a yield of 4.56% on the prevailing price level, higher than its four-year average of 3.07%. Its dividend has grown at a CAGR of 8.2% over the past three years.

BMY’s total revenues amounted to $10.97 billion for the third quarter (ended September 30, 2023), while its total expenses declined 2% from the year-ago value to $8.83 billion. The company’s attributable net earnings increased 20% from the prior-year quarter to $1.93 billion, and its non-GAAP EPS came in at $2.00, up marginally year-over-year.

Street expects BMY’s revenue and EPS to increase 3.1% and marginally year-over-year to $11.27 billion and $2.06 in the fiscal first quarter ending March 2024. It surpassed EPS estimates in three of four trailing quarters.

Shares of BMY gained marginally intraday to close the last trading session at $50.23.

BMY’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall rating of A, which equates to a Strong Buy in our proprietary rating system.

It has an A grade for Value and a B for Growth, Stability, and Quality. It is ranked #4 in the same industry.

To see BMY’s additional Sentiment and Momentum ratings, click here.

Stock #2: AbbVie Inc. (ABBV)

ABBV is a research-based biopharmaceutical company that develops, manufactures, and sells pharmaceuticals worldwide. The company’s product offerings include HUMIRA, SKYRIZI, and RINVOQ.

ABBV’s trailing-12-month EBIT and EBITDA margins of 34.85% and 50.77% are significantly higher than the 0.81% and 5.41% industry averages.

On December 5, 2023, ABBV and BigHat Biosciences announced a research collaboration to develop therapeutic antibodies in oncology and neuroscience. BigHat will leverage its Milliner™ platform, integrating machine learning technologies with a high-speed wet lab, to guide the design of high-quality antibodies for multiple therapeutic targets.

ABBV aims to accelerate its oncology and neuroscience pipeline through AI/ML-based drug discovery.

On November 30, ABBV and ImmunoGen, Inc. (IMGN) announced a definitive agreement for ABBV to acquire IMGN, including its flagship cancer therapy ELAHERE®. ELAHERE® is a first-in-class antibody-drug conjugate approved for platinum-resistant ovarian cancer. The transaction involves AbbVie acquiring all outstanding shares of ImmunoGen for $31.26 per share in cash, valuing ImmunoGen at approximately $10.1 billion. The acquisition enhances ABBV's presence in the solid tumor space and complements its ADC platform and ongoing programs.

The company pays a yearly dividend of $6.20, resulting in a yield of 4.30% on the current market price. Over the last three years, it has consistently increased its dividend payments at a CAGR of 7.8%.

ABBV’s net revenues for the fiscal third quarter that ended September 30, 2023, came in at $13.93 billion. Its operating earnings stood at $2.28 billion. Moreover, the company’s non-GAAP net earnings came in at $5.25 billion and $2.95 per share.

ABBV’s revenue and EPS are likely to amount to $13.97 billion and $2.91 in the fiscal fourth quarter ending December 2023. Also, it has exceeded the EPS estimates in three of the trailing four quarters.

ABBV’s shares have gained 2% over the past month and 5.6% over the past six months to close the last trading session at $144.57.

It is no surprise that ABBV has an overall A rating, equating to a Strong Buy in our POWR Ratings system.

ABBV has an A grade for Quality and a B for Value, Stability, and Sentiment. It is ranked #3 within the same industry.

Beyond what we stated above, we also have given ABBV grades for Growth and Momentum. Get all the ABBV’s ratings here.

Stock #1: Taro Pharmaceutical Industries Ltd. (TARO)

Based in Haifa, Israel, TARO develops, manufactures, and markets prescription and over-the-counter pharmaceutical products in the United States, Canada, Israel, and internationally. It offers its products for various therapeutic categories comprising allergy, analgesic, antibacterial, anti-inflammatory, anti-cancer, etc.

TARO’s trailing-12-month EBIT and EBITDA margins of 1.24% and 6.92% are 53.2% and 28% higher than the 0.81% and 5.41% industry averages.

During the fiscal second quarter which ended September 30, 2023, TARO’s net sales increased 13.6% year-over-year to $148.20 million. Its gross profit rose 56.7% from the previous-year quarter to $73.60 million.

The company’s net income amounted to $8.55 million and $0.23 per share, compared to a net loss of $2.81 million and $0.07 per share in the year-ago quarter.

Analysts expect TARO’s revenue and EPS for the third quarter (ending December 2023) to increase 11.3% and 57.9% year-over-year to $154.91 million and $0.30, respectively.

TARO’s shares have gained 26.2% year-to-date and 20.8% over the past year to close the last trading session at $36.65.

TARO’s POWR Ratings reflect this sound outlook. The stock has an overall rating of A, which translates to a Strong Buy in our proprietary rating system.

It has an A grade for Value and Sentiment and a B for Growth and Stability. It is ranked first in the same industry.

In addition to the POWR Ratings highlighted above, one can access TARO’s additional Momentum and Quality ratings 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.

2024 Stock Market Outlook >

ABBV shares were trading at $145.51 per share on Wednesday morning, up $0.94 (+0.65%). Year-to-date, ABBV has declined -6.33%, versus a 20.93% rise in the benchmark S&P 500 index during the same period.

About the Author: Kritika Sarmah

Her interest in risky instruments and passion for writing made Kritika an analyst and financial journalist. She earned her bachelor's degree in commerce and is currently pursuing the CFA program. With her fundamental approach, she aims to help investors identify untapped investment opportunities.


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