The pharmaceutical industry is driving the next drug revolution with AI and biotech innovations. Companies are using automation to streamline processes, boosting productivity and accuracy. Investors favor the sector for its steady profits, resilience during economic shifts, and sustained demand, driven by factors such as rising chronic illnesses.
Amid this favorable backdrop, investors could consider buying fundamentally strong pharmaceutical stocks: AbbVie Inc. (ABBV), Bristol-Myers Squibb Company (BMY), and Gilead Sciences, Inc. (GILD).
In today's digital era, pharmaceutical firms are rapidly embracing AI to enhance biopharma manufacturing, drug development, and healthcare solutions. AI and machine learning are revolutionizing drug discovery, personalizing treatments, and boosting efficiency. Global pharmaceutical revenues are projected to reach $1.16 trillion this year, with a 6.2% CAGR, also reaching $1.47 trillion by 2028.
In addition, advancements in biopharmaceuticals and biomedical science are driving cutting-edge therapies, such as cell and gene therapies, stem cell technologies, and regenerative and precision medicines. These innovations are propelling the pharmaceutical industry's growth, with the global biotechnology market projected to reach $3.88 trillion by 2030, growing at a CAGR of 14%.
Considering these conducive trends, let’s take a look at the fundamentals of the three pharmaceutical picks.
AbbVie Inc. (ABBV)
ABBV discovers, develops, manufactures, and sells pharmaceuticals worldwide. It offers a diverse range of pharmaceutical products, including treatments for autoimmune diseases, dermatology, rheumatology, oncology, neuroscience, eye care, gastroenterology, and endocrinology. Some of the products in its portfolio are HUMIRA, SKYRIZI, and RINVOQ.
In terms of the trailing-12-month EBIT margin, ABBV’s 32.01% is considerably higher than the 2.78% industry average. Likewise, its 35.70% trailing-12-month levered FCF margin is significantly higher than the 1.66% industry average. Furthermore, its 69.66% trailing-12-month gross profit margin is 20.7% higher than the 57.70% industry average.
ABBV’s net revenues for the fiscal second quarter that ended on June 30, 2024, increased 4.3% year-over-year to $14.46 billion. Its operating earnings for the period were $4 billion, and its adjusted earnings after tax were $4.71 billion. Additionally, its adjusted EPS was $2.65.
Street expects ABBV’s revenue for the quarter ended September 30, 2024, to increase 2.4% year-over-year to $14.27 billion. Its EPS for the quarter ending December 31, 2024, is expected to grow 5.7% year-over-year to $2.95. Over the past year, ABBV’s stock has gained 32.8% to close the last trading session at $196.82.
ABBV’s POWR Ratings reflect strong prospects. It has an overall rating of A, translating to a Strong Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
It is ranked #3 out of 159 stocks in the Medical – Pharmaceuticals industry. It has a B grade for Growth, Value, Stability, Sentiment, and Quality. Click here to see ABBV’s Momentum ratings.
Bristol-Myers Squibb Company (BMY)
BMY discovers, develops, licenses, manufactures, markets, distributes, and sells biopharmaceutical products worldwide. It offers products for hematology, oncology, cardiovascular, immunology, fibrotic, and neuroscience diseases.
On September 26, 2024, BMY announced FDA approval of COBENFY, a first-in-class treatment for schizophrenia. COBENFY introduces a new pharmacological approach, offering improved symptom reduction and safety.
In terms of the trailing-12-month levered FCF margin, BMY’s 33.74% is significantly higher than the 1.66% industry average. Its 0.49x trailing-12-month asset turnover ratio is 19.9% higher than the 0.41x industry average. Also, its 76.18% trailing-12-month gross profit margin is 32% higher than the 57.70% industry average.
During the second quarter that ended June 30, 2024, BMY’s total revenues increased 8.7% year-over-year to $12.20 billion. Its non-GAAP gross profit rose 9.6% from the year-ago value to $9.23 billion. For the same quarter, its non-GAAP net earnings attributable to BMY and non-GAAP EPS came in at $4.19 billion and $2.07, up 14.1% and 18.3% over the prior year’s quarter, respectively.
For the quarter ended September 30, 2024, BMY’s revenue is expected to increase 2.8% year-over-year to $11.27 million. Its EPS for fiscal 2025 is expected to rise 822.5% year-over-year to $7. It surpassed the consensus EPS estimates in three of the trailing four quarters. Over the past three months, the stock has gained 32.9% to close the last trading session at $53.76.
BMY’s POWR Ratings reflect a robust outlook. It has an overall rating of A, which translates to a Strong Buy in our proprietary rating system.
It has an A grade for Growth and a B for Value, Sentiment, and Quality. It is ranked #5 in the Medical – Pharmaceuticals industry. To see BMY’s additional grades for Momentum and Stability, click here.
Gilead Sciences, Inc. (GILD)
GILD discovers, develops, and commercializes medicines in the areas of unmet medical need in the United States, Europe, and internationally.
On September 10, 2024, GILD announced a strategic collaboration with Genesis Therapeutics to leverage AI for discovering and developing novel small molecule therapies. GILD gained exclusive rights to develop and commercialize resulting products from the collaboration.
On August 14, 2024, GILD announced the FDA's accelerated approval of Livdelzi (seladelpar) for treating primary biliary cholangitis in adults. The drug demonstrated significant reductions in key biomarkers and pruritus compared to placebo.
In terms of the trailing-12-month EBITDA margin, GILD’s 48.42% is 654.8% higher than the 6.41% industry average. Likewise, its 77.44% trailing-12-month gross profit margin is 34.2% higher than the 57.70% industry average. Additionally, its 0.48x trailing-12-month asset turnover ratio is 16.3% higher than the 0.41x industry average.
For the fiscal second quarter (ended June 30, 2024), GILD’s total revenues increased 5.4% year-over-year to $ 6.95 billion. The company’s non-GAAP operating income came in at $3.27 billion, up 43.4% from the previous year’s quarter. In addition, its non-GAAP net income attributable to GILD stood at $2.52 billion or $2.01 per share, up 49.2% and 50% year-over-year, respectively.
Analysts expect GILD's revenue for the quarter ending December 31, 2024, to increase marginally year-over-year to $7.16 billion. Its EPS for fiscal 2025 is expected to grow 87.7% year-over-year to $7.14. It surpassed the Street EPS estimates in three of the trailing four quarters. Over the past three months, GILD's stock has gained 28.9% to close the last trading session at $84.74.
It’s no surprise that GILD has an overall rating of A, which translates to a Strong Buy in our proprietary POWR Ratings system.
It has an A grade for Value and a B for Sentiment and Quality. It is ranked #5 out of 334 stocks in the Biotech industry. Beyond what we stated above, we also have given GILD grades for Growth, Momentum, and Stability. Get all the GILD's 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.
ABBV shares were trading at $195.32 per share on Thursday afternoon, down $1.50 (-0.76%). Year-to-date, ABBV has gained 29.61%, versus a 20.31% rise in the benchmark S&P 500 index during the same period.
About the Author: Abhishek Bhuyan
Abhishek embarked on his professional journey as a financial journalist due to his keen interest in discerning the fundamental factors that influence the future performance of financial instruments.
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