Investing in biopharmaceutical stocks is a lesson in quantity and quality. That is, the best pharma stocks have products that are commercially available. These medicines help bring a steady supply of revenue and, more importantly, earnings through the door. That, in turn, can fund future research and development,
For the best pharma stocks, this becomes a bullish spiral where new medicines deliver new revenue streams, which helps to advance more research, and so on.
But it’s not just about the quantity of the drugs the company produces. Investors should also look at what conditions these companies are treating. In 2023 and into 2024, obesity and type 2 diabetes garnered significant attention. Several of these companies, including the ones in this article, continue to look for advances in cancer treatment that may bring us closer to a cure.
Many traders and some investors prefer to speculate on one of more of the many biopharmaceutical penny stocks — and with good reason. But investors can still find growth and value in large-cap pharma stocks that still offer reasonable valuations, and a price that allows them to accumulate a sizable position with a modest amount of funds.
Pfizer (NYSE:PFE) fits into the category of stocks that could benefit from the “new year, new me” mantra. Things couldn’t have been much worse for Pfizer in 2023. The stock dropped over 35% as revenue from its Covid-19 products cratered.
That puts PFE stock at approximately pre-pandemic levels, which the current revenue and earnings would suggest is correct. But it also creates an opportunity for patient investors.
Pfizer has a deep pipeline with more than a dozen drugs potentially getting FDA approval in the next 18 months. Some of these will be in oncology particularly through Pfizer’s partnership with Seagen (NASDAQ:SGEN). The company may also get in the weight loss arena and try its hand at precision medicine.
The company is projecting a 46% growth in earnings in 2024 and analysts give PFE stock a 17.69% upside from its current level. In the meantime, investors get a dividend that has increased for 14 consecutive years and has a yield of 5.38%.
Incyte (NASDAQ:INCY) is a good example of that bullish spiral I wrote about in the introduction. The company’s ruxolitinib cream for treating atopic dermatitis in children is on the cusp of FDA approval after positive Phase 3 trial results.
The company has subsequently received that approval and, just like that, a new revenue stream opens up for Incyte. In its 2022 Investor Presentation the company was forecasting a 2-3 million addressable audience for atopic dermatitis.
Even before that approval, Incyte was showing year-over-year growth in revenue and earnings based on its existing hematology/oncology and inflammation and autoimmunity portfolio.
Incyte is projecting a 29% growth in earnings in 2024 and analysts project the stock to grow by 23% in the next year. The company has a forward P/E ratio of around 20x earnings which makes it an attractive value in a segment known for high valuations.
Exelixis (NASDAQ:EXEL) was one of the best performers among pharma stocks in 2023. On the strength of the company’s Cabozantinib oncology drugs, the company continues to post growing revenue and earnings that accounted for a 28% increase in the EXEL stock price in 2023.
A strength of Exelixis is its singular focus on oncology. The company brings decades of experience to bring what it calls a “rational approach” to drug development. This includes matching features of the company’s drug candidates with specific characteristics of patients’ tumors. This helps increase the chance of success.
It also helps fund the company’s robust pipeline which includes a dozen candidates including four that are in Phase 3 trials.
The company is projecting 90% earnings growth in the next 12 months. That growth may not be fully priced into the stock. Analysts currently are giving EXEL stock a 17.62% upside. But that may move higher once the company reports earnings in February.
On the date of publication, Chris Markoch did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.