As in all things, the biotech industry is also settling into a post-COVID world with the future of pharma rife with possibility, yet shaky in terms of investments. A quick search of pharma stocks 2023 will tell us that pharma investments have not been a priority this year, with many companies failing to increase their profit margins. However, with the growth of the healthcare industry and funds being diverted to research into specialty drugs and gene therapies, there are many undervalued pharma stocks that could soon see significant growth. Let us understand where the industry currently stands and identify the best pharmaceutical stocks in 2023.
Status of the Biotech Industry: Review of Pharma Stocks 2023
An IQVIA report summarised the market in July 2023, stating that while COVID-related conditions and their necessary treatments were on the decline, specialty drugs made up around 51 percent of the total market sales. The report also surmised that biologics accounted for 46 percent of drug spending and indicated that with the expiration of exclusivity rights, an increase in spending on biosimilars could rise to $20-49 billion in 2027. These stats are a positive sign to turn back our attention to undervalued pharma stocks and make calculated investments in the best pharma stocks to buy in 2023.
Moderna (MRNA) and Pfizer (PFE)
Both companies were frontrunners in the pharma industry during the pandemic, providing vaccines at unprecedented paces. Despite the decline in COVID cases, both companies recently received FDA approvals for a new COVID-19 vaccine, and Nasdaq listed them among the top undervalued pharma stocks to buy in September 2023. Moderna is relying on the vaccine approval to assist in settling other mRNA vaccines into their clinical trials. They announced positive testing results for some of their projects, including those for the treatment of cancer and other rare diseases. Pfizer, on the other hand, has multiple candidates that should soon see approvals in the next 18 months, reducing the company’s reliance on its COVID-related offerings. The company’s acquisition of Seagen and its oncology products should also be beneficial.
Moderna’s stock is reported to be trading at $103, reportedly down 43% this year with one of the most unfortunate performances in the S&P 500 index this year. However, analysts are certain it can increase significantly by 50 percent with the new COVID-19 vaccine announcements and external collaborations.
Meanwhile, the Nasdaq report also states that Pfizer is found to be trading near the bottom of its 52-week range with a forward P/E ratio of 10.3x, however, an upside of 32 percent is predicted for the stock. Additionally, Pfizer pays a steady dividend, which has gone up for 12 years in a row. Right now, the dividend yield is 4.79 percent, making it a safe choice for investors.
Vertex Pharmaceuticals (VRTX)
Forbes Advisor states that the company has six FDA-approved therapies and addresses the many varied conditions such as diabetes and sickle cell disease. It maintains a significant portion of its revenue from its cystic fibrosis (CF) medicines, which are expected to hit $10 billion in sales this year. This provides a stable base for its performance as its additional research maintains significant potential for growth. The company is working in collaboration with Moderna to develop an mRNA therapeutic for more unique cases of CF. But is it one of the best pharma stocks to buy in 2023?
Currently trading at $352.28, the company has shown an annualized growth rate of 6.6 percent with an average annual return of 16.53 percent. The company’s earnings per share (EPS) has grown by an average of 52 percent per year over the last five years, however, this trend is predicted to slow down signaling slow future growth of 10 percent over the next five years. With no real long-term debt holding the company back, Vertex might continue to see stable stock growth, especially if it receives the necessary approvals for its exa-cel gene therapy program soon.
BioNTech (BNTX)
BioNTech is currently trading at around $111, and its stock price has fallen by 26 percent. With investors feeling less optimistic about the future of global COVID-19-associated companies, it is no surprise that they are moving away from investments. However, some analysts feel this is a short-sighted view as MarketBeat reports “Moderna and Germany-based BioNTech are being given little credit for their big cash positions, still-durable Covid franchises—BioNTech and its partner Pfizer (PFE) have the leading Covid vaccine in sales, with Moderna at No. 2—and promising and well-funded drug pipelines. Their stocks look appealing at now-depressed prices.” With eyes turning back to the company, BioNTech could be one of the best pharma stocks of 2023.
In the recent quarter, the company reported an EPS ($0.79 that exceeded analysts’ expectations by $0.04. BioNTech also had a healthy return on equity of 21.46 percent and a robust net margin of 47.37 percent. Reports indicate that BioNTech has an average rating of “moderate-buy” and an average target price of $158.69, with HC Wainwright and HSBC issuing a “buy” rating.
Round-up of the Best Pharma Stocks to Buy in 2023
Abbott Laboratories (ABT) and its now separated division AbbVie (ABBV), are touted as consistent with year-on-year dividend payout increases for the last 51 years, marking it as an ideal place for investors to be, despite their currently underwhelming performance in the market. UnitedHealth Group (UNH) holds high stakes in the American health system as one of its biggest insurers with a projected 11 percent growth in 2023 followed by an 8 percent rise in the following year. Investing in the company appears to be among the best pharmaceutical stocks for 2023.
The pharma industry is full of undervalued pharma stocks as investor attention has shifted to AI and healthcare, and while prices are low, it creates a great opportunity to buy in. A multitude of pharma companies are projecting significant growth numbers for the future and there are many contenders for the title of “best pharma stocks to buy 2023”. Choosing one with an existing market presence and multiple projects in the pipeline can be a great start to selecting which one is right for you.
