5 Most Undervalued Pharma Stocks To Buy According To Hedge Funds

In this article, we discuss 5 most undervalued pharma stocks to buy according to hedge funds. If you want to see more stocks in this selection, check out 12 Most Undervalued Pharma Stocks To Buy According To Hedge Funds. 

5. GSK plc (NYSE:GSK)

Number of Hedge Fund Holders: 37

P/E Ratio as of January 23: 13.06

GSK plc (NYSE:GSK) was founded in 1715 and is headquartered in Brentford, the United Kingdom. The company focuses on the discovery, development, manufacture, and marketing of pharmaceutical products, vaccines, over-the-counter medicines, and health-related consumer products worldwide. It operates through four segments – Pharmaceuticals, Pharmaceuticals R&D, Vaccines, and Consumer Healthcare. GSK plc (NYSE:GSK) is one of the most undervalued pharma stocks to monitor. 

On January 5, China-based WuXi Biologics announced that it has signed an agreement with GSK plc (NYSE:GSK), where the latter will receive exclusive licenses for up to four T cell engaging (TCE) antibodies. GSK plc (NYSE:GSK) will also have the option to team up with WuXi for three additional bi/multi-specific TCE antibodies. Per the agreement, WuXi is also eligible for tiered royalties on net sales.

According to Insider Monkey’s Q3 data, GSK plc (NYSE:GSK) was part of 37 hedge fund portfolios, compared to 34 in the prior quarter. Ken Fisher’s Fisher Asset Management is the largest stakeholder of the company, with more than 12 million shares worth $358.2 million. 

Ariel Investment made the following comment about GSK plc (NYSE:GSK) in its Q3 2022 investor letter:

“By comparison, health care leader GSK plc (NYSE:GSK) was the largest detractor from performance in the quarter. Investors are concerned about legal liabilities associated with its antacid drug Zantac. While it is impossible to know the outcome with certainty, our preliminary assessment suggests that the decline in market capitalization exceeds the likely financial impact on the company.”

4. Organon & Co. (NYSE:OGN)

Number of Hedge Fund Holders: 38

P/E Ratio as of January 23: 7.91

Organon & Co. (NYSE:OGN) is a New Jersey-based health care company that develops health solutions through a portfolio of prescription medicines and therapies in the United States and internationally. On November 14, Organon & Co. (NYSE:OGN)’s Ontruzant, a biosimilar of Roche’s cancer drug Herceptin, to treat adults with early breast cancer, metastatic breast cancer, and metastatic gastric cancer, became available in Canada. It is one of the most undervalued pharma stocks to invest in according to smart investors. 

On January 5, Organon & Co. (NYSE:OGN) announced a strategic investment in Claria Medical, a private company developing an investigational medical device being studied for use during minimally invasive laparoscopic hysterectomy. The agreement also allows Organon & Co. (NYSE:OGN) the option to acquire Claria Medical.

According to Insider Monkey’s data, Organon & Co. (NYSE:OGN) was part of 38 hedge fund portfolios at the end of September 2022, up from 28 in the earlier quarter. Steven Boyd’s Armistice Capital is the largest stakeholder of the company, with 1.70 million shares worth $39.5 million. 

Miller Value Partners made the following comment about Organon & Co. (NYSE:OGN) in its Q3 2022 investor letter:

“Organon & Co. (NYSE:OGN) was the top detractor for the quarter, falling 30.0%2. Organon reported 2Q22 revenue of $1.59 billion, -0.6% Y/Y, ahead of consensus of $1.54 billion, and Adjusted EPS of $1.25, -27.3% Y/Y, in-line with analyst expectations. Adjusted EBITDA for the quarter came in at $512 million (32.3% margin), compared to 2Q21 Adjusted EBITDA of $627 million (39.3% margin). Management revised FY22 guidance for revenue of $6.1-6.3 billion, compared to previous guidance for revenue of $6.1-6.4 billion, to reflect persisting foreign exchange (FX) headwinds, and Adjusted EBITDA margin of 32-34%, compared to prior guidance for a margin of 34-36%, which incorporates ~$110 million of in-process research and development (IPR&D) and milestone expenses from business development. Management’s guidance implies FY22 Adjusted EBITDA of $2.05B, at the respective midpoints, or an Enterprise Value (EV)/EBITDA multiple of ~7.0x.”

3. Moderna, Inc. (NASDAQ:MRNA)

Number of Hedge Fund Holders: 44

P/E Ratio as of January 23: 6.86

Moderna, Inc. (NASDAQ:MRNA) is a Massachusetts-based biotechnology company, discovers, develops, and commercializes messenger RNA therapeutics and vaccines for the treatment of infectious diseases, immuno-oncology, rare diseases, cardiovascular diseases, and auto-immune diseases. It is one of the most undervalued stocks in the pharma sector as per hedge funds. 

On January 18, Chardan analyst Geulah Livshits raised the price target on Moderna, Inc. (NASDAQ:MRNA) to $208 from $191 and maintained a Neutral rating on the shares after the company announced its respiratory syncytial virus vaccine mRNA-1345 has met core efficacy endpoints in an interim analysis of the phase III ConquerRSV trial in older adults. Moderna, Inc. (NASDAQ:MRNA) plans to submit for regulatory approval in the first half of 2023, as well as to present the data at “an upcoming scientific meeting” and submit the data for peer-reviewed publication, the analyst told investors.

According to Insider Monkey’s data, 44 hedge funds were long Moderna, Inc. (NASDAQ:MRNA) at the end of Q3 2022, compared to 45 funds in the prior quarter. Patrick Degorce’s Theleme Partners is the largest stakeholder of the company, with 6 million shares worth $710 million. 

Here is what Baron Funds said about Moderna, Inc. (NASDAQ:MRNA) in its Q3 2022 investor letter:

“Within biotechnology, underperformance of Moderna, Inc. (NASDAQ:MRNA) and lower exposure to this better performing sub-industry weighed the most on relative performance. Shares of Moderna, a leader in the emerging field of mRNA-based vaccines and therapeutics, declined due to increasing uncertainty around what a booster market could look like as COVID shifts away from pandemic status and becomes an increasingly commercial market rather than government funded.”

2. Bausch Health Companies Inc. (NYSE:BHC)

Number of Hedge Fund Holders: 44

P/E Ratio as of January 23: 11.01

Bausch Health Companies Inc. (NYSE:BHC) is a Canadian firm that  develops, manufactures, and markets a range of pharmaceutical, medical device, and over-the-counter products for eye health, gastroenterology, and dermatology. On November 17, Evercore ISI analyst Umer Raffat said the FDA issued new product specific guidance for generic Xifaxan, one of Bausch’s primary drugs, with the “key change” being that the new guidance no longer grants a waiver of in vivo testing for the 550 mg strength based on 200 mg testing. By doing this, the FDA added “an extra layer hurdle for generics to jump through,” according to the analyst, who noted that generic 550 mg “is really what matters” given that the 550 mg dose is “where 99% of the Xifaxan volume lies.” He maintained an In Line rating on Bausch Health Companies Inc. (NYSE:BHC). 

According to Insider Monkey’s data, 44 hedge funds were long Bausch Health Companies Inc. (NYSE:BHC) at the end of Q3 2022, compared to 39 funds in the last quarter. Carl Icahn’s Icahn Capital LP held the largest stake in the company, comprising 34.7 million shares worth $239.2 million. It is one of the most undervalued pharma stocks to buy according to hedge funds. 

Here is what Miller Value Partners Opportunity Trust Fund has to say about Bausch Health Companies Inc. (NYSE:BHC) in its Q2 2022 investor letter:

“Bausch Health Companies Inc. (NYSE:BHC) declined during the quarter as the company consummated its Bausch+Lomb IPO at valuations far below expectations, reported disappointing Q1 2022 results, and delayed its plan to spin out its Solta (aesthetics) business due to difficult market conditions. While the company spun off 10% of Bausch+Lomb (BCLO) they retained 90% of the company which they intend to distribute once they have met their target leverage ratio of 6.5-6.7x. The future spin-off value of the Bausch+Lomb piece represents a value of $12.55 per share, 39% above where Bausch Health is currently trading. The company recently appointed John Paulsen as Chair of the Board, which should accelerate value realization.”

1. Pfizer Inc. (NYSE:PFE)

Number of Hedge Fund Holders: 77

P/E Ratio as of January 23: 8.64

Pfizer Inc. (NYSE:PFE) is an American multinational company that discovers, develops, manufactures, markets, distributes, and commercializes biopharmaceutical products worldwide. On January 17, Pfizer Inc. (NYSE:PFE) said it expanded its commitment to ‘An Accord for a Healthier World’ to provide the full portfolio of medicines and vaccines on a not-for-profit basis for 45 lower-income countries.

According to Insider Monkey’s third quarter database, 77 hedge funds were bullish on Pfizer Inc. (NYSE:PFE), compared to 70 funds in the prior quarter. Cliff Asness’ AQR Capital Management is the largest stakeholder of the company, with 10.6 million shares worth $467.5 million. It is one of the most undervalued pharma stocks to invest in according to elite investors. 

Diamond Hill Capital made the following comment about Pfizer Inc. (NYSE:PFE) in its Q3 2022 investor letter:

“Also among our bottom contributors were health care products manufacturer Abbott Labs, global pharmaceutical company Pfizer Inc. (NYSE:PFE), media and technology giant Alphabet, and insurance company American International Group (AIG). Although Pfizer continues to report strong performance of its core drugs, sales of its COVID vaccine and treatment have likely peaked and sales are expected to decline going forward. We remain optimistic about the company long term as we believe management is taking the company in the right direction, focusing R&D, and making strategic acquisitions with profits generated from COVID vaccine sales.”

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