We recently compiled a list of the 12 Best Small Cap Pharma Stocks to Buy Now. In this article, we are going to take a look at where Evolus, Inc. (NASDAQ:EOLS) stands against the other small cap pharma stocks.

Impact of US Tariffs and Obesity Drug Performance on the Pharmaceutical Industry

Emily Field, Head of European Pharma Research at Barclays, spoke on CNBC on February 20 about the performance of obesity medications, the effects of US tariffs, and the dynamics of the pharmaceutical industry. According to her, the industry might not perform poorly at least in the first half of this year. The effectiveness of obesity medications is still up for debate, though, as leading companies in the field have shown inconsistent results.

Speaking about the tariffs, she stated that since some businesses assemble their products in the US after producing them overseas, their implementation raises several unanswered questions for the pharmaceutical industry. These businesses therefore have relatively low manufacturing costs, which is an important factor to take into account when assessing the effects of tariffs. She thought that these businesses could easily absorb the higher expense of the tariffs. The topic hasn’t come up much on earnings calls this quarter, and the market is nearing the end of the reporting season.

Eli Lilly’s Chief Scientific Officer spoke with CNBC’s Health and Pharma correspondent Angelica Peebles about the weight reduction industry. The domain presents opportunities for easier-to-use treatments, including tablets, and medications that help individuals lose weight, she noted based on the conversation. How much weight reduction users need to observe on top of what they already have is another topic of discussion about the subject. According to Dan Skovronsky, Chief Scientific Officer of Eli Lilly, the majority of the audience seems to benefit from medications that provide about 20% weight loss. According to him, the market for stronger medications that offer at least 25% is smaller.

He also believed that the potential benefits of these weight reduction medications for a wide range of illnesses were the most fascinating thing he had witnessed in his work as a scientist and doctor. The patterns they have been observing in the answers from patients serve as their current source of knowledge.

Our Methodology 

For our methodology, we selected stocks with a market capitalization between $250 million and $2 billion and ranked them based on the highest hedge fund sentiment according to Insider Monkey’s database, as of Q4 2024.

Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 373.4% since May 2014, beating its benchmark by 218 percentage points (see more details here).

Evolus, Inc. (NASDAQ:EOLS)

Number of Hedge Fund Holders: 32

Evolus, Inc. (NASDAQ:EOLS) is a performance beauty company specializing in the cash-pay aesthetic market, focusing on neurotoxins and dermal fillers. Its flagship product, Jeuveau, is a botulinum toxin type A used to temporarily improve moderate to severe frown lines between the eyebrows in adults.

Evolus, Inc. (NASDAQ:EOLS) reported strong revenue growth for Q3 2024, reaching $61.1 million, a 22% increase compared to the same period in 2023. This growth outpaced the overall market and was driven by effective marketing strategies, the Evolus Rewards program, and increased brand recognition. The company maintained a healthy gross margin of 68.9%, reflecting efficient cost management.

However, Evolus, Inc. (NASDAQ:EOLS) faced challenges with high operating expenses, which totaled $76.6 million. A large portion of these costs came from selling, general, and administrative (SG&A) expenses, including stock-based compensation. As a result, the company reported a non-GAAP operating loss of $6.7 million, a significant drop from the $1.1 million operating income in the previous quarter. This highlights the need to manage expenses as revenue continues to grow.

Evolus, Inc. (NASDAQ:EOLS) ended the quarter with $85 million in cash, a decrease from $93.7 million in June, and a cash burn of $8.7 million. The company revised its 2024 revenue guidance to $260 million to $266 million, forecasting 29% to 32% growth. They also expect a strong gross profit margin of 68% to 71% and non-GAAP operating expenses between $185 million and $190 million. Looking ahead, the company plans to launch Evolysse in the U.S. by September 2025, which is expected to attract interest due to its unique cold HA technology.

Overall EOLS ranks 2nd on our list of the best small cap pharma stocks to buy now. While we acknowledge the potential of EOLS as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns, and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than EOLS but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.

READ NEXT: 20 Best AI Stocks To Buy Now and Complete List of 59 AI Companies Under $2 Billion in Market Cap

Disclosure: None. This article is originally published at Insider Monkey.