We recently compiled a list of the 12 Best Low Price Pharma Stocks To Invest In Right Now. In this article, we are going to take a look at where Haleon plc (NYSE:HLN) stands against the other pharma stocks.
The Rising Demand for Weight-Loss Medications and GLP-1 Developments
Healthcare, which includes numerous businesses that offer patient care, conduct research and development of novel treatments, and design, produce, and distribute diagnostic tools and tests, takes the term “defensive” a step further than practically any other industry. Improvements in medical technology, medications, and therapeutic approaches have changed the course of patient care. As the need for quick results has grown, pharmaceutical corporations in particular have drawn much attention. Global pharmaceutical manufacturing was estimated to be worth $516.48 billion in 2022, according to a Grand View Research analysis. From 2023 to 2030, the industry is expected to expand at a compound annual growth rate (CAGR) of 7.63%.
The biopharma industry now has the most extensive and varied clinical pipeline to date, thanks to decades of groundbreaking research. In 2012, there were 3,200 distinct medications under development; by 2022, that number had nearly doubled to 6,100. The average cost of producing a single treatment is over $1 billion, while just 14% of medications in clinical trials reach FDA clearance, according to MIT research. This could be a game-changer for AI. For instance, generative AI helps identify illness patterns in large data sets to determine the optimal medicine combinations while enabling researchers to investigate far more possible compounds than they could with conventional techniques. Additionally, according to PwC, AI-driven analytics and automation could cut operational costs by more than 30% and process timeframes by 60–70%.
In a similar vein, the market has grown significantly due to consumer interest in weight-loss medications like Ozempic and Wegovy. According to a recent study in the scientific journal Addiction, GLP-1 medications may reduce the prevalence of alcohol and opioid addiction by as much as 50%. Additionally, these medications are being evaluated for Alzheimer’s disease and other disorders that are frequently associated with obesity. The development of GLP-1s is becoming crucial for pharmaceutical businesses that want to be leaders in fields like cardiovascular and renal health.
Competition with the leading companies in the anti-obesity business, which is expected to grow to $130 billion by 2030, is no longer the main emphasis. The possibility for additional participants to enter the field is growing along with the possible applications of GLP-1s. For example, the Swiss business Roche entered the weight-loss drug sweepstakes last year when it paid up to $3.1 billion to acquire California-based Carmot Therapeutics. The corporation wants to “fast-track” its anti-obesity medicines to regain faith in its pipeline and take a share of the weight-loss market.
Challenges in Biotech Funding and the Shift Towards Cell and Gene Therapies
The pharmaceutical sector may appear to be flourishing at first glance. However, it has its own set of difficulties, just like every other industry. Compared to 2021, funding for biotech and pharmaceuticals fell by a sharp 48.6% last year. In 2022, the IPO market also saw a significant decline, with profits falling as a result of market volatility and instability. Many general investors were apprehensive of the spike in drug-developer initial public offerings (IPOs) in 2020 and 2021, which garnered about $46.5 billion, more than the total from the preceding eight years combined. Future initial public offerings (IPOs) are being closely watched due to the high-risk, high-reward nature of the biotech sector as well as macroeconomic and geopolitical issues that impact larger markets.
However, as of September 3, drug developers had raised $2 billion through initial public offerings (IPOs) this year, a 24% increase over the same period in 2023. However, according to BNN Bloomberg, over two-thirds of these funds were raised in the first two months as a result of a spike in new listings. However, pharma companies’ portion of U.S. IPO profits has decreased from 17% in February to 6.5%, with less than $800 million raised in the next six months.
Tim Hunt, CEO of the Alliance for Regenerative Medicine (ARM), emphasized increased funding in cell and gene therapies in 2024 in his opening remarks at the October 7 conference. Thirteen of the fifteen biggest pharmaceutical companies in the world by market capitalization, he said, now have an “active presence” in this area. Major pharmaceutical corporations are increasingly turning to cell and gene therapies to fill possible revenue shortages as many product patents are about to expire. Despite this enthusiasm, there has been a reduction in related patent filings, and the number of cell and gene therapy deals in the pharmaceutical industry fell by 38% in Q2 2024 compared to the same time in 2023. Nevertheless, the sector is appealing and should not be disregarded by investors.
Our Methodology
Our methodology involved selecting pharmaceutical sector stocks with a market capitalization exceeding $2 billion and a share price below $20. We then identified the stocks with the lowest share prices and verified their last closing prices using Yahoo Finance. Finally, we ranked these stocks in ascending order based on their closing price as of February 21st.
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).
A pharmacist and a customer discussing a novel therapeutic oral health product in a pharmacy.
Haleon plc (NYSE:HLN)
Share Price as of the Close of February 21: $10.08
Haleon plc (NYSE:HLN) is a British multinational consumer healthcare company specializing in OTC medications and wellness products. It operates across five categories: Oral Health, VMS, Pain Relief, Respiratory Health, and Digestive Health. The company generates revenue by marketing trusted brands directly to consumers and healthcare professionals through retail sales and pharmacy partnerships.
Haleon plc (NYSE:HLN) expects organic revenue growth of 4-6% for FY 2024, with operating profit growth in the high-single digits. The company’s £300 million productivity program is on track, reinvesting savings into advertising and clinical studies. However, divestitures of Lamisil, ChapStick, and NRT businesses outside the US will reduce revenue by 1.9% and adjusted operating profit by 5.2%.
Geographically, Q3 2024 showed strong growth in Asia Pacific (8.2%), followed by EMEA and LatAm (6.1%) and North America (4.8%). However, foreign exchange rates are expected to negatively impact revenue by 3.7% and adjusted operating profit by 6.5%. Haleon plc (NYSE:HLN) also completed the acquisition of a 33% equity stake in Tianjin TSKF in China, boosting future earnings by reducing Non-Controlling Interest.
Financially, the company’s Q3 organic revenue growth was 6.1%, driven by a 3.3% price increase and a 2.8% rise in volume/mix. Oral and Respiratory Health categories performed well, while Pain Relief declined due to tough comparatives in China but recovered in Q3. Haleon plc (NYSE:HLN) remains focused on long-term profitability through cost savings and reinvestments. The company completed its £500 million share buyback program and continues to manage its debt through bond repayments and new issuances.
Overall HLN ranks 4th on our list of the best low price pharma stocks to invest in right now. While we acknowledge the potential of HLN 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 HLN but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.