In this article, we discuss the 10 cheap pharmaceutical stocks to watch.
Pharmaceutical industry was among the very few sectors that actually thrived in the middle of the pandemic. The lack of Covid-related awareness and relevant information caused panic-buying of medicines. By the end of 2020, the global drug spending grew by $88 billion, the University of Minnesota reported.
In the latter half of 2020, the pharmaceutical companies geared up for preparing vaccines to fight the pandemic, while generating huge revenues throughout the year and pushing the profits in 2021 as well. According to a report published by Wall Street Journal, the pharma behemoth Pfizer Inc. (NYSE:PFE) expects to generate over $15 billion in vaccine revenue in 2021. Moreover, iShares U.S. Pharmaceuticals ETF, which measures the performance of the pharma sector of the U.S. equity market, gained 13.76% in the past year and 3.83% year to date. The exchange-traded fund lists famous pharmaceutical companies such as Johnson & Johnson (NYSE:JNJ), Pfizer Inc. (NYSE:PFE), Bristol-Myers Squibb Company (NYSE:BMY), and Merck & Co., Inc. (NYSE:MRK).
As the pharmaceutical sector remained the center of attention in 2020, the pharma and biotech stocks caught the investors’ eye from all around the world. As McKinsey & Company reports, the market cap of pharmaceutical companies listed on the Hong Kong and Shanghai stock exchanges crossed the mark of $217 billion in 2020, from $12 billion in 2017.
According to CNBC’s Jim Cramer, the rally in pharma stocks would likely continue in the coming quarters as well and could offer lucrative opportunities to investors because of the rising drug prices in the U.S. This comes in agreement with the industry’s future outlook. Research and Markets published a report on the global pharmaceutical industry and mentioned that the global pharmaceutical market is expected to grow at a CAGR of 8%, reaching $1,700.9 billion by 2025. The report further mentioned that this growth is stimulated by the pharma companies’ continuous efforts to curb the coronavirus pandemic.
In the past few years, cheap pharmaceutical stocks are gaining attention due to their potential long-term growth. This is achieved by using technological advances and signing megadeals with established pharma companies. Moreover, the small companies work at a breakneck speed to launch their own products, instead of becoming acquisition targets for large pharma companies. For example, a major pharmaceutical company Moderna, Inc. (NASDAQ:MRNA) was traded at $18.6 per share in December 2018 and reached $435.70 per share today. Some of the notable cheap pharmaceutical stocks include Viatris Inc. (NASDAQ:VTRS), Ironwood Pharmaceuticals, Inc. (NASDAQ:IRWD), Kadmon Holdings, Inc. (NASDAQ:KDMN), Amneal Pharmaceuticals, Inc. (NYSE:AMRX), and Catalyst Pharmaceuticals, Inc. (NASDAQ:CPRX).
Our Methodology:
Let’s start our list of the cheap pharmaceutical stocks to watch. The stocks mentioned below are cheap pharma stocks, with share price under $17. In addition to this, we took into account hedge fund sentiments, analysts’ ratings, long-term growth potential, and fundamentals while choosing these stocks.
Why pay attention to hedge fund sentiment while choosing stocks? Insider Monkey’s research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 86 percentage points since March 2017. Between March 2017 and July 2021 our monthly newsletter’s stock picks returned 186.1%, vs. 100.1% for the SPY. Our stock picks outperformed the market by 86 percentage points (see the details here). That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to. You can subscribe to our free newsletter on our homepage to receive our stories in your inbox.
Cheap Pharmaceutical Stocks to Watch
10. Entasis Therapeutics Holdings Inc. (NASDAQ:ETTX)
Number of Hedge Fund Holders: 2
Stock Price as of September 22: $3.57
Entasis Therapeutics Holdings Inc. (NASDAQ:ETTX) stands tenth on our list of the cheap pharmaceutical stocks to watch. The company manufactures drugs addressing the threat of multidrug-resistant bacteria, with the help of a pathogen-targeted platform.
Recently, Entasis Therapeutics Holdings Inc. (NASDAQ:ETTX) made waves in the media due to the potential of its preclinical candidate ETX0462, which would be used against multidrug-resistant and biothreat infections. In Q2 2021, Entasis Therapeutics Holdings Inc. (NASDAQ:ETTX) reported cash and cash equivalents of $56.4 million. Since the beginning of the year, Entasis Therapeutics Holdings Inc. (NASDAQ:ETTX) delivered a 40% return to shareholders, while its 12-month returns came in at 26.3%. This September, HC Wainwright reiterated a ‘Buy’ rating on the stock, with a $5 price target.
As of Q2 2021, 2 hedge funds tracked by Insider Monkey have positions in Entasis Therapeutics Holdings Inc. (NASDAQ:ETTX), worth $148,000. The number of hedge funds having stakes in the company were the same in the previous quarter.
9. Synlogic, Inc. (NASDAQ:SYBX)
Number of Hedge Fund Holders: 9
Stock Price as of September 22: $3.57
Synlogic, Inc. (NASDAQ:SYBX) is an American pharmaceutical company that manufactures synthetic biotic medicines to combat the tumor’s severity. Along with this, the company’s medicines also boost the patient’s immune response and promote the body’s ability to detect and destroy cancer cells. Synlogic, Inc. (NASDAQ:SYBX) ranks ninth on our list of the cheap pharmaceutical stocks to watch.
Recently, Synlogic, Inc. (NASDAQ:SYBX) announced the data from the successful clinical trial of its two investigational synthetic biotic medicines, SYNB1618 and SYNB1934 in patients with phenylketonuria. The company plans to start a pivotal trial for these candidates based on the data received.
In Q2 2021, Synlogic, Inc. (NASDAQ:SYBX) reported revenue of $0.2 million, beating the consensus by $0.17 million. In September, Piper Sandler lifted its price target on Synlogic, Inc. (NASDAQ:SYBX) to $9, while maintaining an ‘Overweight’ rating on the shares. The firm’s analyst Edward Tenthoff mentioned that the company met his expectations after a successful trial of two of its most important candidates, which caused a notable reduction of phenylalanine in patients. After hitting a low of $1.60 in the initial months of the pandemic in 2020, Synlogic, Inc. (NASDAQ:SYBX) gained 78.6% in the past year and 75.3% year to date.
As of Q2 2021, 9 hedge funds tracked by Insider Monkey have positions in Synlogic, Inc. (NASDAQ:SYBX), up from 7 in the previous quarter. The total value of these stakes is over $27.9 million. With over 3.6 million shares, worth $14.3 million, OrbiMed Advisors is the company’s largest shareholder.
8. Amryt Pharma plc (NASDAQ:AMYT)
Number of Hedge Fund Holders: 11
Stock Price as of September 22: $11.91
Amryt Pharma plc (NASDAQ:AMYT) is a British commercial stage pharmaceutical company that develops and delivers innovative new medicines, treatments, and therapies to improve the lives of patients with rare and debilitating diseases. Amryt Pharma plc (NASDAQ:AMYT) ranks eighth on our list of the cheap pharmaceutical stocks to watch.
In June, Amryt Pharma plc (NASDAQ:AMYT) was granted a priority review by the FDA for its new drug application (NDA), which would be used for the treatment of Epidermolysis Bullosa (EB). In Q2 2021, Amryt Pharma plc (NASDAQ:AMYT) reported revenue of $62.7 million, showcasing a 35.9% year-over-year growth. The company also lifted its FY21 guidance and now expects revenue in the range of $210 million to $215 million versus the previous guidance of $205 million – $210 million. In August, SVB Leerink initiated its coverage on Amryt Pharma plc (NASDAQ:AMYT) with an ‘Outperform’ rating and a $22 price target.
Of the 873 hedge funds tracked by Insider Monkey, 11 hedge funds have positions in Amryt Pharma plc (NASDAQ:AMYT) in Q2 2021, up from 8 in the previous quarter. These stakes are valued at $73.1 million.
In addition to Johnson & Johnson (NYSE:JNJ), Pfizer Inc. (NYSE:PFE), Bristol-Myers Squibb Company (NYSE:BMY), Merck & Co., Inc. (NYSE:MRK), and Moderna, Inc. (NASDAQ:MRNA), analysts and investors are also paying attention to Amryt Pharma plc (NASDAQ:AMYT) amid the company’s long-term growth potential.
7. Cabaletta Bio, Inc. (NASDAQ:CABA)
Number of Hedge Fund Holders: 12
Stock Price as of September 22: $12.40
Cabaletta Bio, Inc. (NASDAQ:CABA) ranks seventh on our list of the cheap pharmaceutical stocks to watch. It is an American pharmaceutical company that develops and discovers targeted cell therapies for patients with autoimmune diseases.
In June, Mizuho initiated its coverage on Cabaletta Bio, Inc. (NASDAQ:CABA) with a ‘Buy’ rating and a $22 price target. The firm’s analyst sees an opportunity in the company’s management to bring transformative innovation into immunology. In Q2 2021, Cabaletta Bio, Inc. (NASDAQ:CABA) posted a GAAP EPS of -$0.45, beating the market consensus by $0.03. At the end of the quarter, the company reported cash and cash equivalents of $102.8 million. In the past year, Cabaletta Bio, Inc. (NASDAQ:CABA) delivered a 17.5% return to shareholders, while its 6-month returns stood at 5.06%.
As of Q2 2021, 12 hedge funds tracked by Insider Monkey have positions in Cabaletta Bio, Inc. (NASDAQ:CABA), compared with 11 funds in the previous quarter. The total value of these stakes is over $73.1 million. With over 3 million shares, Adage Capital Management is the company’s leading shareholder.
Like Johnson & Johnson (NYSE:JNJ), Pfizer Inc. (NYSE:PFE), Bristol-Myers Squibb Company (NYSE:BMY), Merck & Co., Inc. (NYSE:MRK), and Moderna, Inc. (NASDAQ:MRNA), Cabaletta Bio, Inc. (NASDAQ:CABA) is valued by investors due to its long-term potential growth.
6. Neoleukin Therapeutics, Inc. (NASDAQ:NLTX)
Number of Hedge Fund Holders: 13
Stock Price as of September 22: $7.53
Neoleukin Therapeutics, Inc. (NASDAQ:NLTX) is an American biopharmaceutical company that creates next-generation immunotherapies for serious diseases like cancer as well as inflammation and autoimmunity using de novo protein design technology. The company ranks sixth on our list of the cheap pharmaceutical stocks to watch.
In August, Piper Sandler assumed Neoleukin Therapeutics, Inc. (NASDAQ:NLTX) with an ‘Overweight’ rating and a $30 price target. The firm’s analyst Joseph Catanzaro appreciated the company’s de novo protein design technology and sees it as a unique approach to building effective protein therapeutics. In Q2 2021, Neoleukin Therapeutics, Inc. (NASDAQ:NLTX) reported cash and cash equivalent of $164.2 million. On August 27, shares of Neoleukin Therapeutics, Inc. (NASDAQ:NLTX) rose 23% as the company’s CEO purchased 100,000 shares, worth $611,100, and taking the total to over 2.3 million shares. The stock gained 17.2% in the past month.
As of Q2 2021, 13 hedge funds tracked by Insider Monkey have positions in Neoleukin Therapeutics, Inc. (NASDAQ:NLTX), worth $125.9 million. The number of hedge funds having stakes in the company were the same in the previous quarter.
5. Catalyst Pharmaceuticals, Inc. (NASDAQ:CPRX)
Number of Hedge Fund Holders: 16
Stock Price as of September 22: $4.89
Catalyst Pharmaceuticals, Inc. (NASDAQ:CPRX) is an American biopharmaceutical company that develops and commercializes therapies for rare neurological diseases. The company stands fifth on our list of cheap pharmaceutical stocks to watch.
In August, Piper Sandler appreciated the company’s growing business as it continues to generate positive cash flow. The firm lifted its price target on Catalyst Pharmaceuticals, Inc. (NASDAQ:CPRX) to $6.50, while keeping an ‘Overweight’ rating on the shares. In Q2 2021, the company reported an operating income of $15.8 million, up from $10.3 million from the prior-year quarter. Catalyst Pharmaceuticals, Inc. (NASDAQ:CPRX) generated $36.3 million in revenue in the second quarter, beating the estimates by $5.07 million. Since the beginning of the year, Catalyst Pharmaceuticals, Inc. (NASDAQ:CPRX) delivered a 38.5% return to shareholders, while its 12-month returns stood at 52.34%.
In Q2 2021, 16 hedge funds tracked by Insider Monkey have positions in Catalyst Pharmaceuticals, Inc. (NASDAQ:CPRX), compared with 13 in the previous quarter. These stakes are valued at over $92.1 million. With 10 million shares, Steven Boyd’s Armistice Capital is the company’s leading shareholder.
4. Amneal Pharmaceuticals, Inc. (NYSE:AMRX)
Number of Hedge Fund Holders: 17
Stock Price as of September 22: $5.03
Amneal Pharmaceuticals, Inc. (NYSE:AMRX) stands fourth on our list of the cheap pharmaceutical stocks to watch. It is a specialty pharmaceutical company that manufactures and commercializes complex oral solids, injectables, softgels, and inhalation products.
On August 25, Amneal Pharmaceuticals, Inc. (NYSE:AMRX) announced a successful late-stage trial of its IPX-203 drug in certain patients with Parkinson’s Disease and reported a significant improvement in the drug’s efficacy. In Q2 2021, Amneal Pharmaceuticals, Inc. (NYSE:AMRX) posted an EPS of $0.25, beating the consensus by $0.06. The company reported revenue of $535.07 million, presenting a 15.2% year-over-year growth. In April, Guggenheim lifted its price target on Amneal Pharmaceuticals, Inc. (NYSE:AMRX) to $8.00, while maintaining a ‘Buy’ rating on the shares. After hitting a low of $2.87 in April 2020 due to the pandemic-related financial market crash, Amneal Pharmaceuticals, Inc. (NYSE:AMRX) gained 18.99% in the past year.
Of the 873 hedge funds tracked by Insider Monkey, 17 hedge funds have positions in Amneal Pharmaceuticals, Inc. (NYSE:AMRX) as of Q2 2021, up from 15 in the previous quarter. These stakes are valued at over $53.6 million.
3. Citius Pharmaceuticals Inc (NASDAQ: CTXR)
Number of Hedge Fund Holders: 3
Stock Price as of September 27: $2.09
Citius is one of the best cheap stocks to buy for long-term growth. Citius Pharmaceuticals, Inc. (NASDAQ: CTXR) develops and markets drugs for critical care.
On September 7, Citius Pharmaceuticals, Inc. (NASDAQ: CTXR) announced that it had signed an agreement with Dr. Reddy’s Laboratories for exclusive licensing of E7777, an oncology immunotherapy for the treatment of cutaneous T-cell lymphoma.
Out of the hedge funds being tracked by Insider Monkey, New York-based investment firm Renaissance Technologies is a leading shareholder in Citius Pharmaceuticals, Inc. (NASDAQ: CTXR) with 1.8 million shares worth more than $6.6 million.
2. Ironwood Pharmaceuticals, Inc. (NASDAQ:IRWD)
Number of Hedge Fund Holders: 28
Stock Price as of September 22: $12.67
Ironwood Pharmaceuticals, Inc. (NASDAQ:IRWD) stands second on our list of the cheap pharmaceutical stocks to watch. It is an American pharmaceutical company that manufactures medicines for patients suffering from gastrointestinal (GI) diseases.
On August 26, Ironwood Pharmaceuticals, Inc. (NASDAQ:IRWD) got approval from the FDA for its revised label for LINZESS (linaclotide) as the data signaled the clinical safety of the drug. The drug would be used to averse the risk of dehydration and contraindication in children. In Q2 2021, Ironwood Pharmaceuticals, Inc. (NASDAQ:IRWD) posted an EPS of $0.34, beating the estimates by $0.12. The company’s revenue for the quarter stood at $104.03 million, presenting a 16.3% year-over-year growth. For FY21, Ironwood Pharmaceuticals, Inc. (NASDAQ:IRWD) expects revenue in the range of $390 million to $410 million. In July, Morgan Stanley raised its price target on Ironwood Pharmaceuticals, Inc. (NASDAQ:IRWD) to $12, while keeping an ‘Equal Weight’ rating on the shares. The stock gained 30.1% in the past year and 12.88% year to date.
In Q2 2021, 28 hedge funds tracked by Insider Monkey have positions in Ironwood Pharmaceuticals, Inc. (NASDAQ:IRWD), worth $498.4 million. The number of hedge funds having stakes in the company were the same in the previous quarter.
1. Viatris Inc. (NASDAQ:VTRS)
Number of Hedge Fund Holders: 53
Stock Price as of September 22: $13.28
Viatris Inc. (NASDAQ:VTRS) tops our list of the cheap pharmaceutical stocks to watch. It is a global pharmaceutical company that provides access to medicines, sustainable operations, and develops innovative solutions to improve patients’ health.
In Q2 2021, Viatris Inc. (NASDAQ:VTRS) posted an EPS of $0.98, beating the estimates by $0.10. The company’s revenue for the quarter stood at $4.58 billion, up 67.8% from the prior-year quarter. Viatris Inc. (NASDAQ:VTRS) raised its FY21 revenue guidance and expects revenue in the range of $17.5 billion and $17.9 billion, versus the estimates of $17.6 billion. This May, Royal Bank of Canada initiated its coverage on Viatris Inc. (NASDAQ:VTRS) with an ‘Outperform’ rating and a $24 price target.
In Q2 2021, 53 hedge funds tracked by Insider Monkey have positions in Viatris Inc. (NASDAQ:VTRS), compared with 58 in the previous quarter. The total value of these stakes is over $1.5 billion. With over 1.5 million shares, worth $22.7 billion, Crake Asset Management is the company’s leading shareholder.
Mittleman Brothers mentioned Viatris Inc. (NASDAQ:VTRS) in its first-quarter 2021 investor letter. Here is what the firm has to say:
“Our other new position in Q1 (in addition to AMA Group) is Viatris (VTRS), which is the old stock of the generic drug manufacturer Mylan Labs after it merged with Pfizers’s Upjohn unit late last year, via a tax-efficient Reverse Morris Trust. VTRS’s current market capitalization of ~$17B is less than 6x its estimated FCF of $3B (before restructuring costs) estimated for 2022, and the current enterprise value of $40B is only 6.4x EBITDA of $6.25B. Consider that Mylan Labs stock (MYL, predecessor to VTRS) was nearly $67/share on a $40B buy-out offer from Teva in 2015. Mylan rejected that seemingly very reasonable bid. In merging with Pfizer’s spin-off of Upjohn, Viatris became an equal (in sales, about $17B for each company) to the largest player in generic pharmaceuticals globally, Teva, Mylan’s former suitor. Viatris is an orphan, but its pedigree is tarnished (the reputation of Mylan’s management in rejecting the Teva bid, and other mistakes, still lingers), even though the new CEO and CFO come from Pfizer, the Chairman and President from Mylan remain. Also, ETFs that owned Pfizer had to sell the VTRS shares that they received, which added considerable forced selling.”
You can also take a look at Top Pharmaceutical Companies in India and 10 Best Pharmaceutical Stocks to Buy According to Cathie Wood
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Disclosure: 10 Cheap Pharmaceutical Stocks to Watch
