Experts Top 5 Drug Delivery Stocks - InvestingChannel

Experts Top 5 Drug Delivery Stocks

Proprietary Data Insights

Financial Pros’ Top Drug Delivery Stock Searches in the Last Month

Rank Ticker Name Searches
#1 TMO Thermo Fisher Scientific Inc 12
#2 DHR Danaher Corp 11
#3 MTD Mettler-Toledo International 7
#4 BDX Becton Dickinson and Company 1
#5 WST West Pharmaceutical Services 1
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Experts Top 5 Drug Delivery Stocks

Our readers are always on the lookout for unique investment ideas.

So, when we recently became acquainted with IntelGenx (IGXT), our eyes opened to the potential of drug delivery systems.

Most of us rarely think about how we take medication. It’s either swallowed or injected.

However, there’s much more going on than you probably realize.

For example, millions, yes millions of adults, struggle to take pills every year.

Children…forget about it.

IntelGenx is trying to change the game with its dissolvable oral films that act like Listerine strips.

This idea struck us as so unique that we wanted to see what other companies were out there working on solving these problems.

And according to our TrackStar data, Thermo Fisher Scientific (TMO) is at the top of that list.

Thermo Fisher Scientific’s Business

Thermo Fisher Scientific, or TMO, is a global leader in serving science, with a mission to enable its customers to make the world healthier, cleaner, and safer. 

The company’s unique value proposition lies in its innovative technologies, purchasing convenience, and pharmaceutical services. With a presence in over 50 countries and annual revenue surpassing $40 billion, TMO has established itself as a force to be reckoned with in the scientific community.

TMO offers a comprehensive range of products and services catering to a diverse customer base, including pharmaceutical and biotech companies, hospitals, clinical diagnostic labs, universities, research institutions, government agencies, and environmental and industrial settings. The company’s offerings span life sciences solutions, analytical instruments, specialty diagnostics, and laboratory products, providing a one-stop-shop for all your laboratory needs.

To better understand TMO’s operations, let’s break down its business segments:

  • Life Sciences Solutions (23% of total revenues) – This segment provides reagents, instruments, and consumables for biological and medical research, drug discovery, and vaccine production.
  • Analytical Instruments (17% of total revenues) – Here, TMO offers instruments, consumables, software, and services for laboratories in the pharmaceutical, biotech, academic, government, environmental, and industrial sectors.
  • Specialty Diagnostics (10% of total revenues) – This segment focuses on delivering diagnostic test kits, reagents, culture media, instruments, and associated products for disease diagnosis.
  • Laboratory Products and Biopharma Services (54% of total revenues) – This is TMO’s largest segment, providing virtually everything needed for laboratories, along with outsourced pharmaceutical services.

Interestingly, TMO is also making significant strides in developing and manufacturing drug delivery systems, particularly subcutaneous solid implants. 

These implants offer several advantages over traditional oral dosage forms, including targeted drug delivery, reduced dosing frequency, and the potential use of biodegradable materials.



Source: Stock Analysis

2023 was one of the first years TMO has seen revenues drop in nearly a decade. Like many healthcare companies, the boost in sales for Covid products waned as the pandemic faded.

In Q1 2024, TMO reported revenue of $10.34 billion, with GAAP diluted earnings per share (EPS) increasing 4% to $3.46.

Despite launching innovative products like the Thermo Scientific Dionex Inuvion Ion Chromatography system, revenue was slightly lower compared to the previous year, indicating a decline in core organic revenue growth.

The company’s focus on high-impact, innovative products and expansion in high-growth markets is anticipated to drive its growth trajectory in 2024 and beyond, although slower economic recovery in China and competitive pressures could pose challenges.

The company carries $36 billion in debt, which grew from $22 billion in 2021 due to the acquisition of PPD Inc.

Overall, operating cash flows are double what they were prepandemic, allowing for share buybacks of $3 billion per year on top of a $500 million dividend.



Source: Seeking Alpha

TMO is cheaper than it has been in several years as its revenues appear to have stalled.

However, this appears to be a broader problem as Danaher (DHR) and Mettler Toledo (MTD) both trade at depressed price-to-cash flow multiples.



Source: Seeking Alpha

Unsurprisingly, the forward revenue outlook across the board is bleak.

Only Becton Dickinson and Company (BDX) and West Pharmaceutical Services (WST) expect measurable growth. Yet, their forecasts don’t even reach 5%.

Additionally, free cash flow growth appears to have stalled or reversed for everyone on this list.



Source: Seeking Alpha

Thankfully, all the companies listed boast decent margins from gross down through free cash flow.

However, the lower returns on assets and total capital, especially for TMO, support the sour outlook.


Our Opinion 5/10

We don’t see enough value in TMO to warrant stepping in right now.

The stock trades in line with its 5-year averages on most valuation measures, if not slightly higher.

With a lowered sales forecast, we would wait until Covid sales settle out and management issues a more upbeat outlook.

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