When investors discuss striking it rich in the stock market, they often discuss a few industries. One of them being technology and the other being pharmaceutical stocks.
Buying a clinical trial-stage Canadian pharmaceutical stock and hoping it takes off is a popular strategy among hyper-aggressive investors.
Judging by the fact you've landed on our page that will discuss the top Canadian pharmaceutical stocks to buy right now, you might fit the description above.
Healthcare spending is expected to exceed $310B in 2021 and shows no signs of slowing down. So, if you'd like to take advantage of this by purchasing Canadian pharmaceutical stocks, we've got 3 of the best in the country.
3 top Canadian pharmaceutical stocks to buy today
Knight Therapeutics (TSX:GUD)
Knight Therapeutics (TSE:GUD) manufactures both generic and specialty drugs. The company has an exciting way of operating its business. Knight Therapeutics will look to identify and purchase underrated drugs from Big Pharma, ones that these major companies do not want to invest the time and capital into getting approved in nations like Canada.
Knight Therapeutic's CEO, Jonathan Goodman, has been involved in the pharma business his whole life.
When he was 26 years old, Goodman took Paladin Labs public and earned a whopping 27% annual return for shareholders over nearly two decades. Paladin was acquired by Endo International in 2014.
After Paladin, Goodman started Knight, and many investors expected the same results. Thus far, it has generally been a disappointment. The company has been slow to invest in new opportunities, although it acquired Grupo Biotoscana in 2019 and has made eight smaller investments since 2020.
However, when it comes to Goodman, if there is one thing he does have, it is patience. The company has nearly $80M in cash and a solid balance sheet. The company has minimal debt and over 100 products in its portfolio. It doesn't pay a dividend, instead keeping its cash for the subsequent acquisition.
Most of the company's revenue comes from Brazil, and most comes from products used to treat infectious diseases and oncology.
The company is partnered with some of the largest pharmaceutical companies in the world, like AstraZeneca (NASDAQ:ANZ), Bristol Myers Squibb (NYSE:BMY), Gilead Sciences (NASDAQ:GILD) and Pierre Fabre.
An investment in Knight Therapeutics significantly affects the company's management, notably Goodman.
He's frustrated investors up to this point. Still, he has shown he can execute exceptionally well in the past. If he continues to do so, Knight could become a solid Canadian pharmaceutical stock moving forward.
Viemed Healthcare (TSX:VMD)
Viemed Healthcare (TSE:VMD) isn't a pharmaceutical stock in the traditional drug production sense. Instead, it plays on home respiratory care, a booming industry. With a market cap of just over $500M, Viemed is middle of the line regarding small-cap stocks.
Viemed is one of the largest non-invasive ventilation companies in the US home respiratory health care industry.
The company has grown revenue by over 30% annually since 2017 and serves over 96,000 patients.
The company started in 2006 as Sleep Management before expanding into non-invasive ventilators. In 2015, a public company in PHM acquired it and spun out to create Viemed Healthcare in 2017.
It was listed on the Venture but quickly up-listed to the TSX and NASDAQ in the next few years due to solid results. In 2022, the company had nearly US$140M in annual sales.
The company's primary focus is on treating COPD. When we look at the fact that not only are 10,000 baby boomers turning 65 every single day in the United States, but over $50B of annual healthcare costs in the United States go to treating COPD, we can see the enormous potential for Viemed right now.
Twenty-five million people in the US have COPD, with an estimated 2.5 million in stage 4. This is where a company like Viemed comes in. With only 12% of the market share in non-invasive ventilators, this company has plenty of room to grow.
2021 was a challenging year for the company. Revenue was dipping, and there had been some concerns that growth was starting to sputter for the company moving forward.
The COVID-19 epidemic also made things tough for the entire medical devices industry, with many patients avoiding any non-essential treatments.
However, it has picked things up again recently, and it will be interesting to see how well Viemed can perform in a typical operating environment. It's a pharmaceutical stock you should closely monitor moving forward.
HLS Therapeutics (TSX:HLS)
Much like Knight, HLS Therapeutics (TSE:HLS) is a pharmaceutical company focusing on acquiring late-stage and commercial-stage branded pharmaceutical products. The key difference here is that the company focuses on the North American markets.
The company focuses on drugs targeting the central nervous and cardiovascular systems.
The company's flagship product is Vascepa, a drug used to reduce the risk of cardiovascular events like heart attacks in those with diabetes, heart disease, or patients with high triglycerides.
It is also marketing Clozaril, which is used for treatment-resistant schizophrenia.
The company has partnered with Pfizer (NYSE:PFE) to expand physician coverage and be a promotion partner with Vascepa.
The company figures the promotional partnership will result in a 3x increase in sales representatives and a 4x increase in coverage.
This partnership was a significant event. Pfizer doesn't just choose to promote any drug. It's pretty picky. The fact it picked Vascepa is a sign the drug has strong potential.
The company now has the backing of one of the world's largest pharmaceutical companies; even pre-partnership, we saw strong growth in prescriptions with Vascepa. This should not only solidify but also increase that momentum moving forward.
The company is relatively young and has struggled in terms of performance. This is typical of a younger pharmaceutical company with "irons in the fire," so to speak. But if we look at forward estimates, analysts expect significant growth from HLS, likely because of this flagship product.
Analysts project the company will generate approximately $80M in revenue in 2024, up substantially from 2023. 2025 should see even more growth, with revenue expectations of $102M.
After years of losses, the company is expected to swing into profitability in 2024, earning $0.12 per share. The bottom line is expected to increase to $0.43 per share in 2025.
For the most part, chasing these Canadian pharmaceutical stocks will leave you with an empty wallet.
Sure, there's a chance some new drug could be a big deal, but the pharmaceutical industry isn't as easy as introducing a new kind of breakfast cereal. New drugs take years to market, usually costing tens of millions in research costs.
Then, after all that, new drugs must face Health Canada or the FDA, who have both denied promising new medicines because of deemed risks. In short, betting on this is incredibly risky.
This isn't the proper way to invest, and it isn't something we advocate for here at Stocktrades. The good news, though? Many solid pharmaceutical companies are established among all the Canadian stocks, with stable revenue streams and strong reputations.
These are the long-term winners, pharma companies you'll want to put in your portfolio.
The need for pharmaceutical companies will grow as the Canadian population ages.
In 2019, healthcare spending per Canadian eclipsed $7000 a year. This is the average number for every single Canadian in the country. $7000 doesn't seem like a lot. Still, when you consider some people don't visit the doctor or utilize the medical system for the whole year, this average is relatively high.
Overall, these 3 top Canadian pharmaceutical stocks all have some potential.
You don't need to be chasing what I would call the "bingo cards" of the investment world in early to mid-stage clinical trial pharmaceutical stocks.
There is money, albeit less, to be made in companies with developed products - not as seemingly "boring" as Canadian banks or Canadian insurance stocks, and still some exposure to the Canadian pharma industry.
Will you strike it rich by buying more established companies versus ones with no developed product but many promising ones in the pipeline? No. Pharma stocks like Johnson & Johnson (NYSE:JNJ) or Abbvie (NASDAQ:ABBV) are steady performers, more get rich slowly types of stocks.
Blue chip pharma stocks are boring but have a significantly lower chance of ruin. Especially if you are learning how to buy stocks, it is essential to remember that, as investors, preserving the capital we currently have should be our top priority.