Buy These 4 Big Drugmakers to Keep Coronavirus Woes at Bay
The drug / biotech sector is currently in the spotlight, and investors hope that companies will develop a cure or vaccine for COVID-19 that has brought the world to a standstill. Several drug / biotech companies are working on the production of antibodies, drugs and vaccines to fight the disease.
The economic damage caused by the locks caused by coronaviruses has made it all the more important for the pharmaceutical and biotech sectors to find a treatment / vaccine for COVID-19 so that the situation can normalize again.
The pandemic has also injured the drug / biotech sector. Although consumer goods and drug stocks in the first quarter benefited drug manufacturers' sales, it is expected that second-quarter sales will be more affected by first-quarter sales. However, almost all companies are optimistic that they will recover in the second half of the year, as trends in patient visits to doctors, vaccinations and elective surgery are likely to return to normal levels.
Overall, the basics of the pharmaceutical / biotech sector are largely intact despite the short-term disruptions. Demand-driven sales growth for new products, successful innovation and product line expansion in key therapeutic areas, strong clinical trial results, growing demand for medicines, especially for rare diseases, increased M&A activities and appropriate use of cash should be required solid foundation as soon as the pandemic-related uncertainty subsides. Frequent FDA approvals have also played an important role in increasing the sector this year. The FDA has already approved 24 new drugs in less than six months of the year, as well as several line extensions for marketed drugs.
The sector is facing headwinds, such as government control of high drug prices, pricing and competitive pressures, generic competition for blockbuster treatments and, above all, major pipeline setbacks. However, we believe that the drug and biotech sector is better positioned than retail, restaurants, games, transportation and travel.
In the meantime, the risks of an ongoing global recession have increased as coronavirus cases are increasing worldwide. The pharmaceutical and biotech sectors are considered to be defensive because they are hardly affected by a recession. This is because people will continue to buy medication even in difficult times.
The Zacks Large Cap Pharmaceuticals industry, which includes some of the largest pharmaceutical companies in the world, has been down 2.5% so far this year compared to the 3% decline in the Zacks S & P 500.
In addition, the Zacks Large Cap Pharmaceuticals industry currently has the Zacks Industry Rank # 15, making it one of the top 6% of more than 250 Zacks industries.
In this scenario, investing in large pharmaceutical manufacturers is a prudent step because they control a large part of the industry. Here we highlighted four stocks that may prove to be good purchases.
Eli Lilly & Company LLY
Lilly is working hard to make drugs / antibodies to treat COVID-19. Lilly has two antibody candidates in Phase I studies to treat COVID-19. A phase III study has also started to evaluate the JAK inhibitor olumiant (baricitinib) as a potential treatment for hospital patients diagnosed with COVID-19.
Lilly is making significant progress in the pipeline with several positive late stage data readings and several regulatory updates planned for 2020. Lilly expects to launch two drugs, Retevmo / Selpercatinib for RET-altered cancers and Lyumjev / Ultra-Rapid Lisprofor Type I and Type II Diabetes in 2020. While Retevmo was approved in the US in May and is pending review in the EU, Lyumjev is approved in both the EU and the United States.
In 2020, Lillys expects its revenue to be driven by higher demand for key medicines such as Trulicity, Jardiance, Taltz, Verzenio, Basaglar, Emgality, and the newly launched Baqsimi and Reyvow. These drugs are also being examined for additional indications / label extensions that could increase sales in the coming quarters. Lilly also regularly adds promising pipeline assets through business development deals.
The shares have risen by 21.7% so far this year. Lilly currently has a Zacks Rank 1 (Strong Buy). The full list of today's Zacks # 1 Rank stocks can be found here.
Earnings estimates for 2020 and 2021 have increased from $ 6.77 per share to $ 6.81 and from $ 7.92 per share to $ 8.00 over the past 60 days.
AstraZeneca was recently in the news for its agreement with Oxford University on the worldwide development and distribution of Oxford's potential recombinant adenovirus vaccine, now known as AZD1222, to prevent COVID-19. It is currently being evaluated in a phase II / III study, the data of which are expected to be published shortly. If the data is successful, late stage studies are expected to begin with 30,000 participants in a number of countries. StraZeneca has signed several supply contracts worldwide that, if successfully developed, will require the manufacture of 2 billion doses of the vaccine.
The newer drugs from AstraZeneca, mainly the cancer drugs Lynparza, Tagrisso and Imfinzi, are expected to further increase revenues in 2020. The pipeline is strong and contains numerous catalysts. Several market launches are underway in each of the therapeutic areas - oncology; Cardiovascular, kidney and metabolism; and airways. AstraZeneca participates in external acquisitions and strategic collaborations to strengthen its pipeline while investing in high growth geographic areas such as China. Efforts to reduce costs should increase earnings
This number 2 in the ranking (Buy) has risen by 8.1% so far this year. The Zacks consensus estimate for 2020 and 2021 has increased from $ 2.01 to $ 2.03 per share and from $ 2.57 to $ 2.61 over the past 60 days.
AbbVie currently has a Zacks rank of 2. The shares have risen 8.1% so far this year. Earnings estimates for 2020 and 2021 have risen 7.4% and 6.6%, respectively, over the past 60 days.
Although AbbVies is the most important drug, Humira records a decline in sales in international markets due to the biosimilar competition. However, demand in the USA continues to develop strongly. AbbVie has successfully expanded the labels of its cancer drugs Imbruvica and Venclexta. It also has an impressive late-stage pipeline. The company received approval for two new drugs with significant potential in 2019, Skyrizi (risankizumab) and Rinvoq. Skyrizi and Rinvoq got off to a good start, and AbbVie anticipates combined sales of these two drugs of around $ 1.9 billion in 2020.
The Allergan acquisition, which was completed in May, should diversify AbbVie's sales base and accelerate the non-Humira business. AbbVie anticipates that more than 20 new products or product line extensions for marketed drugs will be launched before the U.S. Humira biosimilars competition begins in 2023.
Bristol-Myers Squibb Company BMY
Bristol-Myers has a Zacks rank of 2. The blockbuster immuno-oncology drug from Bristol-Myers, Opdivo and the blood thinner Eliquis are driving sales growth. The expansion of the label by Opdivo to additional indications will further increase the return on sales. Empliciti and Sprycel also do well with label extensions. The acquisition of Celgene in 2019 strengthened Revlimid's oncology portfolio. The acquisition also strengthened the company's pipeline with encouraging oncology candidates.
Earnings estimates for 2020 and 2021 have increased 0.7% and 0.4%, respectively, over the past 60 days.
A chart showing the stock price movement of the four stocks so far this year is given below:
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