3 Big Drug/Biotech Outperformers Worth Keeping an Eye On (Revised)
Eli Lilly (LLY), Pfizer (PFE) and Novo Nordisk (NVO) are three large drugmakers that have outperformed the industry and are good stocks to hold for th...
The second-quarter earnings season was a strong one for the drug/biotech sector. Majority of the companies beat estimates for both earnings and sales. Almost all companies witnessed a recovery in sales of their key products/drugs from the earlier impacts of the pandemic in the second quarter and sounded optimistic of continued improvement in the second half. Some companies like J&J JNJand Pfizer PFE raised their expectations for both earnings and sales.
With regard to pipeline developments, the drug/biotech industry continues to witness improvements in drug research in 2021 while withstanding the impact of the pandemic remarkably well. Though updates related to COVID-19 medicines/vaccines continue to take center stage this year as well, the sector has been witnessing developments in other innovative pipeline areas like Alzheimer’s.
Here we have highlighted three bigshot drugmakers, Eli Lilly LLY, Pfizer and Novo Nordisk NVO, which have outperformed the industry this year and are good stocks to hold for the next few months and beyond. A chart showing the share price movement of these companies this year so far is given below.
Image Source: Zacks Investment Research
Lilly’s stock is up 61.5% this year so far compared with an 18.5% increase of the industry. Earnings estimates for 2021 have gone up from $7.86 to $7.87 and from $8.42 to $8.45 for 2022 over the past 30 days
Lilly has some intriguing pipeline assets in its portfolio for cancer, diabetes and Alzheimer's.
A key pipeline candidate in Lilly’s portfolio is its investigational antibody for Alzheimer’s, donanemab, which is also a key reason for the significant increase in the stock’s price. The candidate has led to significant slowing of decline in a composite measure of cognition and daily function in patients with early symptomatic Alzheimer's disease compared to placebo in a pivotal phase II study. Meanwhile, treatment with donanemab also resulted in substantial clearance of amyloid plaques and slowing of spread of tau pathology. In June, the FDA granted the medicine Breakthrough Therapy designation. Lilly plans to submit a biologics license application (BLA),seeking accelerated approval for the candidate for treating Alzheimer's disease later this year. If Lilly is successful in getting an approval for donanemab, it can be a game changer for the company as the Alzheimer’s market has huge potential. In fact, FDA approval of Biogen’s BIIB Alzheimer’s drug, Aduhelm in June increased the likelihood of Lillygaining approval for donanemab.
Another important drug in Lilly’s portfolio is its dual GIP and GLP-1 receptor agonist tirzepatide, which has shown impressive blood sugar reductions and weight loss in type II diabetes patients in phase III studies. A BLA for tirzepatide for type II diabetes is also expected to be filed in 2021.
Lilly boasts a solid portfolio of new drugs in diabetes, autoimmune diseases and cancer. Lilly’s revenue growth in the first half of 2021 was driven by higher demand for drugs like Trulicity, Taltz, and others despite its COVID-19 cocktail therapy generating lower-than-expected sales. It is regularly adding promising new pipeline assets through business development deals.
Lilly currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Pfizer’s stock has risen 37% this year so far. Earnings estimates for 2021 have gone up from $3.65 to $4.01 and from $3.29 to $3.35 for 2022 over the past 30 days
Pfizer has been riding high on the success of its two-shot vaccine for COVID-19, BNT162b2/Comirnaty, which it developed in partnership with Germany-based company, BioNTech BNTX. The vaccine was developed in record time and is now approved for emergency/temporary use in several countries and has become a key contributor to the top line. In the first half of 2021, the vaccine contributed $14.1 billion to Pfizer’s global sales. The pharma giant expects to record $33.5 billion in revenues from BNT162b2 in 2021.Pfizer/BioNTech have already delivered more than a billion doses of BNT162b2 to help vaccinate the global population. They expect to manufacture in total up to 3 billion doses by the end of December 2021 and have agreements (signed through mid-July 2021) in place to deliver 2.1 billion doses in 2021.
The companies are also evaluating the vaccine in younger patients, a booster vaccine dose and an updated version of the vaccine, specifically designed to target the rapidly spreading, highly infectious Delta variant.
Pfizer’s Prevnar-20, a 20-valent pneumococcal conjugate vaccine, was approved in the United States in June while Myfembree (relugolix combination tablet), developed in partnership with Myovant Sciences was approved to treat heavy menstrual bleeding associated with uterine fibroids in premenopausal women in the United States in May. Prevnar-20 is under review in the EU with approval expected in the next few months.
Overall, the Consumer Healthcare joint venture with Glaxo GSK and the merger of Upjohn unit with Mylan (now Viatris) has made this Zacks #3 Ranked stock a smaller company with a diversified portfolio of innovative drugs and vaccines. The smaller Pfizer should see better revenue growth. Pfizer expects strong growth of key brands like Ibrance, Inlyta and Eliquis to continue to drive sales this year.
Novo Nordisk’s stock is up 50.3% this year so far. Estimates for Novo Nordisk’s 2021 earnings have increased from $3.10 to $3.22 per share in the past 30 days while that for 2022 have risen from $3.36 to $3.53 over the same period.
Novo Nordisk, a Danish company, has a vast portfolio of insulin drugs and diabetes-related products. Victoza, Ozempic (semaglutide), Xultophy and Saxenda have been helping the company maintain momentum. Label expansion of these existing drugs will further boost sales. In June 2021, the FDA approved semaglutide as a weekly 2.4 mg injection for weight management in people with obesity under the brand name of Wegovy. It is also evaluating semaglutide in phase III studies for Alzheimer’s disease and NASH.
Novo Nordisk has also stepped up its M&A activity in lately and is making acquisitions to expand various parts of its business.
Its second-quarter results were strong as it beat estimates for both earnings and sales. Sales rose 17% at constant exchange rate (CER), driven by Diabetes and Obesity care sales. It also raised its sales growth expectations for the year. Sales are expected to rise 10%-13%at CER in 2021, higher than 6-10% expected previously. Novo Nordisk has a Zacks Rank #3.
(We are reissuing this article to correct a mistake. The original article, issued on August 18, 2021, should no longer be relied upon.)
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GlaxoSmithKline plc (GSK): Free Stock Analysis Report
Biogen Inc. (BIIB): Free Stock Analysis Report
Johnson & Johnson (JNJ): Free Stock Analysis Report
Pfizer Inc. (PFE): Free Stock Analysis Report
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Eli Lilly and Company (LLY): Free Stock Analysis Report
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