We use cookies to understand how you use our site and to improve your experience. This includes personalizing content and advertising. To learn more, click here. By continuing to use our site, you accept our use of cookies, revised Privacy Policy and Terms of Service.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
5 Drug/Biotech Stocks With Promise to Sustain Bull Run in 2019
Read MoreHide Full Article
The performance of the drug/biotech space has been mixed so far this year. The Zacks Large Cap Pharmaceuticals industry (comprising some of the world’s biggest drugmakers) has gained 8.3% against the S&P 500 Composite’s decrease of 0.9%.
However, the riskier Zacks Medical-Biomedical and Genetics industry, which includes large as well as small biotech companies, has underperformed the S&P 500 Composite. The biotech sector has declined 17.8%, wider than the S&P 500 Composite’s fall of 0.9%, probably due to some pipeline setbacks faced by the industry.
Large-Cap Pharma and Biomed/Genetics Versus S&P 500
Notably, the s Medical-Biomedical and Genetics industry includes large and small biotech companies. The larger ones, namely Amgen (AMGN - Free Report) , Vertex (VRTX - Free Report) , Regeneron, Biogen have done relatively well this year. Most of them have handily outperformed the Medical-Biomedical and Genetics industry. The chart below shows the scenario.
We believe that strong quarterly results along with increases in full-year sales and earnings guidance, new product sales ramp up with rising demand, successful innovation and product line extensions, strong clinical study results and frequent FDA approvals have helped these big drug/biotech giants consistently do well this year despite broader macro issues and the industry’s internal challenges. Moreover, the sector is likely to perform well even if the global economy slows down next year. This is because it is a defensive growth space, almost insulated from broader macroeconomic factors. Importantly, merger and acquisition activity are gaining momentum with the tax reform in place.
Notably, the big drug/biotech companies face their share of headwinds like government scrutiny of high drug prices, pricing and competitive pressure, generic competition for blockbuster treatments, slowdown in sales of some of the most high-profile older drugs and major pipeline setbacks. Meanwhile, the drug pricing issue will remain a headline risk for this sector.
Nonetheless, we believe, pipeline success, cost-cutting, share buybacks, product launches, increased M&A and collaboration activity and appropriate utilization of cash should keep these stocksafloat in 2019.
Here we have highlighted five stocks that did well in 2018, outperforming the S&P 500 Composite indexand are expected to continue with the positive trend next year. All these stocks carry a Zacks Rank #2 (Buy) and have seen their share price and earnings estimates rise this year. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
A chart showing the year-to-date share price movement of all five stocks compared with the S&P 500 Composite is given below.
Shares of Lilly have surged 36% this year so far. Lilly’s earnings estimates have inched up 1% for 2019 over the past 90 days.
Lilly’s new products like Trulicity, Taltz, Basaglar, Cyramza, Jardiance, Lartruvo and Verzenioare driving sales growth, a trend expected to continue in 2019. The company is also on a strong footing in terms of its pipeline with several positive late-stage data readouts this year along with various regulatory approvals. A key regulatory success for Lilly was the FDA approval of Emgality/galcanezumab, a calcitonin gene-related peptide (CGRP) antibody for migraine prevention, which could emerge as a significant contributor to sales growth in 2019 and thereafter.
Several key regulatory and pipeline events are expected in 2019. Any positive outcome will push up the share price further.
Merck’s earnings estimates have moved 1.9% north for 2019 over the past 90 days. The stock has soared 40.3% year to date.
Strong performance and positive regulatory updates related to its PD-1 inhibitor, Keytruda, aided the company’s strong performance this year. Within a very short span, Keytruda has become Merck’s largest product. It is already approved for use in 12 indications across eight different tumor types in the United States. In fact, the Keytruda development program is also progressing rapidly. Several regulatory decisions for new indications in the United States and Europe are due in 2019, which, if approved, can further boost sales.
Key recent nods for Merck include Steglatro and its fixed-dose combinations for type II diabetes, two new HIV drugs — Pifeltro and Delstrigo — containing doravirine and Prevymis (letermovir) for cytomegalovirus (CVM) infection. Merck also gained several label expansion approvals for Keytruda and another cancer drug, Lynparza, which it markets in partnership with AstraZeneca (AZN).
All these new drugs and line extension approvals can drive the company’s pharmaceuticals sales in 2019.
Merck’s animal health and vaccine products are also performing strongly and remain core growth drivers for the company.
Shares of J&J’s have risen 5.8% so far this year. Its earnings estimates for 2019 have moved 0.5% up in the past 90 days.
J&J’s Pharma segment is performing better than the market in 2018 so far despite the impact of biosimilars on sales of its blockbuster rheumatoid arthritis medicine, Remicade. Also, the Medical Devices and Consumer units are seeing improving organic growth trends.
J&J has also raised its full-year organic sales growth outlook thrice this year. Though quite a few key products in J&J’s portfolio like Remicade and Concerta are facing generic competition, we believe that new products in all segments, successful label expansion of cancer drugs like Imbruvica and Darzalex and contribution from recent acquisitions will continue to drive top-line improvement in 2019. J&J enjoys a robust multi-year pipeline of new drugs and line extensions. Share buybacks and restructuring initiatives should provide bottom-line support.
Shares of Biogen have increased 0.5% year to date. Its earnings estimates have been revised 1.6% upward for 2019 over the past 90 days.
Though Biogen has a strong position in the multiple sclerosis (MS) market, its efforts to diversify beyond MS to other areas like Alzheimer’s, Parkinson's and stroke etc. is encouraging. Spinraza, approved for spinal muscular atrophy (SMA) in 2016, has performed beyond expectations so far, witnessing a strong patient uptake in the United States and internationally. We expect Spinraza sales to remain solid in 2019. Meanwhile, Biogen has a sturdy portfolio of biosimilar drugs, which will continue to aid its top line. Biogen is optimistic that its biosimilars business has the opportunity to potentially double over the next couple of years.
We are encouraged by Biogen’s efforts to regularly in-license assets to build its pipeline with several having transformative potential. Multiple data readouts are anticipated next year.
Shares of Roche have climbed 1% this year so far. Its earnings estimates have been raised 2.6% for 2019 over the past 90 days.
Roche has a strong presence in the oncology market. In particular, the company dominates the breast cancer space with steep demand for its HER2 franchise drugs. The HER2 franchise includes drugs like Herceptin, Perjeta and Kadcyla. Apart from its strong breast cancer franchise, Roche’s oncology portfolio boasts drugs like Avastin and Tarceva for indications like lung cancer. Imuno-oncology is another key focus area for Roche with the company currently having multiple candidates under development. Its immuno-oncology drug, Tecentriq, has been a consistent performer as several label expansion studies on the drug are underway.
Roche is actively seeking acquisitions to strengthen its portfolio further. The company also has a robust pipeline and approval of new drugs will lead to growth.
In addition to the stocks discussed above, would you like to know about our 10 top tickers to buy and hold for the entirety of 2019?
Image: Bigstock
5 Drug/Biotech Stocks With Promise to Sustain Bull Run in 2019
The performance of the drug/biotech space has been mixed so far this year. The Zacks Large Cap Pharmaceuticals industry (comprising some of the world’s biggest drugmakers) has gained 8.3% against the S&P 500 Composite’s decrease of 0.9%.
However, the riskier Zacks Medical-Biomedical and Genetics industry, which includes large as well as small biotech companies, has underperformed the S&P 500 Composite. The biotech sector has declined 17.8%, wider than the S&P 500 Composite’s fall of 0.9%, probably due to some pipeline setbacks faced by the industry.
Large-Cap Pharma and Biomed/Genetics Versus S&P 500
Notably, the s Medical-Biomedical and Genetics industry includes large and small biotech companies. The larger ones, namely Amgen (AMGN - Free Report) , Vertex (VRTX - Free Report) , Regeneron, Biogen have done relatively well this year. Most of them have handily outperformed the Medical-Biomedical and Genetics industry. The chart below shows the scenario.
We believe that strong quarterly results along with increases in full-year sales and earnings guidance, new product sales ramp up with rising demand, successful innovation and product line extensions, strong clinical study results and frequent FDA approvals have helped these big drug/biotech giants consistently do well this year despite broader macro issues and the industry’s internal challenges. Moreover, the sector is likely to perform well even if the global economy slows down next year. This is because it is a defensive growth space, almost insulated from broader macroeconomic factors. Importantly, merger and acquisition activity are gaining momentum with the tax reform in place.
Notably, the big drug/biotech companies face their share of headwinds like government scrutiny of high drug prices, pricing and competitive pressure, generic competition for blockbuster treatments, slowdown in sales of some of the most high-profile older drugs and major pipeline setbacks. Meanwhile, the drug pricing issue will remain a headline risk for this sector.
Nonetheless, we believe, pipeline success, cost-cutting, share buybacks, product launches, increased M&A and collaboration activity and appropriate utilization of cash should keep these stocksafloat in 2019.
Here we have highlighted five stocks that did well in 2018, outperforming the S&P 500 Composite indexand are expected to continue with the positive trend next year. All these stocks carry a Zacks Rank #2 (Buy) and have seen their share price and earnings estimates rise this year. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
A chart showing the year-to-date share price movement of all five stocks compared with the S&P 500 Composite is given below.
Eli Lilly & Company (LLY - Free Report)
Shares of Lilly have surged 36% this year so far. Lilly’s earnings estimates have inched up 1% for 2019 over the past 90 days.
Lilly’s new products like Trulicity, Taltz, Basaglar, Cyramza, Jardiance, Lartruvo and Verzenioare driving sales growth, a trend expected to continue in 2019. The company is also on a strong footing in terms of its pipeline with several positive late-stage data readouts this year along with various regulatory approvals. A key regulatory success for Lilly was the FDA approval of Emgality/galcanezumab, a calcitonin gene-related peptide (CGRP) antibody for migraine prevention, which could emerge as a significant contributor to sales growth in 2019 and thereafter.
Several key regulatory and pipeline events are expected in 2019. Any positive outcome will push up the share price further.
Merck & Co., Inc. (MRK - Free Report)
Merck’s earnings estimates have moved 1.9% north for 2019 over the past 90 days. The stock has soared 40.3% year to date.
Strong performance and positive regulatory updates related to its PD-1 inhibitor, Keytruda, aided the company’s strong performance this year. Within a very short span, Keytruda has become Merck’s largest product. It is already approved for use in 12 indications across eight different tumor types in the United States. In fact, the Keytruda development program is also progressing rapidly. Several regulatory decisions for new indications in the United States and Europe are due in 2019, which, if approved, can further boost sales.
Key recent nods for Merck include Steglatro and its fixed-dose combinations for type II diabetes, two new HIV drugs — Pifeltro and Delstrigo — containing doravirine and Prevymis (letermovir) for cytomegalovirus (CVM) infection. Merck also gained several label expansion approvals for Keytruda and another cancer drug, Lynparza, which it markets in partnership with AstraZeneca (AZN).
All these new drugs and line extension approvals can drive the company’s pharmaceuticals sales in 2019.
Merck’s animal health and vaccine products are also performing strongly and remain core growth drivers for the company.
Johnson & Johnson (JNJ - Free Report)
Shares of J&J’s have risen 5.8% so far this year. Its earnings estimates for 2019 have moved 0.5% up in the past 90 days.
J&J’s Pharma segment is performing better than the market in 2018 so far despite the impact of biosimilars on sales of its blockbuster rheumatoid arthritis medicine, Remicade. Also, the Medical Devices and Consumer units are seeing improving organic growth trends.
J&J has also raised its full-year organic sales growth outlook thrice this year. Though quite a few key products in J&J’s portfolio like Remicade and Concerta are facing generic competition, we believe that new products in all segments, successful label expansion of cancer drugs like Imbruvica and Darzalex and contribution from recent acquisitions will continue to drive top-line improvement in 2019. J&J enjoys a robust multi-year pipeline of new drugs and line extensions. Share buybacks and restructuring initiatives should provide bottom-line support.
Biogen Inc. (BIIB - Free Report)
Shares of Biogen have increased 0.5% year to date. Its earnings estimates have been revised 1.6% upward for 2019 over the past 90 days.
Though Biogen has a strong position in the multiple sclerosis (MS) market, its efforts to diversify beyond MS to other areas like Alzheimer’s, Parkinson's and stroke etc. is encouraging. Spinraza, approved for spinal muscular atrophy (SMA) in 2016, has performed beyond expectations so far, witnessing a strong patient uptake in the United States and internationally. We expect Spinraza sales to remain solid in 2019. Meanwhile, Biogen has a sturdy portfolio of biosimilar drugs, which will continue to aid its top line. Biogen is optimistic that its biosimilars business has the opportunity to potentially double over the next couple of years.
We are encouraged by Biogen’s efforts to regularly in-license assets to build its pipeline with several having transformative potential. Multiple data readouts are anticipated next year.
Roche Holding AG (RHHBY - Free Report)
Shares of Roche have climbed 1% this year so far. Its earnings estimates have been raised 2.6% for 2019 over the past 90 days.
Roche has a strong presence in the oncology market. In particular, the company dominates the breast cancer space with steep demand for its HER2 franchise drugs. The HER2 franchise includes drugs like Herceptin, Perjeta and Kadcyla. Apart from its strong breast cancer franchise, Roche’s oncology portfolio boasts drugs like Avastin and Tarceva for indications like lung cancer. Imuno-oncology is another key focus area for Roche with the company currently having multiple candidates under development. Its immuno-oncology drug, Tecentriq, has been a consistent performer as several label expansion studies on the drug are underway.
Roche is actively seeking acquisitions to strengthen its portfolio further. The company also has a robust pipeline and approval of new drugs will lead to growth.
In addition to the stocks discussed above, would you like to know about our 10 top tickers to buy and hold for the entirety of 2019?
These 10 are painstakingly handpicked from over 4,000 companies covered by the Zacks Rank. They are our primary picks poised to outperform in the year ahead. Be among the first to see the newZacks Top 10 Stocks >>