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Research Daily

Monday, April 6, 2020

The Zacks Research Daily presents the best research output of our analyst team. Today's Research Daily features new research reports on 16 major stocks, including Johnson & Johnson (JNJ), Merck & Co (MRK) and Novartis (NVS). These research reports have been hand-picked from the roughly 70 reports published by our analyst team today.

You can see all of today’s research reports here >>>

Johnson & Johnson’s shares have outperformed the Zacks Large Cap Pharmaceuticals industry over the past six months (+0.8% vs. +0.1%). The Zacks analyst believes that J&J is witnessing significant generic/biosimilar headwinds in the Pharma unit.

However, the unit is performing above-market levels driven by new drugs like Tremfya and successful label expansion of cancer drugs like Imbruvica and Darzalex and immunology drug, Stelara. Several pivotal data readouts and regulatory milestones are expected in 2020.

Headwinds like biosimilar/generic competition and pricing pressure remain. J&J faces numerous lawsuits, which allege personal injuries to patients caused by the use of its products. These lawsuits have resulted in uncertainty. Estimates have gone down ahead of Q1 results due to uncertainty about the impact of the coronavirus pandemic on results. J&J has a positive record of earnings surprises in the recent quarters.

 (You can read the full research report on Johnson & Johnson here >>>)

Shares of Merck have lost -5.8% over the past year against the Zacks Large Cap Pharmaceuticals industry’s fall of -4.2%. The Zacks analyst believes that Merck’s products like Keytruda, Lynparza and Bridion are driving sales. Keytruda has strong growth prospects based on increased utilization, recent approvals for new indications and potential additional approvals worldwide. Animal health and vaccine products remain core growth drivers.

The potential separation into two companies makes strategic sense as the remaining Merck should be able to achieve higher profits than the combined company. However, generic competition for several drugs, rising competitive pressure, mainly on the diabetes franchise and uncertainty surrounding coronavirus pandemic are some top-line headwinds. Estimates have declined slightly ahead of Q1 results. Merck has a positive record of earnings surprises in recent quarters.

(You can read the full research report on Merck here >>>)

Novartis’ shares have lost -11.5% over the past three months against the Zacks Large-Cap Pharmaceuticals industry’s fall of -10.1%. The Zacks analyst believes that solid performance of key drugs like Cosentyx and Entresto, and contribution from gene therapy, Zolgensma, have boosted performance in recent times and offset the impact of generic competition for legacy drugs.

New launches like Piqray, Mayzent and Beovu should further boost sales. The biosimilar portfolio also gains traction with new key approvals. Novartis’ decision to restructure its business is a positive and should boost the pharma segment. The deep pipeline is encouraging as well.

However, price erosion in the United States has adversely impacted the generic business. Moreover, pipeline setbacks and generic competition for additional drugs are concerning.

(You can read the full research report on Novartis here >>>)

Other noteworthy reports we are featuring today include PayPal (PYPL), Lockheed Martin (LMT) and International Business Machines (IBM).

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Sheraz Mian

Director of Research

Note: Sheraz Mian heads the Zacks Equity Research department and is a well-regarded expert of aggregate earnings. He is frequently quoted in the print and electronic media and publishes the weekly Earnings Trends and Earnings Preview reports. If you want an email notification each time Sheraz publishes a new article, please click here>>>

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