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3 Big Drugmakers Likely to be in Focus in Second Half of 2021

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The large-cap drug sector lagged the broader S&P 500 market in the first half of the year. Sales of some drugs/vaccines/products were hurt by business disruption due to the coronavirus pandemic in the first quarter of 2021. Second-quarter results of most big drugmakers, due to be released this month and early next month, are likely to reflect continued negative impact from the pandemic though trends are expected to be better as economies have re-opened and vaccinations continue in full swing. Companies are optimistic of seeing more normal demand trends in the second half. However, the impact of an expected third wave of infections, if and when it comes, on their performance needs to be seen.

Nonetheless, successful innovation resulting in new drug/product approvals, important advances in clinical studies, particularly those on COVID-19 treatments/vaccines, and strategic collaborations with small companies making innovative medicines, have kept companies like Eli Lilly (LLY - Free Report) , Pfizer (PFE - Free Report) and Bayer (BAYRY - Free Report) afloat.

These three large companies are worth buying and holding for the next few months and beyond. A chart showing the share price movement of these companies this year so far is given below.


Zacks Investment ResearchImage Source: Zacks Investment Research

Eli Lilly

Lilly’s stock is up 36.0% this year so far compared with 8.3% increase of the industry

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. 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. Last week 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. In fact, FDA approval of Biogen’s (BIIB) Alzheimer’s drug, Aduhelm last month increased the likelihood that Lilly may also gain 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.

It also received rapid emergency approval for COVID-19 antibody cocktail drug, bamlanivimab and etesevimab. Lilly has an agreement with the U.S. government to supply a minimum of 100,000 doses of bamlanivimab/etesevimab cocktail.

Meanwhile, Lilly also boasts a solid portfolio of new drugs in diabetes, autoimmune diseases and cancer. Lilly’s revenue growth is expected to be driven by higher demand for drugs like Trulicity, Taltz, and others. 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 (PFE - Free Report)

Pfizer’s (PFE - Free Report) stock has risen 6.4% this year so far.

Pfizer has been riding high on the success of its two-shot vaccine for COVID-19, BNT162b2/Comirnaty, which it has developed in partnership with Germany-based company, BioNTech (BNTX - Free Report) . The vaccine was developed in record time and is now approved for emergency/temporary use in individuals 16 years of age and older in 91 countries worldwide. The vaccine is bringing in significant revenues for BioNTech and Pfizer. In the first quarter of 2021, the vaccine contributed $3.5 billion to Pfizer’s global sales.  The pharma giant expects to record $26 billion in revenue from BNT162b2 in 2021.

In May, the FDA and European Commission expanded BNT162b2’s emergency/temporary authorizations to allow vaccinating adolescents aged 12-15 years old in United States and Europe, respectively. Meanwhile, studies are ongoing to expand the authorization of BNT162b2 to additional population groups like pregnant women and younger children. The companies are also evaluating a potential booster dose and an updated version of the vaccine.

Meanwhile, Pfizer has also initiated a phase I study on its investigational, novel oral antiviral therapeutic, PF-07321332, to treat COVID-19.

Pfizer boasts a sustainable pipeline with multiple late-stage programs that can drive growth. Last month, the FDA approved Pfizer’s 20-valent pneumococcal conjugate vaccine, Prevnar 20, for the prevention of invasive disease and pneumonia in adults. The vaccine helps protect against 20 serotypes responsible for the majority of invasive pneumococcal disease and pneumonia. In May, the FDA approved Pfizer and its partner Myovant Sciences (MYOV - Free Report) , Myfembree (relugolix combination tablet) for heavy menstrual bleeding associated with uterine fibroids.

Regulatory applications for some of its pipeline candidates are under review including abrocitinib, its JAK selective inhibitor for atomic dermatitis and somatrogon to treat children with growth hormone deficiency. FDA decisions for both applications are expected this year, which, if approved, could bring in more new products for the company.

Overall, the Consumer Healthcare joint venture with Glaxo (GSK - Free Report) and the merger of Upjohn unit with Mylan 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.

Bayer (BAYRY - Free Report)

Bayer has a Zacks Rank of 2 (Buy). Its stock is up 2.7% this year so far.

Bayer’s Crop Science division is demonstrating an encouraging sales performance amid an improving market environment. Sales in Bayer’s Pharmaceuticals unit have remained steady driven by strong sales of its partnered medicines, oral anticoagulant Xarelto and eye drug Eylea. Bayer’s Consumer Health division has outperformed competition.

The company is undertaking several initiatives to strengthen its position across portfolios, including the divestiture of the Animal Health business unit and the Consumer Health brands-Coppertone and Dr. Scholl’s. Bayer also sold its 60% interest in Germany-based site services provider, Currenta. Moreover, the recent acquisition of Asklepios will strengthen Bayer’s cell and gene therapy platform. Restructuring initiatives should help the bottom line.

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