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It’s been a tough few quarters for the medical sector with the NASDAQ Biotechnology Index and the NYSE ARCA Pharmaceutical Index declining 26.7% and 4.1% year-to-date (YTD), respectively. Several factors are weighing on the performance of the sector including increasing political and media focus on high price tags for new drugs, the changing competitive scenario, pipeline setbacks and mixed earnings reports among others.
However, is it all bad news for the sector? Not really – fundamentals remain strong with several companies continuing to generate robust revenues from key drugs and working on bringing innovative treatments to market.
Moreover, with valuations approaching reasonable levels, we could see several merger and acquisition (M&As) agreements being announced as the year progresses. Quite a few of the major pharma and biotech companies are rumored to be on the look-out for suitable deals. Sanofi is currently looking to acquire cancer-focused Medivation, Inc. while Shire recently acquired Baxalta.
While the drug pricing issue is not likely to die down easily -- at least not until election is over – the medical sector could bounce back on the back of positive pipeline news, new product approvals, label expansions and sales ramp up of newly launched products and continued strong performance of existing products. So far in 2016, the FDA has approved 13 drugs and has expanded the label of cancer treatments like Kyprolis, Imbruvica and Xalkori.
7 Profitable Medical Stocks With Favorable Zacks Rank
For investors averse to putting their money in high-risk biotech and pharma stocks that bank on single products for growth or just have one major candidate in their pipeline, we have zeroed in on seven medical companies that have favorable Zacks Ranks -- Zacks Rank #1 (Strong Buy) and Zacks Rank #2 (Buy) – and are expected to be profitable this year.
New York-based Pfizer, Inc. (PFE - Free Report) focuses on the development and commercialization of a wide range of products including human and animal biologic and small molecule medicines and vaccines, as well as consumer health care products. Pfizer’s first quarter results surpassed expectations by a huge margin and the company’s raised outlook was also above expectations.
This Zacks Rank #1 stock has seen its 2016 earnings estimate being raised by 6.9% over the past 60 days to $2.45 per share, representing year-over-year growth of 11.5%. Cost-cutting efforts and share buybacks should help Pfizer achieve its earnings guidance. Core products and new products like Ibrance should drive revenues. Moreover, the Hospira acquisition has significantly expanded Pfizer's sterile injectable and biosimilar capabilities.
Bristol-Myers Squibb Company (BMY - Free Report) , another New-York based stock, also performed well in the first quarter of 2016 and raised its earnings outlook for the year. This Zacks Rank #1 stock is focused on the development of innovative treatments for serious diseases and has a strong presence in the cancer market. The 2016 Zacks Consensus Estimate for this company is up 7.9% to $2.60 per share over the last 60 days. Earnings are expected to grow 29.5% in 2016.
New Brunswick, NJ-based Johnson & Johnson, Inc. (JNJ - Free Report) has started the year on a strong note with the company beating on all fronts and raising its outlook for the year. The 2016 Zacks Consensus Estimate for this Zacks Rank #2 stock is up 1.2% over the last 60 days with 6.4% earnings growth expected this year. A diversified business model, lack of cyclicality and strong financial position will continue helping the company pave its way through tough situations. New as well as core products should continue performing well and share buybacks should help boost the bottom-line.
La Jolla, CA-based Ligand Pharmaceuticals Inc. (LGND - Free Report) is a biotechnology company with a focus on drug discovery, reformulation and partnering. The company’s Captisol formulation technology has allowed it to enter into several licensing deals and generate royalties. This Zacks Rank #2 stock's 2016 Zacks Consensus Estimate is up 0.7% over the past 60 days.
Ligand’s earnings history is pretty impressive, with the company delivering positive earnings surprises over the last four quarters. Ligand’s raised outlook for 2016 is encouraging. Geographical and label expansion of its key partnered assets, Promacta and Kyprolis, the anticipated approval and launch of up to five new partnered products, and continued development of the partnership portfolio are likely to boost the top line throughout 2016.
Florham Park, NJ-based Zoetis Inc. (ZTS - Free Report) is another company with rising earnings estimates and an impressive earnings history. The company, which came into existence following Pfizer’s decision to spin off its animal health business, focuses on the discovery, development, manufacture and commercialization of animal health medicines and vaccines.
The 2016 Zacks Consensus Estimate for this Zacks Rank #2 stock is up 3.9% over the past 60 days with earnings expected to grow 5.2%.
Copenhagen, Denmark-based Genmab A/S (GNMSF - Free Report) is a biotechnology company focused on the development of differentiated antibody therapeutics for the treatment of cancer. The company has two approved antibodies in its portfolio -- Arzerra and Darzalex. Genmab has a licensing agreement with J&J’s Janssen Biotech for Darzalex. Efforts are ongoing to expand Darzalex’s label. The 2016 Zacks Consensus Estimate for this Zacks Rank #2 stock is up 45.2% over the last 60 days.
Rancho Cucamonga, CA-based specialty pharmaceutical company Amphastar Pharmaceuticals, Inc. (AMPH - Free Report) is a Zacks Rank #1 stock focused on developing, manufacturing, marketing, and selling technically-challenging generic and proprietary injectable, inhalation, and intranasal products. The company also sells insulin active pharmaceutical ingredient products. Amphastar has a strong earnings track record and the Zacks Consensus Estimate for 2016 has improved considerably over the last 60 days from a loss of 6 cents per share to the current estimate of 5 cents per share. Earnings are expected to grow 183.3% this year.
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7 Profitable Medical Stocks Ranked as Buys Now
It’s been a tough few quarters for the medical sector with the NASDAQ Biotechnology Index and the NYSE ARCA Pharmaceutical Index declining 26.7% and 4.1% year-to-date (YTD), respectively. Several factors are weighing on the performance of the sector including increasing political and media focus on high price tags for new drugs, the changing competitive scenario, pipeline setbacks and mixed earnings reports among others.
However, is it all bad news for the sector? Not really – fundamentals remain strong with several companies continuing to generate robust revenues from key drugs and working on bringing innovative treatments to market.
Moreover, with valuations approaching reasonable levels, we could see several merger and acquisition (M&As) agreements being announced as the year progresses. Quite a few of the major pharma and biotech companies are rumored to be on the look-out for suitable deals. Sanofi is currently looking to acquire cancer-focused Medivation, Inc. while Shire recently acquired Baxalta.
While the drug pricing issue is not likely to die down easily -- at least not until election is over – the medical sector could bounce back on the back of positive pipeline news, new product approvals, label expansions and sales ramp up of newly launched products and continued strong performance of existing products. So far in 2016, the FDA has approved 13 drugs and has expanded the label of cancer treatments like Kyprolis, Imbruvica and Xalkori.
Medical Sector Price Index
Medical Sector Price Index
7 Profitable Medical Stocks With Favorable Zacks Rank
For investors averse to putting their money in high-risk biotech and pharma stocks that bank on single products for growth or just have one major candidate in their pipeline, we have zeroed in on seven medical companies that have favorable Zacks Ranks -- Zacks Rank #1 (Strong Buy) and Zacks Rank #2 (Buy) – and are expected to be profitable this year.
New York-based Pfizer, Inc. (PFE - Free Report) focuses on the development and commercialization of a wide range of products including human and animal biologic and small molecule medicines and vaccines, as well as consumer health care products. Pfizer’s first quarter results surpassed expectations by a huge margin and the company’s raised outlook was also above expectations.
This Zacks Rank #1 stock has seen its 2016 earnings estimate being raised by 6.9% over the past 60 days to $2.45 per share, representing year-over-year growth of 11.5%. Cost-cutting efforts and share buybacks should help Pfizer achieve its earnings guidance. Core products and new products like Ibrance should drive revenues. Moreover, the Hospira acquisition has significantly expanded Pfizer's sterile injectable and biosimilar capabilities.
Bristol-Myers Squibb Company (BMY - Free Report) , another New-York based stock, also performed well in the first quarter of 2016 and raised its earnings outlook for the year. This Zacks Rank #1 stock is focused on the development of innovative treatments for serious diseases and has a strong presence in the cancer market. The 2016 Zacks Consensus Estimate for this company is up 7.9% to $2.60 per share over the last 60 days. Earnings are expected to grow 29.5% in 2016.
New Brunswick, NJ-based Johnson & Johnson, Inc. (JNJ - Free Report) has started the year on a strong note with the company beating on all fronts and raising its outlook for the year. The 2016 Zacks Consensus Estimate for this Zacks Rank #2 stock is up 1.2% over the last 60 days with 6.4% earnings growth expected this year. A diversified business model, lack of cyclicality and strong financial position will continue helping the company pave its way through tough situations. New as well as core products should continue performing well and share buybacks should help boost the bottom-line.
La Jolla, CA-based Ligand Pharmaceuticals Inc. (LGND - Free Report) is a biotechnology company with a focus on drug discovery, reformulation and partnering. The company’s Captisol formulation technology has allowed it to enter into several licensing deals and generate royalties. This Zacks Rank #2 stock's 2016 Zacks Consensus Estimate is up 0.7% over the past 60 days.
Ligand’s earnings history is pretty impressive, with the company delivering positive earnings surprises over the last four quarters. Ligand’s raised outlook for 2016 is encouraging. Geographical and label expansion of its key partnered assets, Promacta and Kyprolis, the anticipated approval and launch of up to five new partnered products, and continued development of the partnership portfolio are likely to boost the top line throughout 2016.
Florham Park, NJ-based Zoetis Inc. (ZTS - Free Report) is another company with rising earnings estimates and an impressive earnings history. The company, which came into existence following Pfizer’s decision to spin off its animal health business, focuses on the discovery, development, manufacture and commercialization of animal health medicines and vaccines.
The 2016 Zacks Consensus Estimate for this Zacks Rank #2 stock is up 3.9% over the past 60 days with earnings expected to grow 5.2%.
Copenhagen, Denmark-based Genmab A/S (GNMSF - Free Report) is a biotechnology company focused on the development of differentiated antibody therapeutics for the treatment of cancer. The company has two approved antibodies in its portfolio -- Arzerra and Darzalex. Genmab has a licensing agreement with J&J’s Janssen Biotech for Darzalex. Efforts are ongoing to expand Darzalex’s label. The 2016 Zacks Consensus Estimate for this Zacks Rank #2 stock is up 45.2% over the last 60 days.
Rancho Cucamonga, CA-based specialty pharmaceutical company Amphastar Pharmaceuticals, Inc. (AMPH - Free Report) is a Zacks Rank #1 stock focused on developing, manufacturing, marketing, and selling technically-challenging generic and proprietary injectable, inhalation, and intranasal products. The company also sells insulin active pharmaceutical ingredient products. Amphastar has a strong earnings track record and the Zacks Consensus Estimate for 2016 has improved considerably over the last 60 days from a loss of 6 cents per share to the current estimate of 5 cents per share. Earnings are expected to grow 183.3% this year.
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