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Zacks Investment Ideas feature highlights: Merck and Amgen
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For Immediate Release
Chicago, IL – August 6, 2018 – Today, Zacks Investment Ideas feature highlights Features: Merck (MRK - Free Report) ) and Amgen (AMGN - Free Report) .
Two Pharma Giants Successfully Navigate a Challenging Climate
In May, the Trump administration released a blueprint for its plans to reduce the price of prescription drugs. The first sentence was “A BURDEN ON THE AMERICAN PEOPLE: Drug prices are being driven up unfairly, taking a toll on the American people.”
The plan seeks to increase competition in the market for prescription drugs and was seen as a shot over the bow of pharmaceutical manufacturers.
It’s long been argued that profits in the pharmaceutical sector fuel the research and development of newer and better treatments. Manufacturers explain that the high price tags on new and in-demand drugs finance even newer and better drugs that improve health outcomes and save lives.
Philosophical and political factors aside, savvy investors understand that the U.S. government accounts for 40% of all dollars spent on prescription drugs in the Medicare and Medicaid programs. With president Trump demanding lower prices and more competition in the industry, it would appear to be a challenging climate ahead for pharmaceutical manufacturers, but the latest quarterly earnings reports at Merck and Amgen suggest that the best managed pharma companies are still performing quite well and have adeptly adjusted their strategies to survive and thrive in the current environment.
While a drug is still on patent, manufacturers retain a great deal of pricing power and many of them have been quite adept at gaming the system to keep prices higher even after the original patent protection might have expired. The new Trump plans seeks to make generics available more quickly, so companies that have a wide array of on-patent drugs are likely to hold onto better margins than smaller companies who are dependent on one or two “blockbusters” that may become vulnerable to cheaper competition.
Revenues at both of these companies are spread across a wide range of proprietary formulations. This is likely to insulate them from attempts to lower prices in the industry by streamlining the generic approval process.
Large drug companies are also defensive to larger economic trends. Consumers can choose not to purchase more discretionary items, but when you need medicine, you pretty much need it no matter what. AMGN and MRK both have a long history of steady earnings growth in all economic environments. The chances that they will have blowout quarters and huge rallies is fairly low, but so are the chances of a big miss and a fast decline.
These slow-and-steady giants are also a value proposition with forward P/E Ratios of 14X and 15.3X, respectively. And they dividend performers with Amgen currently yielding 2.7% annually and Merck yielding 2.9%.
For the health care portion of an investor’s portfolio, both of these Pharma giants provide stable growth, good value and income and are likely to survive drug-price reform efforts quite nicely.
Will You Make a Fortune on the Shift to Electric Cars?
Here's another stock idea to consider. Much like petroleum 150 years ago, lithium power may soon shake the world, creating millionaires and reshaping geo-politics. Soon electric vehicles (EVs) may be cheaper than gas guzzlers.
Some are already reaching 265 miles on a single charge. With battery prices plummeting and charging stations set to multiply, one company stands out as the #1 stock to buy according to Zacks research. It's not the one you think.
Zacks Investment Research is under common control with affiliated entities (including a broker-dealer and an investment adviser), which may engage in transactions involving the foregoing securities for the clients of such affiliates.
Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performance for information about the performance numbers displayed in this press release.
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Zacks Investment Ideas feature highlights: Merck and Amgen
For Immediate Release
Chicago, IL – August 6, 2018 – Today, Zacks Investment Ideas feature highlights Features: Merck (MRK - Free Report) ) and Amgen (AMGN - Free Report) .
Two Pharma Giants Successfully Navigate a Challenging Climate
In May, the Trump administration released a blueprint for its plans to reduce the price of prescription drugs. The first sentence was “A BURDEN ON THE AMERICAN PEOPLE: Drug prices are being driven up unfairly, taking a toll on the American people.”
The plan seeks to increase competition in the market for prescription drugs and was seen as a shot over the bow of pharmaceutical manufacturers.
It’s long been argued that profits in the pharmaceutical sector fuel the research and development of newer and better treatments. Manufacturers explain that the high price tags on new and in-demand drugs finance even newer and better drugs that improve health outcomes and save lives.
Philosophical and political factors aside, savvy investors understand that the U.S. government accounts for 40% of all dollars spent on prescription drugs in the Medicare and Medicaid programs. With president Trump demanding lower prices and more competition in the industry, it would appear to be a challenging climate ahead for pharmaceutical manufacturers, but the latest quarterly earnings reports at Merck and Amgen suggest that the best managed pharma companies are still performing quite well and have adeptly adjusted their strategies to survive and thrive in the current environment.
While a drug is still on patent, manufacturers retain a great deal of pricing power and many of them have been quite adept at gaming the system to keep prices higher even after the original patent protection might have expired. The new Trump plans seeks to make generics available more quickly, so companies that have a wide array of on-patent drugs are likely to hold onto better margins than smaller companies who are dependent on one or two “blockbusters” that may become vulnerable to cheaper competition.
Revenues at both of these companies are spread across a wide range of proprietary formulations. This is likely to insulate them from attempts to lower prices in the industry by streamlining the generic approval process.
Large drug companies are also defensive to larger economic trends. Consumers can choose not to purchase more discretionary items, but when you need medicine, you pretty much need it no matter what. AMGN and MRK both have a long history of steady earnings growth in all economic environments. The chances that they will have blowout quarters and huge rallies is fairly low, but so are the chances of a big miss and a fast decline.
These slow-and-steady giants are also a value proposition with forward P/E Ratios of 14X and 15.3X, respectively. And they dividend performers with Amgen currently yielding 2.7% annually and Merck yielding 2.9%.
For the health care portion of an investor’s portfolio, both of these Pharma giants provide stable growth, good value and income and are likely to survive drug-price reform efforts quite nicely.
Will You Make a Fortune on the Shift to Electric Cars?
Here's another stock idea to consider. Much like petroleum 150 years ago, lithium power may soon shake the world, creating millionaires and reshaping geo-politics. Soon electric vehicles (EVs) may be cheaper than gas guzzlers.
Some are already reaching 265 miles on a single charge. With battery prices plummeting and charging stations set to multiply, one company stands out as the #1 stock to buy according to Zacks research. It's not the one you think.
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Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performance for information about the performance numbers displayed in this press release.