The drug and biotech sector bounced back in the second half of 2022 from a rather weak performance in the first half. An uptick in M&A deals, strong earnings performance, new drug approvals, a favorable regulatory environment and pipeline successes helped the sector turn around.
The sector is expected to see a favorable operating environment in 2023 despite macroeconomic uncertainty and the rising risk of a global recession.
While the broader market is grappling with rising interest rates and inflation, innovation — the sector’s driving force — continues to take place, with the trend expected to continue in 2023. M&A in the drug and biotech sector is also expected to pick up noticeably.
It is a defensive sector to invest in the present environment of rising interest rates and economic uncertainty.
Here we discuss three drug and biotech companies,
Sanofi
SNY
,
GSK
GSK
and
BioNTech
BNTX
,which have a Zacks Rank #2 (Buy) and are good stocks to add to your portfolio for some healthy returns next year. You can see
the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here
.
Sanofi
Sanofi’s immunology medicine, Dupixent, has become the key top-line driver. Dupixent is now annualizing close to €9.0 billion in sales after around five years on the market. Sanofi expects Dupixent to achieve more than €13 billion in peak sales. Dupixent is now approved in the United States for five type II inflammatory diseases, namely severe chronic rhinosinusitis with nasal polyposis, severe asthma, moderate-to-severe atopic dermatitis, eosinophilic esophagitis and prurigo nodularis. The frequent label expansion approvals are driving the drug’s sales higher. With outside U.S. revenues accelerating and multiple approvals for new indications and expansion in younger patient populations expected, its sales are expected to be higher.
Sanofi possesses one of the world’s leading vaccine operations, with total annual sales of more than €5 billion in the past five years. Its vaccine unit has become the primary top-line driver.
Sanofi has shifted its R&D focus on Specialty Care therapy areas (oncology, immunology, rare disease and rare blood disorder) and Vaccines. Its programs in these areas have increased significantly since 2017. In the last three years, Sanofi doubled the number of New Molecular Entity across key areas in immunology, oncology, neurology and vaccines. Several data readouts are expected in 2023
Sanofi stock has declined 3.9% this year so far. Estimates for Sanofi’s 2022 earnings have gone up from $4.04 to $4.27 per share, while that for 2023 have increased from $4.22 to $4.31 per share over the past 60 days.
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GSK
GSK’s relatively newer specialty products like Nucala (severe eosinophilic asthma), Bexsero (meningitis vaccine), Shingrix (shingles vaccines), Trelegy Ellipta (three medicines in a single inhaler to treat COPD) and Juluca (dolutegravir+ rilpivirine once-daily, single pill for HIV) have witnessed considerable success and have become key drivers of top-line growth, making up for a decline in Established Pharmaceuticals due to generic erosion.
GSK expects its new medicines and vaccines (approved between 2017 and 2021) to contribute around 60% of the new GSK’s (after CHC demerger) sales growth for the period 2022-2026.
GSK has made significant progress in its pipeline in 2022. Several pipeline readouts are expected in 2023. GSK plans to launch more than 20 new products/line extensions by 2026 with more than 10 having blockbuster potential.
The spin-off of the Consumer unit this year has allowed it to focus on its drug development.
GSK’s stock has declined 36.4% this year so far. Estimates for GSK’s 2022 earnings have gone up from $3.14 to $3.28 per share, while that for 2023 have increased from $3.26 to $3.41 per share over the past 60 days.
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BioNTech
Germany-based company, BioNTech successfully made the mRNA-based COVID-19 vaccine along with partner Pfizer. The vaccine is approved in several countries and has become a key contributor to BioNTech’s top line. Other than that, BioNTech’s pipeline boasts several candidates, such as BNT111, the company’s mRNA-based FixVac cancer vaccine program as well as BNT113, BNT122, BNT211 and BNT311 that are in early to mid-stage studies for various oncological indications.
BioNTech’s stock has declined 38.0% this year so far. The Zacks Consensus Estimate for 2022 has risen from $32.49 per share to $35.38 per share, while that for 2023 has gone up from $16.31 per share to $16.93 per share over the past 60 days.
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