The recently ended third-quarter earnings season was a good one for the drug and biotech sector with many companies beating estimates on both counts. Some companies also raised their expectations for both earnings and sales, reflecting their optimistic outlook for the fourth quarter and 2022, in general.
The drug/biotech sector has played a key role in bringing global economic development on track by providing vaccines to fight the dreadful COVID pandemic. While breakthrough infections continue, the vaccines have definitely lowered the risk of severe disease and death rates. At the same time, though some treatments are already available, more refined medicines (antibodies and oral antiviral pills) are being developed to treat as well as prevent COVID to reduce the spread of the infection. The world keenly watched the developments of this sector last year and continues to do so. People are invested in stocks of big drugmakers for the relative stability they provide.
Here we have highlighted three bigshot drugmakers, Eli Lilly LLY , Pfizer PFE , and Novo Nordisk NVO , which have outperformed the industry this year and are good stocks to hold for the next few months and beyond. A chart showing the share price movement of these companies this year so far is given below.
Image Source: Zacks Investment Research
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here .
Eli Lilly
Lilly’s stock is up 52.7% this year so far compared with a 16.1% increase of the industry . Earnings estimates for 2021 have gone up from $7.87 to $7.93 per share over the past 60 days
Lilly has some intriguing pipeline assets in its portfolio for cancer, diabetes and Alzheimer’s. It recently submitted regulatory applications for dual GIP and GLP-1 receptor agonist tirzepatide for type II diabetes. Also, it has initiated a rolling submission for another key candidate donanemab for early Alzheimer’s disease. Both candidates have multibillion-dollar sales potential.
Lilly’s revenue growth is being driven by higher demand for drugs like Trulicity, Taltz, and others. Higher revenues from Lilly’s COVID-19 therapies benefited sales in the third quarter as the spread of the Delta variant led to a sharp rise in infection rates in the quarter. Lilly’s COVID-19 antibody cocktail, bamlanivimab plus etesevimab, was granted emergency approval by the FDA in February 2021 to treat mild-to-moderate COVID-19 in high-risk patients based on data from the BLAZE-1 study. In September, the FDA expanded the EUA for the cocktail antibody medicine to include the post-exposure prevention (prophylaxis) for COVID-19 indication.
Lilly also raised its previous sales and earnings forecast for 2021 due to additional expected revenues from its COVID-19 antibody medicines.
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
Pfizer’s stock has risen 34.8% this year so far. Earnings estimates for 2021 have gone up from $4.06 to $4.11 per share and from $3.42 to $3.86 for 2022 over the past 60 days
Pfizer has been riding high on the success of its two-shot vaccine for COVID-19, Comirnaty, which it developed in partnership with Germany-based company, BioNTech BNTX . The vaccine was developed in record time and is now approved for emergency/temporary use in several countries and has become a key contributor to the top line.
In the first nine months of 2021, the vaccine contributed $24.3 billion to Pfizer’s global sales. The pharma giant expects to record $36.0 billion in revenues from Comirnaty in 2021.
Pfizer and BioNTech have already shipped 2 billion doses to 152 countries. They expect to manufacture in total up to 3 billion doses by the end of December 2021. Pfizer and BioNTech’s vaccine was approved for younger patients (5-17 years) while a booster vaccine dose was also approved in the United States in 2021.
Pfizer’s third-quarter results were strong as it beat estimates for both earnings and sales. Pfizer raised its financial outlook for 2021 for the third time this year, mainly due to increasing revenue expectations from Comirnaty.
Overall, the Consumer Healthcare joint venture with Glaxo and the merger of the Upjohn unit with Mylan (now Viatris) 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. It also boasts a sustainable pipeline with multiple late-stage programs that can drive growth.
Novo Nordisk
Novo Nordisk’s stock is up 63.2% this year so far. Estimates for Novo Nordisk’s 2021 earnings have increased from $3.22 to $3.27 per share in the past 60 days while that for 2022 have risen from $3.59 to $3.61 over the same period.
Novo Nordisk, a Danish company, has a vast portfolio of insulin drugs and diabetes-related products. Victoza, Ozempic (semaglutide), Xultophy and Saxenda have been helping the company maintain momentum. Label expansion of these existing drugs will further boost sales.
Initial demand for its newly approved weight management drug, Wegovy (semaglutide as a weekly 2.4 mg injection) has exceeded management’s expectations. Novo Nordisk is also evaluating semaglutide in phase III studies for Alzheimer’s disease and NASH.
Novo Nordisk has also stepped up its M&A activity lately and is making acquisitions to expand various parts of its business.
Novo Nordisk’s third-quarter results were strong as it beat estimates for both earnings and sales. Sales in the Diabetes and Obesity Care segment grew 18% at CER while sales in the Biopharma segment were down 2% at CER. Solid sales growth in the first nine months of 2021 enabled the company to raise its sales growth guidance for the full year. Novo Nordisk now expects 12-15% sales growth at CER, higher than 10-13% expected previously.
The sales growth is driven by all geographical areas and by all therapy areas, particularly significant growth of its portfolio of GLP-1 treatments for diabetes and obesity
Novo Nordisk has a Zacks Rank #3.
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