We use cookies to understand how you use our site and to improve your experience. This includes personalizing content and advertising. To learn more, click here. By continuing to use our site, you accept our use of cookies, revised Privacy Policy and Terms of Service.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
5 Large Drug Stocks to Keep An Eye On in the New Year
Read MoreHide Full Article
The drug and biotech industry had a tough time in the past couple of months after Trump announced the appointment of Robert F. Kennedy Jr., a vaccine skeptic, as the head of Health and Human Services, the agency that oversees the FDA. This, coupled with disappointing third-quarter sales and profits, guidance cuts, and pipeline setbacks took a toll on the overall drug and biotech industry’s performance. However, the industry is expected to recover in 2025.
Innovation is at its peak for the industry, with key spaces like rare diseases, next-generation oncology treatments, obesity, immunology and neuroscience attracting investor attention. R&D innovation is likely to remain a major focus area in 2025 as well. M&A activity is also expected to remain strong, particularly with Trump’s return to the White House.
Regular pipeline setbacks, slow ramp-up of newer drugs, patent cliffs, regulatory risks and macroeconomic pressure are some of the headwinds for the sector. Nonetheless, large drugmakers have several robust revenue streams and are mostly profitable companies, which makes them safe havens for investments.
The Zacks Large Cap Pharmaceuticals industry comprises some of the largest global companies that developmulti-million dollar drugs for a broad range of therapeutic areas like neuroscience, cardiovascular and metabolism, rare diseases, immunology and oncology. Some of these companies also make vaccines, animal health products, medical devices and consumer-related healthcare products. These players invest millions of dollars in their product pipelines and line extensions of their already-marketed drugs. Continuous innovation is a defining characteristic of pharma companies, and these large drugmakers are constantly investing in drug development and the discovery of new medicines. Regular mergers and acquisitions and collaboration deals are other key features of large drug companies.
What's Shaping the Future of the Large-Cap Pharma Industry?
Innovation and Pipeline Success: For big drugmakers, an innovative pipeline is a competitive necessity and key to top-line growth. Pharma companies are constantly striving to ramp up innovation and spend a significantly high portion of their revenues on R&D. Successful innovation and product line extensions in important therapeutic areas, and strong clinical study results may act as important catalysts for these stocks.
Aggressive M&A & Collaboration Activity: The sector is characterized by aggressive M&A activity. Given that it takes several years and millions of dollars to develop new therapeutics from scratch, large pharmaceutical companies, sitting on huge piles of cash, regularly buy innovative small/mid-cap biotech companies to build out their pipelines. Also, sloppy sales of mature drugs, dwindling in-house pipelines, government scrutiny of drug prices and the growing use of AI for drug discovery whet the M&A appetite of large drugmakers. Moreover, collaborations and partnerships with smaller companies are in full swing. Fast-growing and lucrative markets such as oncology, rare disease and cell and gene therapy are likely to remain focus areas for M&A activities. Of late, areas like obesity and inflammatory bowel disease are attracting buyout interest. Some of the larger M&A deals of 2024 were Eli Lilly’s buyout of Morphic, Vertex’s buyout of Alpine Immune Sciences and Novo Nordisk’s acquisition of Catalent. M&A activity is expected to remain rampant in 2025.
Pipeline Setbacks & Other Headwinds: The failure of key pipeline candidates in pivotal studies and regulatory and pipeline delays can be setbacks for large drug companies and significantly hurt their share prices. Other headwinds for the industry include pricing and competitive pressure, generic competition for blockbuster treatments, a slowdown in sales of some of the most high-profile older drugs, Medicare drug price negotiations and increasing FTC scrutiny of M&A deals.
Macroeconomic Uncertainty: Escalating geopolitical tensions in various parts of the world and their impact on global economic growth and macroeconomic uncertainty have increased broader economic woes.
Zacks Industry Rank Indicates a Dim Outlook
The Zacks Large Cap Pharmaceuticals industry is a 12-stock group within the broader Medical sector. The group’s Zacks Industry Rank is basically the average of the Zacks Rank of all the member stocks.
The Zacks Large Cap Pharmaceuticals industry currently carries a Zacks Industry Rank #146, which places it in the bottom 41% of 250 Zacks industries. Our research shows that the top 50% of the Zacks-ranked industries outperform the bottom 50% by a factor of more than 2 to 1.
Before we present a few large drug stocks that are well-positioned to outperform the market based on a strong earnings outlook, let’s take a look at the industry’s performance and its current valuation.
Industry Versus S&P 500 & Sector
The industry has outpaced the Zacks Medical Sector but significantly underperformed the S&P 500 in the past year.
Stocks in this industry have collectively declined 1.2% in the past year compared with the Zacks Medical Sector’s decrease of 6.1% in the said time frame. In contrast, the Zacks S&P 500 composite has risen 26.2%.
One-Year Price Performance
Industry's Current Valuation
Based on the forward 12-month price-to-earnings (P/E), a commonly used multiple for valuing large pharma companies, the industry is currently trading at 18.64X compared with the S&P 500’s 25.08X and the Zacks Medical Sector's 25.47X.
Over the last five years, the industry has traded as high as 20.70X, as low as 13.31X and at a median of 15.31X, as the chart below shows.
Forward 12-Month Price-to-Earnings (P/E) Ratio
5 Large Drugmakers to Watch
J&J: Its biggest strength is its diversified business model. J&J’s Innovative Medicines segment is showing a growth trend. J&J’s outlook for 2025 looks positive. In 2025, the company expects sales in its Innovative Medicine unit to be more than its guidance of $57 billion. In its Innovative Medicine segment, growth is expected to be driven by its key products such as Darzalex, Tremfya, Erleada and others, as well as new drugs and new indications for Tremfya and Rybrevant.
Sales in J&J’s MedTech unit slowed in 2024 on continued headwinds in Asia Pacific, specifically in China. Sales in China are being hurt by the impact of the volume-based procurement program and the anti-corruption campaign. However, in 2025, in MedTech, J&J expects operational sales growth to be at the upper end of its long-term (2022-2027) guided range of 5-7%, driven by the launch of new products and contributions from Abiomed and Shockwave acquisitions.
The company also has an interesting R&D pipeline that can generate innovative products and drive its growth further. Importantly, the visibility of potential resolutions to talc lawsuits has improved.
The Zacks Consensus Estimate for 2025 EPS has risen from $10.54 to $10.55 per share over the past 60 days. The stock has declined 10.2% in the past year.
Price and Consensus: JNJ
Pfizer: It is one of the largest and most successful drugmakers in the field of oncology. Its position in oncology was strengthened with the addition of Seagen in December 2023. After a couple of tough years, it seems that Pfizer’s worst slowdown is over now, and the company is gradually making a comeback. Though COVID revenues are declining, Pfizer’s non-COVID operational revenues improved in the first three quarters of 2024, driven by its key in-line products like Vyndaqel and Eliquis, new launches like Abrysvo, newly acquired products from Seagen.
Pfizer faces its share of challenges, the key being declining sales of its COVID-19 products. Pfizer also expects a significant impact from the loss of patent exclusivity in the 2026-2030 period, as several of its key products will face patent expirations. However, Pfizer’s new products/late-stage pipeline candidates and newly acquired products, including those acquired from Seagen, position it strongly for operational growth in 2025 and beyond.
Also, Pfizer expects cost cuts and internal restructuring to deliver savings of at least $5.5 billion. Huge profits from its COVID products strengthened its cash position. The funds are being used to make acquisitions, increase dividends, buy back shares and reduce debt.
Pfizer has a Zacks Rank #3 (Hold). The Zacks Consensus Estimate for 2025 EPS has remained stable at $2.92 per share over the past 60 days. The stock has declined 10.8% in the past year.
Price and Consensus: PFE
AbbVie: Sales of AbbVie’s blockbuster drug, Humira, are declining due to loss of exclusivity and biosimilar erosion. However, AbbVie has successfully navigated Humira's loss of exclusivity by launching two other successful new immunology medicines, Skyrizi and Rinvoq, which are performing extremely well, bolstered by approvals for new indications.
Strong sales performance of drugs like Rinvoq, Skyrizi, Venclexta and Vraylar, coupled with significant contributions from newer drugs like Ubrelvy, Elahere, Epkinly and Qulipta, should keep driving the company’s top line in 2025. However, AbbVie is seeing declining sales of Juvederm fillers in the United States and China, which will be a headwind in 2025.
Boosted by its new product launches, AbbVie expects to return to robust mid-single-digit revenue growth in 2025 with a high single-digit CAGR through the end of the decade.
AbbVie has also been on an acquisition spree in the past couple of years, which is strengthening its pipeline. It has signed several M&A deals in the immunology space, its core area, while also signing some early-stage deals in oncology and neuroscience areas.
AbbVie has a Zacks Rank #3.
In the past year, the stock has risen 10.7%. The Zacks Consensus Estimate for 2025 earnings has risen from $12.17 to $12.27 per share over the past 60 days.
Price and Consensus: ABBV
Eli Lilly: It has seen stupendous success with its tirzepatide medicines, Mounjaro for type II diabetesand Zepbound for obesity. Despite a short time on the market, Mounjaro and Zepbound became key top-line drivers for Lilly in 2024, with demand rising rapidly. Though demand for the two drugs remains massive, Mounjaro and Zepbound’s sales were hurt due to inventory issues in the third quarter. This led the shares of the company to drop after third-quarter results following a powerful first-half performance.
Nonetheless, the company is balancing the demand and supply of Mounjaro and Zepbound and the launch of the drugs in international markets. Lilly’s efforts to increase demand activities for Mounjaro and Zepbound in the fourth quarter should benefit sales in 2025. The launch of Mounjaro in new international markets is expected to contribute to the drug’s sales in the fourth quarter and in 2025.
Lilly’s revenue growth is expected to continue to be driven by higher demand for Mounjaro, Zepbound, Verzenio and others, making up for the decline in sales from Trulicity. Other new drugs like Omvoh for ulcerative colitis, Jaypirca for mantle cell lymphoma and chronic lymphocytic leukemia and Kisunla (donanemab) for early symptomatic Alzheimer's disease should support Lilly’s top-line growth in 2025. Also, Lilly looks well placed to get approval for several new drugs and label expansions for marketed drugs, including Mounjaro and Zepbound, in the next few years.
Lilly is a #3 Ranked stock. Estimates for Lilly’s 2025 earnings have risen from $23.78 to $24.05 per share over the past 60 days. Lilly’s stock has risen 25% in the past year.
Price and Consensus: LLY
AstraZeneca: It boasts a diversified geographical footprint as well as a product portfolio with several blockbuster medicines. AstraZeneca now has 12 blockbuster medicines in its portfolio, with sales exceeding $1 billion, including Tagrisso, Fasenra, Farxiga, Imfinzi, Lynparza, Soliris and Ultomiris. These drugs are driving the company’s top line with AstraZeneca launching them in more markets and an increased number of indications.
AstraZeneca has been making significant progress with its pipeline in areas like oncology, cardiovascular health, immunology and rare diseases. In 2024, it acquired small biotechs like Gracell, Fusion Pharmaceuticals and Amolyt to strengthen its pipeline.
Backed by its new products and pipeline drugs, AstraZeneca believes it can post industry-leading top-line growth in the 2025-2030 period. AstraZeneca expects to generate$80 billion in total revenues by 2030. By the said time frame, AstraZeneca plans to launch 20 new medicines, with six new medicines already launched. It believes that many of these new medicines will have the potential to generate more than $5 billion in peak-year revenues. The company is also on target to achieve a mid-30s percentage core operating margin by 2026.
AstraZeneca has a Zacks Rank #3 currently. The Zacks Consensus Estimate for AstraZeneca’s 2025 EPS has remained stable at $4.69 over the past 60 days. The stock has declined 4.1% in the past year.
Price and Consensus: AZN
See More Zacks Research for These Tickers
Normally $25 each - click below to receive one report FREE:
Image: Bigstock
5 Large Drug Stocks to Keep An Eye On in the New Year
The drug and biotech industry had a tough time in the past couple of months after Trump announced the appointment of Robert F. Kennedy Jr., a vaccine skeptic, as the head of Health and Human Services, the agency that oversees the FDA. This, coupled with disappointing third-quarter sales and profits, guidance cuts, and pipeline setbacks took a toll on the overall drug and biotech industry’s performance. However, the industry is expected to recover in 2025.
Innovation is at its peak for the industry, with key spaces like rare diseases, next-generation oncology treatments, obesity, immunology and neuroscience attracting investor attention. R&D innovation is likely to remain a major focus area in 2025 as well. M&A activity is also expected to remain strong, particularly with Trump’s return to the White House.
Regular pipeline setbacks, slow ramp-up of newer drugs, patent cliffs, regulatory risks and macroeconomic pressure are some of the headwinds for the sector. Nonetheless, large drugmakers have several robust revenue streams and are mostly profitable companies, which makes them safe havens for investments.
Among the large drugmakers, Eli Lilly (LLY - Free Report) , J&J (JNJ - Free Report) , AbbVie (ABBV - Free Report) , AstraZeneca (AZN - Free Report) and Pfizer (PFE - Free Report) are worth retaining in one’s portfolio.
Industry Description
The Zacks Large Cap Pharmaceuticals industry comprises some of the largest global companies that developmulti-million dollar drugs for a broad range of therapeutic areas like neuroscience, cardiovascular and metabolism, rare diseases, immunology and oncology. Some of these companies also make vaccines, animal health products, medical devices and consumer-related healthcare products. These players invest millions of dollars in their product pipelines and line extensions of their already-marketed drugs. Continuous innovation is a defining characteristic of pharma companies, and these large drugmakers are constantly investing in drug development and the discovery of new medicines. Regular mergers and acquisitions and collaboration deals are other key features of large drug companies.
What's Shaping the Future of the Large-Cap Pharma Industry?
Innovation and Pipeline Success: For big drugmakers, an innovative pipeline is a competitive necessity and key to top-line growth. Pharma companies are constantly striving to ramp up innovation and spend a significantly high portion of their revenues on R&D. Successful innovation and product line extensions in important therapeutic areas, and strong clinical study results may act as important catalysts for these stocks.
Aggressive M&A & Collaboration Activity: The sector is characterized by aggressive M&A activity. Given that it takes several years and millions of dollars to develop new therapeutics from scratch, large pharmaceutical companies, sitting on huge piles of cash, regularly buy innovative small/mid-cap biotech companies to build out their pipelines. Also, sloppy sales of mature drugs, dwindling in-house pipelines, government scrutiny of drug prices and the growing use of AI for drug discovery whet the M&A appetite of large drugmakers. Moreover, collaborations and partnerships with smaller companies are in full swing. Fast-growing and lucrative markets such as oncology, rare disease and cell and gene therapy are likely to remain focus areas for M&A activities. Of late, areas like obesity and inflammatory bowel disease are attracting buyout interest. Some of the larger M&A deals of 2024 were Eli Lilly’s buyout of Morphic, Vertex’s buyout of Alpine Immune Sciences and Novo Nordisk’s acquisition of Catalent. M&A activity is expected to remain rampant in 2025.
Pipeline Setbacks & Other Headwinds: The failure of key pipeline candidates in pivotal studies and regulatory and pipeline delays can be setbacks for large drug companies and significantly hurt their share prices. Other headwinds for the industry include pricing and competitive pressure, generic competition for blockbuster treatments, a slowdown in sales of some of the most high-profile older drugs, Medicare drug price negotiations and increasing FTC scrutiny of M&A deals.
Macroeconomic Uncertainty: Escalating geopolitical tensions in various parts of the world and their impact on global economic growth and macroeconomic uncertainty have increased broader economic woes.
Zacks Industry Rank Indicates a Dim Outlook
The Zacks Large Cap Pharmaceuticals industry is a 12-stock group within the broader Medical sector. The group’s Zacks Industry Rank is basically the average of the Zacks Rank of all the member stocks.
The Zacks Large Cap Pharmaceuticals industry currently carries a Zacks Industry Rank #146, which places it in the bottom 41% of 250 Zacks industries. Our research shows that the top 50% of the Zacks-ranked industries outperform the bottom 50% by a factor of more than 2 to 1.
Before we present a few large drug stocks that are well-positioned to outperform the market based on a strong earnings outlook, let’s take a look at the industry’s performance and its current valuation.
Industry Versus S&P 500 & Sector
The industry has outpaced the Zacks Medical Sector but significantly underperformed the S&P 500 in the past year.
Stocks in this industry have collectively declined 1.2% in the past year compared with the Zacks Medical Sector’s decrease of 6.1% in the said time frame. In contrast, the Zacks S&P 500 composite has risen 26.2%.
One-Year Price Performance
Industry's Current Valuation
Based on the forward 12-month price-to-earnings (P/E), a commonly used multiple for valuing large pharma companies, the industry is currently trading at 18.64X compared with the S&P 500’s 25.08X and the Zacks Medical Sector's 25.47X.
Over the last five years, the industry has traded as high as 20.70X, as low as 13.31X and at a median of 15.31X, as the chart below shows.
Forward 12-Month Price-to-Earnings (P/E) Ratio
5 Large Drugmakers to Watch
J&J: Its biggest strength is its diversified business model. J&J’s Innovative Medicines segment is showing a growth trend. J&J’s outlook for 2025 looks positive. In 2025, the company expects sales in its Innovative Medicine unit to be more than its guidance of $57 billion. In its Innovative Medicine segment, growth is expected to be driven by its key products such as Darzalex, Tremfya, Erleada and others, as well as new drugs and new indications for Tremfya and Rybrevant.
Sales in J&J’s MedTech unit slowed in 2024 on continued headwinds in Asia Pacific, specifically in China. Sales in China are being hurt by the impact of the volume-based procurement program and the anti-corruption campaign. However, in 2025, in MedTech, J&J expects operational sales growth to be at the upper end of its long-term (2022-2027) guided range of 5-7%, driven by the launch of new products and contributions from Abiomed and Shockwave acquisitions.
The company also has an interesting R&D pipeline that can generate innovative products and drive its growth further. Importantly, the visibility of potential resolutions to talc lawsuits has improved.
J&J is a Zacks Rank #2 (Buy) stock. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here
The Zacks Consensus Estimate for 2025 EPS has risen from $10.54 to $10.55 per share over the past 60 days. The stock has declined 10.2% in the past year.
Price and Consensus: JNJ
Pfizer: It is one of the largest and most successful drugmakers in the field of oncology. Its position in oncology was strengthened with the addition of Seagen in December 2023. After a couple of tough years, it seems that Pfizer’s worst slowdown is over now, and the company is gradually making a comeback. Though COVID revenues are declining, Pfizer’s non-COVID operational revenues improved in the first three quarters of 2024, driven by its key in-line products like Vyndaqel and Eliquis, new launches like Abrysvo, newly acquired products from Seagen.
Pfizer faces its share of challenges, the key being declining sales of its COVID-19 products. Pfizer also expects a significant impact from the loss of patent exclusivity in the 2026-2030 period, as several of its key products will face patent expirations. However, Pfizer’s new products/late-stage pipeline candidates and newly acquired products, including those acquired from Seagen, position it strongly for operational growth in 2025 and beyond.
Also, Pfizer expects cost cuts and internal restructuring to deliver savings of at least $5.5 billion. Huge profits from its COVID products strengthened its cash position. The funds are being used to make acquisitions, increase dividends, buy back shares and reduce debt.
Pfizer has a Zacks Rank #3 (Hold). The Zacks Consensus Estimate for 2025 EPS has remained stable at $2.92 per share over the past 60 days. The stock has declined 10.8% in the past year.
Price and Consensus: PFE
AbbVie: Sales of AbbVie’s blockbuster drug, Humira, are declining due to loss of exclusivity and biosimilar erosion. However, AbbVie has successfully navigated Humira's loss of exclusivity by launching two other successful new immunology medicines, Skyrizi and Rinvoq, which are performing extremely well, bolstered by approvals for new indications.
Strong sales performance of drugs like Rinvoq, Skyrizi, Venclexta and Vraylar, coupled with significant contributions from newer drugs like Ubrelvy, Elahere, Epkinly and Qulipta, should keep driving the company’s top line in 2025. However, AbbVie is seeing declining sales of Juvederm fillers in the United States and China, which will be a headwind in 2025.
Boosted by its new product launches, AbbVie expects to return to robust mid-single-digit revenue growth in 2025 with a high single-digit CAGR through the end of the decade.
AbbVie has also been on an acquisition spree in the past couple of years, which is strengthening its pipeline. It has signed several M&A deals in the immunology space, its core area, while also signing some early-stage deals in oncology and neuroscience areas.
AbbVie has a Zacks Rank #3.
In the past year, the stock has risen 10.7%. The Zacks Consensus Estimate for 2025 earnings has risen from $12.17 to $12.27 per share over the past 60 days.
Price and Consensus: ABBV
Eli Lilly: It has seen stupendous success with its tirzepatide medicines, Mounjaro for type II diabetesand Zepbound for obesity. Despite a short time on the market, Mounjaro and Zepbound became key top-line drivers for Lilly in 2024, with demand rising rapidly. Though demand for the two drugs remains massive, Mounjaro and Zepbound’s sales were hurt due to inventory issues in the third quarter. This led the shares of the company to drop after third-quarter results following a powerful first-half performance.
Nonetheless, the company is balancing the demand and supply of Mounjaro and Zepbound and the launch of the drugs in international markets. Lilly’s efforts to increase demand activities for Mounjaro and Zepbound in the fourth quarter should benefit sales in 2025. The launch of Mounjaro in new international markets is expected to contribute to the drug’s sales in the fourth quarter and in 2025.
Lilly’s revenue growth is expected to continue to be driven by higher demand for Mounjaro, Zepbound, Verzenio and others, making up for the decline in sales from Trulicity. Other new drugs like Omvoh for ulcerative colitis, Jaypirca for mantle cell lymphoma and chronic lymphocytic leukemia and Kisunla (donanemab) for early symptomatic Alzheimer's disease should support Lilly’s top-line growth in 2025. Also, Lilly looks well placed to get approval for several new drugs and label expansions for marketed drugs, including Mounjaro and Zepbound, in the next few years.
Lilly is a #3 Ranked stock. Estimates for Lilly’s 2025 earnings have risen from $23.78 to $24.05 per share over the past 60 days. Lilly’s stock has risen 25% in the past year.
Price and Consensus: LLY
AstraZeneca: It boasts a diversified geographical footprint as well as a product portfolio with several blockbuster medicines. AstraZeneca now has 12 blockbuster medicines in its portfolio, with sales exceeding $1 billion, including Tagrisso, Fasenra, Farxiga, Imfinzi, Lynparza, Soliris and Ultomiris. These drugs are driving the company’s top line with AstraZeneca launching them in more markets and an increased number of indications.
AstraZeneca has been making significant progress with its pipeline in areas like oncology, cardiovascular health, immunology and rare diseases. In 2024, it acquired small biotechs like Gracell, Fusion Pharmaceuticals and Amolyt to strengthen its pipeline.
Backed by its new products and pipeline drugs, AstraZeneca believes it can post industry-leading top-line growth in the 2025-2030 period. AstraZeneca expects to generate$80 billion in total revenues by 2030. By the said time frame, AstraZeneca plans to launch 20 new medicines, with six new medicines already launched. It believes that many of these new medicines will have the potential to generate more than $5 billion in peak-year revenues. The company is also on target to achieve a mid-30s percentage core operating margin by 2026.
AstraZeneca has a Zacks Rank #3 currently. The Zacks Consensus Estimate for AstraZeneca’s 2025 EPS has remained stable at $4.69 over the past 60 days. The stock has declined 4.1% in the past year.
Price and Consensus: AZN