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Buy These 5 Big Drug Stocks to Boost Your Portfolio's Health
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The drug and biotech sector has outperformed the broader equity market this year, backed by the launch of promising new medicines, pipeline successes and an increase in merger and acquisition (M&A) activity. Obesity drugs of Novo Nordisk and Eli Lilly (LLY - Free Report) have witnessed tremendous success, which has played a key role in the industry’s outperformance. The Zacks Large Cap Pharmaceuticals industry has outperformed the broader Medical sector as well as the S&P 500 index this year, as seen in the chart below.
Image Source: Zacks Investment Research
Last week, the Federal Reserve announced its decision to cut interest rates by 50 basis points, marking the first reduction in more than four years. With a reduction in borrowing costs and consequent availability of cheaper capital, drugmakers can ramp up their R&D spending to increase innovation, which is the lifeline of the drug and biotech industry.
Regular pipeline setbacks, slow ramp-up of newer drugs, supply chain disruptions, uncertainty about the impact of Medicare drug price negotiations, Federal Trade Commission’s (FTC) scrutiny of M&A deals and macroeconomic uncertainty ahead of the U.S. presidential elections are some of the headwinds for the sector. Despite these headwinds, there has been a surge in investments in drug/biotech stocks this year, marking a turnaround from last year. The industry looks well-positioned to continue its growth trajectory.
With the drug/biotech industry riding high, we discuss five large drugmakers, Pfizer (PFE - Free Report) , Eli Lilly, AstraZeneca (AZN - Free Report) , Bayer (BAYRY - Free Report) and Sanofi (SNY - Free Report) , which can prove to be great additions to your portfolio. These companies have a Zacks Rank #1 (Strong Buy) or 2 (Buy) and most of them have seen their stock prices rise this year, as seen in the chart below.
Image Source: Zacks Investment Research
Lilly Rides on the Success of Mounjaro, Zepbound
Lilly is a great stock to have in one’s portfolio currently based on its strong overall financial performance and robust drug pipeline.
Lilly has consistently reported strong revenues and profits and dealt well with expiring patents and increasing competition. The stupendous success of GLP-1 drugs, Mounjaro (diabetes) and Zepbound (obesity), has made it the largest drugmaker with a market cap of around $835 billion. Mounjaro and Zepbound have become key top-line drivers despite a short time on the market. Mounjaro and Zepbound include the same compound tirzepatide, a dual GIP and GLP-1 receptor agonist (GIP/GLP-1 RA). Tirzepatide is also being developed for other indications, approvals for which can further boost sales.
In the past couple of years, Lilly has also received approvals for several new drugs like Kisunla, Omvoh and Jaypirca and witnessed pipeline and regulatory success. Its new drugs have been contributing significantly to its top-line growth in 2024. Incremental contribution for new drugs, rapid pipeline progress in areas like obesity, diabetes and Alzheimer’s and regular M&A activity should keep the stock afloat.
The stock has risen 58.6% so far this year. Earnings estimates for 2024 have risen from $13.79 to $16.49 per share over the past 60 days. For 2025, earnings estimates have risen from $19.44 to $23.97 per share over the same timeframe.
Pfizer Making a Comeback
Pfizer 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 last year. 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 Pfizer’s COVID revenues are declining, its non-COVID drugs and potential contributions from new and newly acquired products have started to drive growth.
Pfizer’s non-COVID operational revenues improved in the first half of 2024, driven by its key in-line products like Prevnar, Vyndaqel and Eliquis, new launches like Abrysvo, Velsipity, Penbraya, newly acquired products like Nurtec as well as those acquired from Seagen (December 2023). The trend is expected to continue in the second half.
Pfizer’s new products/late-stage pipeline candidates, coupled with newly acquired products, including those acquired from Seagen, position Pfizer strongly for operational growth in 2025 and beyond. 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 is a #2 Ranked stock.
The stock has risen 0.5% so far this year. The Zacks Consensus Estimate for earnings has risen from $2.38 to $2.62 per share for 2024 over the past 60 days, while that for 2025 has risen from $2.74 per share to $2.85 per share.
AstraZeneca Enjoys Solid Portfolio of Blockbuster Drugs
AstraZeneca 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. This year, it has 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. 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 of 2. So far this year, the stock has risen 15.1%. The Zacks Consensus Estimate for 2024 earnings has risen from $4.04 per share to $4.05 per share over the past 60 days. For 2025, earnings estimates have remained stable at $4.71 per share over the same timeframe.
Sanofi’s Dupixent Holds Key to Top-Line Growth
Sanofi’s immunology drug Dupixent has become a key top-line driver on strong demand trends. Dupixent is now annualizing at close to €11.0 billion in sales after almost eight years on the market. Sanofi expects Dupixent to achieve more than €13 billion in sales in 2024 and a low double-digit CAGR till 2030. Sanofi possesses one of the world’s leading vaccine operations, with total annual sales of more than €5 billion in the past five years. Sanofi expects annual net sales to be more than €10 billion from its Vaccines unit by 2030 backed by its innovation efforts.
It has launched several new drugs in the past couple of years and accelerated its mid- and late-stage pipeline this year. It has also been active on the M&A front.
In July, Sanofi improved its earnings growth expectations for 2024 from a decline in the low single-digit range to stable on a constant currency rate basis. The increase in guidance was based on a strong performance in the first half and an optimistic outlook for the second half of the year.
Sanofi has a Zacks Rank #2
So far this year, the stock has risen 13.9%. The Zacks Consensus Estimate for 2024 earnings has risen from $4.16 per share to $4.26 per share over the past 60 days. For 2025, earnings estimates have risen from $4.74 to $4.83 per share over the past 60 days.
Bayer’s Pharmaceutical Unit Drives Growth
Bayer’s key drugs, Nubeqa for cancer and Kerendia for the treatment of patients with chronic kidney disease associated with type II diabetes are fueling growth in its Pharmaceuticals division. The company is also working to expand the labels of Nubeqa and Kerendia, which, if successful, can further drive growth. Bayer also plans to launch two new drugs, elinzanetant and acoramidis, in 2025.
Sales in the Crop Science division declined significantly in 2023 due to lower volumes and prices for glyphosate-based products. However, sales in the segment improved slightly in the second quarter of 2024 amid headwinds in a challenging agricultural market environment. Consumer Health returned to growth.
This Zacks #2 Ranked stock has declined 13% so far this year. Estimates for its 2024 earnings per share have increased from $1.35 to $1.38 over the past 60 days. For 2025, earnings estimates have risen from $1.42 to $1.44 per share over the same timeframe. The stock has declined 13.0% so far this year.
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Buy These 5 Big Drug Stocks to Boost Your Portfolio's Health
The drug and biotech sector has outperformed the broader equity market this year, backed by the launch of promising new medicines, pipeline successes and an increase in merger and acquisition (M&A) activity. Obesity drugs of Novo Nordisk and Eli Lilly (LLY - Free Report) have witnessed tremendous success, which has played a key role in the industry’s outperformance. The Zacks Large Cap Pharmaceuticals industry has outperformed the broader Medical sector as well as the S&P 500 index this year, as seen in the chart below.
Last week, the Federal Reserve announced its decision to cut interest rates by 50 basis points, marking the first reduction in more than four years. With a reduction in borrowing costs and consequent availability of cheaper capital, drugmakers can ramp up their R&D spending to increase innovation, which is the lifeline of the drug and biotech industry.
Regular pipeline setbacks, slow ramp-up of newer drugs, supply chain disruptions, uncertainty about the impact of Medicare drug price negotiations, Federal Trade Commission’s (FTC) scrutiny of M&A deals and macroeconomic uncertainty ahead of the U.S. presidential elections are some of the headwinds for the sector. Despite these headwinds, there has been a surge in investments in drug/biotech stocks this year, marking a turnaround from last year. The industry looks well-positioned to continue its growth trajectory.
With the drug/biotech industry riding high, we discuss five large drugmakers, Pfizer (PFE - Free Report) , Eli Lilly, AstraZeneca (AZN - Free Report) , Bayer (BAYRY - Free Report) and Sanofi (SNY - Free Report) , which can prove to be great additions to your portfolio. These companies have a Zacks Rank #1 (Strong Buy) or 2 (Buy) and most of them have seen their stock prices rise this year, as seen in the chart below.
Lilly Rides on the Success of Mounjaro, Zepbound
Lilly is a great stock to have in one’s portfolio currently based on its strong overall financial performance and robust drug pipeline.
Lilly has consistently reported strong revenues and profits and dealt well with expiring patents and increasing competition. The stupendous success of GLP-1 drugs, Mounjaro (diabetes) and Zepbound (obesity), has made it the largest drugmaker with a market cap of around $835 billion. Mounjaro and Zepbound have become key top-line drivers despite a short time on the market. Mounjaro and Zepbound include the same compound tirzepatide, a dual GIP and GLP-1 receptor agonist (GIP/GLP-1 RA). Tirzepatide is also being developed for other indications, approvals for which can further boost sales.
In the past couple of years, Lilly has also received approvals for several new drugs like Kisunla, Omvoh and Jaypirca and witnessed pipeline and regulatory success. Its new drugs have been contributing significantly to its top-line growth in 2024. Incremental contribution for new drugs, rapid pipeline progress in areas like obesity, diabetes and Alzheimer’s and regular M&A activity should keep the stock afloat.
Lilly sports a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.
The stock has risen 58.6% so far this year. Earnings estimates for 2024 have risen from $13.79 to $16.49 per share over the past 60 days. For 2025, earnings estimates have risen from $19.44 to $23.97 per share over the same timeframe.
Pfizer Making a Comeback
Pfizer 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 last year. 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 Pfizer’s COVID revenues are declining, its non-COVID drugs and potential contributions from new and newly acquired products have started to drive growth.
Pfizer’s non-COVID operational revenues improved in the first half of 2024, driven by its key in-line products like Prevnar, Vyndaqel and Eliquis, new launches like Abrysvo, Velsipity, Penbraya, newly acquired products like Nurtec as well as those acquired from Seagen (December 2023). The trend is expected to continue in the second half.
Pfizer’s new products/late-stage pipeline candidates, coupled with newly acquired products, including those acquired from Seagen, position Pfizer strongly for operational growth in 2025 and beyond. 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 is a #2 Ranked stock.
The stock has risen 0.5% so far this year. The Zacks Consensus Estimate for earnings has risen from $2.38 to $2.62 per share for 2024 over the past 60 days, while that for 2025 has risen from $2.74 per share to $2.85 per share.
AstraZeneca Enjoys Solid Portfolio of Blockbuster Drugs
AstraZeneca 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. This year, it has 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. 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 of 2. So far this year, the stock has risen 15.1%. The Zacks Consensus Estimate for 2024 earnings has risen from $4.04 per share to $4.05 per share over the past 60 days. For 2025, earnings estimates have remained stable at $4.71 per share over the same timeframe.
Sanofi’s Dupixent Holds Key to Top-Line Growth
Sanofi’s immunology drug Dupixent has become a key top-line driver on strong demand trends. Dupixent is now annualizing at close to €11.0 billion in sales after almost eight years on the market. Sanofi expects Dupixent to achieve more than €13 billion in sales in 2024 and a low double-digit CAGR till 2030. Sanofi possesses one of the world’s leading vaccine operations, with total annual sales of more than €5 billion in the past five years. Sanofi expects annual net sales to be more than €10 billion from its Vaccines unit by 2030 backed by its innovation efforts.
It has launched several new drugs in the past couple of years and accelerated its mid- and late-stage pipeline this year. It has also been active on the M&A front.
In July, Sanofi improved its earnings growth expectations for 2024 from a decline in the low single-digit range to stable on a constant currency rate basis. The increase in guidance was based on a strong performance in the first half and an optimistic outlook for the second half of the year.
Sanofi has a Zacks Rank #2
So far this year, the stock has risen 13.9%. The Zacks Consensus Estimate for 2024 earnings has risen from $4.16 per share to $4.26 per share over the past 60 days. For 2025, earnings estimates have risen from $4.74 to $4.83 per share over the past 60 days.
Bayer’s Pharmaceutical Unit Drives Growth
Bayer’s key drugs, Nubeqa for cancer and Kerendia for the treatment of patients with chronic kidney disease associated with type II diabetes are fueling growth in its Pharmaceuticals division. The company is also working to expand the labels of Nubeqa and Kerendia, which, if successful, can further drive growth. Bayer also plans to launch two new drugs, elinzanetant and acoramidis, in 2025.
Sales in the Crop Science division declined significantly in 2023 due to lower volumes and prices for glyphosate-based products. However, sales in the segment improved slightly in the second quarter of 2024 amid headwinds in a challenging agricultural market environment. Consumer Health returned to growth.
This Zacks #2 Ranked stock has declined 13% so far this year. Estimates for its 2024 earnings per share have increased from $1.35 to $1.38 over the past 60 days. For 2025, earnings estimates have risen from $1.42 to $1.44 per share over the same timeframe. The stock has declined 13.0% so far this year.