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Forget Novartis, Buy These Two Pharma Stocks Instead
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Swiss pharma giant Novartis AG (NVS - Free Report) , which saw its shares decline 15.3% in 2016, will continue to face challenges in 2017 with factors like negative currency movement as well as the continued genericization of Gleevec/Glivec in the U.S. and Europe expected to impact performance. Generic competition is expected to impact sales by about $2.5 billion this year with group net sales expected to remain flat. Meanwhile, Alcon, Novartis’ eye care division, showed some improvement but did not return to growth with the Surgical business taking longer to turn around. The company is evaluating options for the Alcon business which includes a possible capital markets exit.
While Cosentyx and biosimilars should help drive sales, Entresto has been lagging expectations and Afinitor is facing intense competition for the breast cancer and renal cell carcinoma indications. Competition in the multiple sclerosis (MS) market will also intensify with Roche’s (RHHBY - Free Report) MS drug, Ocrevus, gaining FDA approval recently. Moreover, both Afinitor and Gilenya (MS) are expected to lose patent protection by 2020. Novartis also expects pricing to continue to be constrained over the next few years.
Zacks Rank & Estimate Revisions
Novartis is a Zacks Rank #4 (Sell) stock. Earnings estimates for both 2017 and 2018 are down 2.3% and 7.3%, respectively, over the last 30 days. Novartis also has a negative Earnings ESP (-1.77%) for Q1.
Price Performance
Year-to-date (YTD), Novartis has underperformed the Zacks categorized Large Cap Pharmaceuticals industry with the company’s shares climbing 0.9% compared to the industry gain of 5.8%.
While Novartis addresses these headwinds and deals with these challenges, here is look at two European pharma stocks that have a strong Zacks Rank -- #1 (Strong Buy) or #2 (Buy).
Roche Holding AG: Swiss healthcare giant, Roche, enjoys a strong presence in the cancer market. The Zacks Rank #1 stock has been witnessing upward revisions in earnings estimates for both 2017 and 2018 over the last 30 days. In addition to a presence in oncology, Roche has a presence in the immunology, infectious diseases, ophthalmology and central nervous system disorder markets. The company has a deep pipeline and is working on building its presence in the highly lucrative immuno-oncology market. Roche has key data readouts lined up for 2017 and has already gained FDA approval for an important drug Ocrevus (MS) this year.
YTD, Roche has outperformed the Zacks categorized Large Cap Pharmaceuticals industry with shares gaining 11%.
Sanofi (SNY - Free Report) : French pharma company, Sanofi, has a strong presence in several markets including diabetes, cardiovascular, rare disorders, vaccines and consumer healthcare. The company, which had recorded a decline in share price last year, has outperformed the Zacks categorized Large Cap Pharmaceuticals industry this year with shares gaining 10.2% YTD.
Although Sanofi’s diabetes segment will remain under pressure in 2017, the company got a boost recently with the FDA approval of its eczema treatment, Dupixent, which has blockbuster potential. As the pipeline continues to deliver and new product sales ramp up, Sanofi could well be poised for a turnaround.
Sanofi is a Zacks Rank #2 stock. The company also has a VGM style score of “A”. The VGM style score is a useful tool that allows investors to gain an insight into a stock’s strengths and weaknesses.
While “V” stands for Value, “G” stands for Growth and “M” for Momentum -- the score is a weighted combination of these three metrics. Our research shows that stocks with a VGM Score of “A” or “B” when combined with a Zacks Rank #1 or #2 offer the best upside potential. You can see the complete list of today’s Zacks #1 Rank stocks here.
Looking for Ideas with Even Greater Upside?
Most of Zacks’ investment ideas are short-term, directly based on our proven 1 to 3 month indicator. In addition, I invite you to consider our long-term opportunities. These rare trades look to start fast with strong Zacks Ranks, but carry through with double and triple-digit profit potential. Starting now, you can look inside our home run, value, and stocks under $10 portfolios, plus more. Click here for a peek at this private information>>
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Forget Novartis, Buy These Two Pharma Stocks Instead
Swiss pharma giant Novartis AG (NVS - Free Report) , which saw its shares decline 15.3% in 2016, will continue to face challenges in 2017 with factors like negative currency movement as well as the continued genericization of Gleevec/Glivec in the U.S. and Europe expected to impact performance. Generic competition is expected to impact sales by about $2.5 billion this year with group net sales expected to remain flat. Meanwhile, Alcon, Novartis’ eye care division, showed some improvement but did not return to growth with the Surgical business taking longer to turn around. The company is evaluating options for the Alcon business which includes a possible capital markets exit.
While Cosentyx and biosimilars should help drive sales, Entresto has been lagging expectations and Afinitor is facing intense competition for the breast cancer and renal cell carcinoma indications. Competition in the multiple sclerosis (MS) market will also intensify with Roche’s (RHHBY - Free Report) MS drug, Ocrevus, gaining FDA approval recently. Moreover, both Afinitor and Gilenya (MS) are expected to lose patent protection by 2020. Novartis also expects pricing to continue to be constrained over the next few years.
Zacks Rank & Estimate Revisions
Novartis is a Zacks Rank #4 (Sell) stock. Earnings estimates for both 2017 and 2018 are down 2.3% and 7.3%, respectively, over the last 30 days. Novartis also has a negative Earnings ESP (-1.77%) for Q1.
Price Performance
Year-to-date (YTD), Novartis has underperformed the Zacks categorized Large Cap Pharmaceuticals industry with the company’s shares climbing 0.9% compared to the industry gain of 5.8%.
While Novartis addresses these headwinds and deals with these challenges, here is look at two European pharma stocks that have a strong Zacks Rank -- #1 (Strong Buy) or #2 (Buy).
Roche Holding AG: Swiss healthcare giant, Roche, enjoys a strong presence in the cancer market. The Zacks Rank #1 stock has been witnessing upward revisions in earnings estimates for both 2017 and 2018 over the last 30 days. In addition to a presence in oncology, Roche has a presence in the immunology, infectious diseases, ophthalmology and central nervous system disorder markets. The company has a deep pipeline and is working on building its presence in the highly lucrative immuno-oncology market. Roche has key data readouts lined up for 2017 and has already gained FDA approval for an important drug Ocrevus (MS) this year.
YTD, Roche has outperformed the Zacks categorized Large Cap Pharmaceuticals industry with shares gaining 11%.
Sanofi (SNY - Free Report) : French pharma company, Sanofi, has a strong presence in several markets including diabetes, cardiovascular, rare disorders, vaccines and consumer healthcare. The company, which had recorded a decline in share price last year, has outperformed the Zacks categorized Large Cap Pharmaceuticals industry this year with shares gaining 10.2% YTD.
Although Sanofi’s diabetes segment will remain under pressure in 2017, the company got a boost recently with the FDA approval of its eczema treatment, Dupixent, which has blockbuster potential. As the pipeline continues to deliver and new product sales ramp up, Sanofi could well be poised for a turnaround.
Sanofi is a Zacks Rank #2 stock. The company also has a VGM style score of “A”. The VGM style score is a useful tool that allows investors to gain an insight into a stock’s strengths and weaknesses.
While “V” stands for Value, “G” stands for Growth and “M” for Momentum -- the score is a weighted combination of these three metrics. Our research shows that stocks with a VGM Score of “A” or “B” when combined with a Zacks Rank #1 or #2 offer the best upside potential. You can see the complete list of today’s Zacks #1 Rank stocks here.
Looking for Ideas with Even Greater Upside?
Most of Zacks’ investment ideas are short-term, directly based on our proven 1 to 3 month indicator. In addition, I invite you to consider our long-term opportunities. These rare trades look to start fast with strong Zacks Ranks, but carry through with double and triple-digit profit potential. Starting now, you can look inside our home run, value, and stocks under $10 portfolios, plus more. Click here for a peek at this private information>>