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Pharma Sector Stocks To Consider For Sustained Returns

June 25, 2014 | About:

A recent EvaluatePharma report estimated the market for prescribed drugs will increase at an annual rate of 3.8% to $895 billion from 2012 to 2018. New patents and improvement in research and development will bolster companies’ portfolios, while a growing population and better access to healthcare will be key factors driving the market size for drugs. Pharmaceutical companies are working hard to capitalize on the growing market. Three such pharmaceutical companies should be of interest to investors. These companies have promising drugs for the treatment of cancer, heart disease, and immunologic disorders.

Bristol-Myers Squibb’s (NYSE:BMY) posted its first quarter result for 2014 which was $3.8 billion marginally down by 1% same quarter last year. U.S. revenues decreased 10% to $1.8 billion in the quarter compared to the same period a year ago. International revenues increased 10% to $2.0 billion.

The company also sold its diabetes business to AstraZeneca, receiving $3.3 billion and this revenue is not included in the posted revenue of $3.8 billion.

The company has three drugs in this business segment, Yervoy, Sprycel, and Erbitux. Yervoy treats skin cancer and this drug has high efficiency in treating Melanoma, and it is widely used to treat inoperable patients. In addition, Bristol-Myers's new drug under development, Nivolumab, showed positive results with a response rate of 31% when tested with Yervoy in its second trial stage. The company expects that the combination of both drugs will provide a breakthrough in the treatment of melanoma. Therefore, it estimates that the sales of Yervoy will increase and reach $1.06 billion in future.

Plavix was a Bristol-Myers blockbuster drug with revenue of $2.54 billion in the last year. Its patent expired last year and generic drugs flooded the market. Despite the fierce competition for this drug, its revenue grew 19%. Other drugs like Yervoy grew 18%, Orencia which grew 13%, and Baraclude which grew 11%. Global revenues for Eliquis were $106 million.

To offset the plunging revenue, Bristol-Myers developed the anti-coagulant drug “Eliquis” jointly with Pfizer. This drug has been already approved by FDA and generated revenue of $2 million last year, and it is expected to reach around $242 million this year.

In the test, Eliquis reduced the stroke risk compared to Warfarin, a competitor of Eliquis. Eliquis showed stroke risk of 1.27% per year, whereas Warfarin had risk of 1.60% per year. With this competitive advantage, analysts anticipate that this drug can achieve peak revenue of around $3.5 billion by the end of 2020.

Pfizer will also benefit from the approval of Eliquis, as this drug achieved average sales of $26 million in the first two months after the launch. The clinical profile of Eliquis is superior to its competitors in this segment, and it also received approval for the treatment of hypertension.

For the current fiscal year, the company anticipates global revenues between $15.2 billion and $15.8 billion.

Johnson & Johnson (NYSE:JNJ) announced its first quarter results recently, and it achieved 3.5% year-over-year revenue growth to $18.1 billion. The Company increased its earnings guidance for fiscal 2014 to $5.80 - $5.90 per share. With the standout performance of Remicade, its sales increased in the pharmaceutical business. Remicade treats arthritis, certain bowel diseases, and skin diseases as well. The company has been marketing this drug in the U.S., Japan, Taiwan, Indonesia, and China, but due to a new contract with Merck, it will increase the marketing of this product to the Middle East, Africa, and Asia-Pacific region.

Johnson & Johnson’s revenue in the consumer healthcare segment decreased by 3.2%, year-over-year and generated $3.6 billion in the first quarter of 2014. The company is the global market leader in this segment. Under the umbrella of consumer healthcare, it sells OTC drugs like Tylenol, Zyrtec, and Benadryl. These drugs treat patients suffering from the common cold, allergies, and coughs and are readily available without prescription. The global market of OTC drugs is expected to reach to $34.5 billion by 2015, which will lead to an increase in revenue for Johnson & Johnson.


Bristol-Myers’ revenue from Yervoy and Eliquis will offset the patent expiration of Plavix. Pfizer will also gain from Eliquis, due to better market positioning and the efficiency of this drug. Meanwhile, Johnson & Johnson's will capitalize on its drug Remicade and the surging market of OTC drugs. Investor looking to invest in Pharma sector, can always opt for these Companies for sustained growth

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