Despite the uncertainty surrounding the global economy, the
drug and biotechnology sectors have continued to perform well in the second
half of 2022. This is due to the positive clinical data and the improving
regulatory environment. In addition, the companies' pipeline successes and the
potential for innovation are expected to continue driving the market in the
next few years. Some of the prominent drugmakers that are worth keeping an eye
on are Johnson & Johnson, Novo Nordisk, Merck and Astra Zeneca.
Industry Picture
The large-cap pharmaceutical companies that are part of the
industry are known for developing multi-million dollar drugs for a wide range
of therapeutic areas, such as neurology, oncology, and cardiovascular and
metabolism. Some of these also make vaccines, medical devices, and animal
health products.
These companies spend a lot of money on their pipeline and
development programs. They are committed to continuous innovation, which is a
key characteristic of the pharmaceutical industry. The continuous development
of new medicines is also a major factor that drives the industry's performance.
What Influence the Future of the Large-Cap Pharma Industry?
The continuous development of new medicines is also a key
factor that drives the industry's performance. Large-cap pharmaceutical
companies are constantly investing in their R&D programs to improve their
product pipeline. Successful product line extensions and the positive clinical
study results of new medicines are some of the factors that can help boost the
stock price of these companies.
The collaboration and acquisition activity of the
pharmaceutical industry is also a major factor that drives the industry's
performance. Due to the time it takes to develop new medicines, large
pharmaceutical companies are constantly acquiring small and mid-sized
biotechnology firms to build their pipeline.
The acquisition activity of large pharmaceutical companies
is also a result of the lackluster sales of older drugs, the government's
scrutiny of the pricing of drugs, and the emergence of new tech firms such as
Google and Apple. These factors have prompted many companies to focus their
M&A efforts on lucrative areas such as cancer and gene therapy.
In addition, the increasing number of collaborations and
partnerships between large pharmaceutical companies and smaller firms has also
prompted many companies to focus their acquisition efforts on lucrative areas.
The most prominent deal of the year was the acquisition of Horizon Therapeutics
by Genentech.
A number of factors affect the performance of the
pharmaceutical industry, such as the failure of key pipeline candidates and the
delays in the approval of certain new medicines. This can lead to significant
losses for large companies. Other factors such as the generic competition for
older drugs and the pricing pressure are also contributing to the industry's
decline.
The various factors that affect the pharmaceutical
industry's performance are also contributing to the uncertainty surrounding the
global economy. The rising interest rates, the weakening dollar, and the war in
Europe are making the situation even more unpredictable.
The pandemic has caused uncertainty about the future of the
pharmaceutical industry. In 2021, the demand for physician-administered drugs
decreased due to the outbreak. However, in the last quarter of that year, the
infection rates spiked due to the emergence of the Omicron variant. In 2022,
the different waves of concern started to dominate the market. There is still a
lot of uncertainty about the impact of the pandemic on the industry's
performance.
Bright Prospects
The large-cap pharmaceutical industry, which is a part of
the Medical sector, has a favorable Industry rank of A. The industry's average
rating is computed on the basis of all the stocks in the group.
The large-cap pharmaceutical industry carries a solid
Industry rank of 83. This sector is currently in the top 33% of all the 250 industries
on the basis of the number of companies in the group. According to our
research, the top 50% of the industries that have a favorable Industry rank
perform better than the bottom 50%.
Before we discuss the various factors that affect the
pharmaceutical industry's performance, let's first take a look at its current
valuation and compare it with the market.
Industry Versus S&P 500 & Sector
The pharmaceutical industry has performed well this year, as
it has outperformed the broader market's S&P 500 and the medical sector. It
has gained 12.0% so far this year, against the 17.6 decline of the S&P 500
and the 16.9% decline of the medical sector.
Keep an Eye On These
- Merck
The multiple blockbusters of drugmaker, Merck, such as
Keytruda, are expected to drive the company's sales in the next few years. The
company's sales have been supported by the ongoing recovery in the global
economy and strong demand for its vaccines against HPV-related cancers.
The company's Keytruda is expected to continue driving its
top-line growth as it continues to expand into new markets and indications. In
addition, its Animal Health business is expected to continue contributing to
the company's sales in the next few years. The multiple cancer pipeline of the
company, which includes Keytruda, should help drive its long-term growth.
The stock of this company has gained 44.7% so far this year.
The current year's earnings estimate has risen from $7.31 to $7.38, while that
for the next year has increased from $7.21 to $7.34. Currently, the company has
a three-year long-term earnings estimate of $7.34 per share.
- Johnson & Johnson
The diversified business model of Johnson & Johnson is
its biggest strength. The company, which is a global healthcare company,
operates through different divisions such as pharmaceuticals, medical devices,
and consumer products. Its ability to withstand various economic cycles helps
it maintain its profitability.
The company's pharmaceutical unit has been performing well,
as it has been supported by the multiple blockbusters, such as Darzalex and
Stelara, as well as the contributions from newer drugs, such as Erleada and
Tremfya. J&J's outlook for the business remains positive, as it continues to
expect its pharmaceutical business to grow at a high rate in 2023.
The company's MedTech division has been performing well, as
it is focused on growing this business through the launch of new products.
J&J is also making progress on its pipeline and line extensions. It has
taken significant steps to resolve its opioid and talc litigation.
The current year's earnings estimate for Johnson &
Johnson has been improving over the past 60 days. The firm's earnings per share
are now expected to be $10.04 in 2022.
- Novo Nordisk
One of the leading diabetes portfolios of Novo Nordisk is
Ozempic, which is an once-weekly injection of semaglutide. The drug has been
performing well since its launch. It is expected to continue driving the
company's top-line growth in the coming years. Another product, Rybelsus, is
also gaining popularity.
The US Food and Drug Administration (FDA) has approved
Wegovy, which is a 2.4-mg injection for the treatment of obesity. Other
products, such as Xultophy and Saxenda, are also gaining popularity. Label expansion
for these drugs is expected to boost sales.
The current year's earnings estimate for Novo Nordisk has
dropped from $3.07 to $3.06. The same for the next year has decreased from
$4.01 to $3.76. Novo Nordisk, which is a #3 ranked stock, has gained 18.6% this
year.
- AstraZeneca
AstraZeneca's key products, such as Imfinzi and Lynparza,
are expected to continue driving its revenues. Its pipeline is strong, and it
has been engaging in strategic collaborations and external acquisitions to
boost its pipeline. The company's cost-cutting efforts are also expected to
drive earnings. Alexion's acquisition of AstraZeneca strengthens its
immunotherapies franchise, adding several new products to the company's top
line.
The current year's earnings estimate for Anglo-Swedish
drugmaker AstraZeneca has been improving over the past 60 days. The firm's
earnings per share are now expected to be $3.36 in 2022 and $3.66 in 2023.
**The opinions and views expressed here are those of the author, and do not necessarily reflect the views and opinions of the company or its subsidiary, or those of Nasdaq, Inc.**
Great job for publishing such a nice article. Your article isn’t only useful but it is additionally really informative. Thank you because you have been willing to share information with us. pain clinic toronto
ReplyDeleteThanks for stopping by...
Delete