On the heels of OxyContin maker Purdue Pharma asking a federal judge to approve a $6 billion nationwide settlement due to the overdose and addiction crisis, a new company will form following the U.S. Bankruptcy Court chapter 11 plan of reorganization. The resulting company is known as Knoa Pharma and profits will be used to fight an opioid crisis that has been linked to the deaths of more than 500,000 Americans over the past two decades.
Despite the devastating headlines linked to pharmaceuticals, you can still point to dozens of reasons to invest in pharmaceuticals. The global pharmaceuticals market is expected to grow from $1228.45 billion in 2020 to $1250.24 billion in 2021 at a compound annual growth rate (CAGR) of 1.8%. The market is expected to reach $1700.97 billion in 2025 at a CAGR of 8%.
Let's go over some other reasons to invest in pharmaceuticals and three stocks you might want to consider.
Why Buy Pharmaceutical Stocks?
Many pharmaceutical companies pay attractive dividends, so they can be great for investors who want income. In addition, the U.S. population is aging. Data from the U.S. Census Bureau shows that there are 76.4 million baby boomers and growing. Pharmaceutical companies can give investors a little bit of an edge in the following ways:
- Consumers can't cut back: Consumers can't cut back on taking medicine that improves their lives, regardless of what's happening with the economy. This results in reliable revenue that provides stable share prices.
- Increased profit margins: Pharmaceutical companies as a rule continue to sell more expensive drugs and increase their profit margins.
- High stock dividend yield: Buy-and-hold investors can take advantage of pharmaceutical stocks' dividend yield which hit at or above the market average.
- Continually expanding treatment options: Pharmaceutical companies continually expand treatment options and seek new ways to incorporate medicine into existing diseases. Pharmaceuticals often treat more than "big" diseases, so look beyond the big ones like cancer or diabetes.
3 Pharmaceutical Stocks to Put on Your Radar
These three pharmaceutical companies are likely already on your radar, but let's go over them just in case you haven't pulled the trigger on any one of them.
Merck & Co., Inc., headquartered in Kenilworth, New Jersey, provides health solutions through prescription medicines, vaccines, biologic therapies, animal health, and consumer care products. It develops human health pharmaceutical and vaccine products and develops, manufactures, and markets animal health products such as treatments for controlling diseases in livestock and pets.
For Merck, Q4 2021 worldwide sales from continuing operations were $13.5 billion, an increase of 24% from Q4 2020 and Q4 2021 GAAP EPS from continuing operations was $1.51 and non-GAAP EPS was $1.80.
Full-year 2021 worldwide sales from continuing operations were $48.7 billion, an increase of 17% from full-year 2020. Sales of KEYTRUDA, one of Merck's key drugs, grew 20% to $17.2 billion and GARDASIL/GARDASIL9 sales grew 44% to $5.7 billion. In addition, animal health sales grew 18% to $5.6 billion
The company anticipates full-year 2022 worldwide sales to be between $56.1 billion and
$57.6 billion.
Amgen, Inc, a biotechnology company headquartered in Thousand Oaks, California, develops, manufactures, and markets human therapeutics, including the following brands: Aranesp, Aimovig, KANJINTI, EVENITY, AMGEVITA, AVSOLA, BLINCYTO, MVASI, Corlanor, Enbrel, EPOGEN, IMLYGIC, Kyprolis, Neulasta, NEUPOGEN, Nplate, Parsabiv, Prolia, Repatha, Sensipar, Vectibix, Otezla, RIABNI, and XGEVA.
Total revenues increased 3% to $6.8 billion in Q4, compared to Q4 2020 and volumes grew double-digits for a number of products including Prolia, MVASI, Repatha, and EVENITY.
GAAP earnings per share (EPS) increased 22% to $3.36 in Q4 driven by increased revenues and lower weighted average shares outstanding.
The company generated $8.4 billion of free cash flow for the full year versus $9.9 billion in 2020, driven by the monetization of interest rate swaps that occurred in 2020 and the timing of payments for sales incentives and discounts, as well as increased capital expenditures in 2021.
Bristol-Myers Squibb Co., headquartered in New York, New York, discovers, develops, licenses, manufactures, markets, distributes and sells biopharmaceutical products. It offers chemically-synthesized drugs or small molecules and products produced through biologics.
Bristol-Myers Squibb reported Q4 earnings of $12 billion and $46.4 billion full-year revenue.
Q4 earnings per share were $1.07 and non-GAAP EPS was $1.83 with a full-
year earnings per share of $3.12 and non-GAAP EPS of $7.51.
Eliquis, immuno-oncology, and new product portfolios also saw large earnings. The company achieved significant growth with its clinical and regulatory milestones and started a $15 billion share repurchase authorization.
Buy Big Pharma for Dividends
Despite negative coverage surrounding pharmaceuticals, there's still a lot of upside for companies that offer life-saving medications.
As we've seen volatility in 2022, many investors are looking to poke their noses into stocks that offer less volatility and more dividends. At least you can depend on dividends to come through, right? Pharmaceuticals can save the day with dividends, and if you can tap into high-yield dividend stocks, so much the better because you'll get a bigger bang for your buck.
If you want dividends during a bumpy period on Wall Street, these pharmaceutical stocks might just punch your ticket and be the key to making something good happen in 2022.
Before you consider Merck & Co., Inc., you'll want to hear this.
MarketBeat keeps track of Wall Street's top-rated and best performing research analysts and the stocks they recommend to their clients on a daily basis. MarketBeat has identified the five stocks that top analysts are quietly whispering to their clients to buy now before the broader market catches on... and Merck & Co., Inc. wasn't on the list.
While Merck & Co., Inc. currently has a "Moderate Buy" rating among analysts, top-rated analysts believe these five stocks are better buys.
View The Five Stocks Here
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