One year ago, investors expected 2021 to be a huge year for pharmaceutical stocks. The bullish perspective was that as vaccines rolled out and the economy reopened, investors would shift from biotech stocks to traditional pharmaceutical stocks.
But the Delta variant has kept Covid-19 top of mind for many investors. While it’s true that some pharmaceutical stocks were part of the vaccine race, other players in the space have not performed as well as was hoped. Case in point, as of October 6, 2021, the iShares U.S. Pharmaceuticals ETF (NYSEARCA:IHE) is up only 9.7% in the last 12 months. And if you bought shares of the fund at the beginning of the year, you have no growth to show for your patience.
There are reasons beyond Covid-19 to consider when assessing the disappointing performance of pharmaceutical stocks. One is the current political climate which is making no secret of its desire to reshape the healthcare industry. And it has the pricing practices of “big pharma” firmly in its crosshairs.
However, the pharmaceutical sector is still loaded with quality stocks for investors who are willing to accept the inherent risk. And that’s the focus of this special presentation. In the next few minutes, we’ll take a look at seven pharmaceutical stocks that
are ready to make strong moves forward in 2022.
Quick Links
- Merck
- Pfizer
- AstraZeneca
- Johnson & Johnson
- AbbVie
- Dynavax Technologies
- Xenon Pharmaceuticals (XENE)
#1 - Merck (NYSE:MRK)
One of the biggest stories in the pharmaceutical sector was the announcement that Merck (NYSE: MRK) was able to report stellar results on a late-stage study for its Covid-19 therapy, molnupiravir. The pill, which the company developed in partnership with Ridgeback Biotherapeutics, is likely to be a huge commercial success should it receive emergency use authorization.
This is igniting an intense debate over whether a safe and effective pill to treat Covid-19 symptoms will render vaccination efforts obsolete. For investors looking to 2022, I believe a “both/and” approach is warranted.
MRK stock gapped up nearly 10% on the announcement. But the stock is giving up some of those gains. The consensus opinion for MRK stock forecasts a 15% gain. But recent opinions that have been issued since the announcement of its Covid-19 pill suggest the stock could have even further to climb. Plus, the company reports earnings at the end of October and the stock may receive further upgrades in advance of, and immediately following the report.
About Merck & Co., Inc.
Merck & Co, Inc operates as a healthcare company worldwide. It operates through two segments, Pharmaceutical and Animal Health. The Pharmaceutical segment offers human health pharmaceutical products in the areas of oncology, hospital acute care, immunology, neuroscience, virology, cardiovascular, and diabetes under the Keytruda, Bridion, Adempas, Lagevrio, Belsomra, Simponi, and Januvia brands, as well as vaccine products consisting of preventive pediatric, adolescent, and adult vaccines under the Gardasil/Gardasil 9, ProQuad, M-M-R II, Varivax, RotaTeq, Live Oral, Vaxneuvance, Pneumovax 23, and Vaqta names.
Read More - Current Price
- $97.43
- Consensus Rating
- Moderate Buy
- Ratings Breakdown
- 12 Buy Ratings, 6 Hold Ratings, 1 Sell Ratings.
- Consensus Price Target
- $130.86 (34.3% Upside)
#2 - Pfizer (NYSE:PFE)
There’s been some speculation about why Pfizer (NYSE: PFE) stock is not soaring. The company along with BioNTech (NASDAQ: BNTX) was the first to receive Emergency Use Authorization (EUA) for its Covid-19 vaccine, Comirnaty. And it was also the first to receive FDA approval as well. This is the best evidence of Pfizer’s purposeful shift into the biopharma space paying off.
However, there’s much more to like about Pfizer than the revenue that Comirnaty will deliver for the company in 2022 and perhaps beyond. To begin with, Pfizer is said to be in the process of developing its own Covid-19 pill to compete with Merck. However, it goes far beyond that. The company has several oncology drugs, headlined by Ibrance, and an anticoagulant, Eliquis, that are showing year-over-year revenue growth. And the company has one of the most robust pipelines in the industry. Of the company’s 100 “discovery projects,” 23 are in late-stage (Phase 3) studies.
With any pharmaceutical stocks, investors should be looking for multiple revenue streams. And in that context, Pfizer is delivering in ways that set it apart from other stocks in the sector.
About Pfizer
Pfizer Inc discovers, develops, manufactures, markets, distributes, and sells biopharmaceutical products in the United States, Europe, and internationally. The company offers medicines and vaccines in various therapeutic areas, including cardiovascular metabolic, migraine, and women's health under the Eliquis, Nurtec ODT/Vydura, Zavzpret, and the Premarin family brands; infectious diseases with unmet medical needs under the Prevnar family, Abrysvo, Nimenrix, FSME/IMMUN-TicoVac, and Trumenba brands; and COVID-19 prevention and treatment, and potential future mRNA and antiviral products under the Comirnaty and Paxlovid brands.
Read More - Current Price
- $24.95
- Consensus Rating
- Moderate Buy
- Ratings Breakdown
- 7 Buy Ratings, 8 Hold Ratings, 1 Sell Ratings.
- Consensus Price Target
- $32.92 (32.0% Upside)
#3 - AstraZeneca (NASDAQ:AZN)
In the introduction to this article, I suggested that oncology and diabetes would be two of the key drivers of pharmaceutical stock growth. And those are the two sectors that make the case for AstraZeneca (NASDAQ: AZN).
In its most recent earnings report, AstraZeneca posted $6.4 billion in sales of its oncology products. That represented a 19% year-over-year increase. And two of the company’s drugs have patents that will remain in effect until 2030. That’s a key metric to use when evaluating a pharmaceutical stock because it keeps the field free of competitors.
On the diabetes front, the company saw its lead drug, Farxiga, deliver $1.4 billion in revenue which was 60% higher than the previous year.
It was results like these that investors were expecting throughout the pharmaceutical sector. If AstraZeneca is any indicator it may simply have been a case of patience being rewarded. And if the company begins to see the growth it expects from its recent acquisition of Alexion Pharmaceuticals the future will look very bright for AZN stock.
About AstraZeneca
AstraZeneca PLC, a biopharmaceutical company, focuses on the discovery, development, manufacture, and commercialization of prescription medicines. The company's marketed products include Tagrisso, Imfinzi, Lynparza, Calquence, Enhertu, Orpathys, Truqap, Zoladex, Faslodex, Farxiga, Brilinta, Lokelma, Roxadustat, Andexxa, Crestor, Seloken, Onglyza, Bydureon, Fasenra, Breztri, Symbicort, Saphnelo, Tezspire, Pulmicort, Bevespi, and Daliresp for cardiovascular, renal, metabolism, and oncology.
Read More - Current Price
- $63.20
- Consensus Rating
- Moderate Buy
- Ratings Breakdown
- 9 Buy Ratings, 3 Hold Ratings, 0 Sell Ratings.
- Consensus Price Target
- $89.75 (42.0% Upside)
#4 - Johnson & Johnson (NYSE:JNJ)
No list of pharmaceutical stocks would seem complete without Johnson & Johnson (NYSE: JNJ) on the list. Like Pfizer, JNJ was one of the big winners in the Covid-19 vaccine race. And one of the recent news items driving the stock is the company’s application to provide booster shots for its vaccine. A decision is expected later in October.
This could be the catalyst that JNJ stock needs to break it out of the doldrums. So far, the stock is flat in 2021. However, JNJ stock is trading in the middle of its 52-week range and analysts give the stock a 20% upside from its current level.
Of course, Johnson & Johnson also has a number of its products currently in the market. And investors shouldn’t forget that Johnson & Johnson is part of the elite Dividend Kings club. The company has increased its dividend every year for the last 59 years. And currently, it sports a dividend yield of 2.67%.
About Johnson & Johnson
Johnson & Johnson, together with its subsidiaries, researches, develops, manufactures, and sells various products in the healthcare field worldwide. The company's Innovative Medicine segment offers products for various therapeutic areas, such as immunology, including rheumatoid arthritis, psoriatic arthritis, inflammatory bowel disease, and psoriasis; infectious diseases comprising HIV/AIDS; neuroscience, consisting of mood disorders, neurodegenerative disorders, and schizophrenia; oncology, such as prostate cancer, hematologic malignancies, lung cancer, and bladder cancer; cardiovascular and metabolism, including thrombosis, diabetes, and macular degeneration; and pulmonary hypertension comprising pulmonary arterial hypertension through retailers, wholesalers, distributors, hospitals, and healthcare professionals for prescription use.
Read More - Current Price
- $153.10
- Consensus Rating
- Moderate Buy
- Ratings Breakdown
- 8 Buy Ratings, 7 Hold Ratings, 0 Sell Ratings.
- Consensus Price Target
- $175.94 (14.9% Upside)
#5 - AbbVie (NYSE:ABBV)
The story of AbbVie (NYSE: ABBV) in 2020 and 2021 has revolved around its signature anti-inflammatory drug, Humira. The company was due to see its patents expire for the drug which would invite generic competition into the market. With those expirations looming, the company purchased Allergan for $63 billion to help expand the company’s portfolio.
However, it’s not like AbbVie’s cupboard was dry. The company is projecting continued growth from its immunology drugs, Skyrizi and Rinvoq which the company believes could deliver $15 billion in revenue by 2025.
And AbbVie has an impressive pipeline that ensures that, at some point, the company will have other drugs that will continue to deliver revenue.
ABBV stock has a consensus price target of $126.16 which is a 15% upside from its current level. But as with JNJ, you can’t overlook AbbVie’s dividend. The company has increased its dividend for 49 years which means that next year it will likely be joining the elite group of Dividend Kings.
About AbbVie
AbbVie Inc discovers, develops, manufactures, and sells pharmaceuticals worldwide. The company offers Humira, an injection for autoimmune and intestinal Behçet's diseases, and pyoderma gangrenosum; Skyrizi to treat moderate to severe plaque psoriasis, psoriatic disease, and Crohn's disease; Rinvoq to treat rheumatoid and psoriatic arthritis, ankylosing spondylitis, atopic dermatitis, axial spondyloarthropathy, ulcerative colitis, and Crohn's disease; Imbruvica for the treatment of adult patients with blood cancers; Epkinly to treat lymphoma; Elahere to treat cancer; and Venclexta/Venclyxto to treat blood cancers.
Read More - Current Price
- $167.74
- Consensus Rating
- Moderate Buy
- Ratings Breakdown
- 18 Buy Ratings, 3 Hold Ratings, 0 Sell Ratings.
- Consensus Price Target
- $203.37 (21.2% Upside)
#6 - Dynavax Technologies (NASDAQ:DVAX)
To this point, I’ve focused your attention on what is known as the Big Pharma stocks. In the interest of trying to provide something for every investor, my last two picks are more on the speculative side. The first is Dynavax Technologies (NASDAQ: DVAX). The company discovers and develops novel products to prevent and treat infectious and inflammatory diseases.
That would seem to make the company a participant in the Covid-19 field. And sure enough, Dynavax is partnering with a French company, Valneva, on a Covid-19 vaccine. As the Delta variant and overall vaccine hesitancy are showing, there will be more vaccines developed. While it’s true that Valneva’s supply agreement with the UK was recently terminated, Dynavax says it still has supply contracts valued between $300 to $400 million in 2021.
As of this writing, short interest is over 20% on DVAX stock. But institutional ownership is over 70%. The stock is currently trading near its 52-week high as well as the consensus price target of analysts.
About Dynavax Technologies
Dynavax Technologies Corporation, a commercial stage biopharmaceutical company, focuses on developing and commercializing vaccines in the United States. It markets HEPLISAV-B, a hepatitis B vaccine for prevention of infection caused by all known subtypes of hepatitis B virus in age 18 years and older in the United States and Europe.
Read More - Current Price
- $12.17
- Consensus Rating
- Moderate Buy
- Ratings Breakdown
- 2 Buy Ratings, 1 Hold Ratings, 0 Sell Ratings.
- Consensus Price Target
- $22.00 (80.8% Upside)
#7 - Xenon Pharmaceuticals (XENE) (NASDAQ:XENE)
Could I interest you in a stock that gapped up nearly 100% at one point in 2021? That was the case with Xenon Pharmaceuticals (NASDAQ: XENE) that made a substantial move after announcing positive mid-stage clinical trial results for its drug candidate designed to treat adult patients with focal epilepsy.
The drug, XEN1101 is part of what is being considered the “next generation” of epilepsy drugs. And the key is that these drugs are expected to deliver improved effectiveness with fewer side effects that are common with current epilepsy drugs.
It’s not wise to chase a stock that nearly doubled in so short a period of time. And Xenon is a low revenue company that has never seen its stock climb to this level since it went public in 2014. If you don’t currently have a position in XENE stock, you might wait until after the company delivers earnings in early November. This will give investors a better line of sight of when the company will be ready to bring XEN1101 to market.
About Xenon Pharmaceuticals
Xenon Pharmaceuticals Inc, a neuroscience-focused biopharmaceutical company, engages in the development of therapeutics to treat patients with neurological disorders in Canada. Its clinical development pipeline includes XEN1101, a novel and potent Kv7 potassium channel opener, which is in Phase 3 clinical trials for the treatment of epilepsy and other neurological disorders.
Read More - Current Price
- $39.34
- Consensus Rating
- Buy
- Ratings Breakdown
- 12 Buy Ratings, 0 Hold Ratings, 0 Sell Ratings.
- Consensus Price Target
- $57.45 (46.0% Upside)
In investing, catching a hot stock can be intoxicating, but it’s usually best to take the long view. As more becomes known about the novel coronavirus, science is adapting – which is what science does. The reality of Covid-19 is becoming one of a virus that will need to be managed as opposed to eradicated. The good news is that managing illnesses falls into the pharmaceutical sector’s wheelhouse. And there are companies that are working to do just that.
This is a story that will play out over a long time. And several of the companies in this presentation will be among the leaders in making that happen.
But one of the appealing features of investing in the pharmaceutical sector is that investors can find value in other areas. For example, in 2022, there are likely to be breakthroughs in areas like oncology and diabetes. Those will provide additional catalysts for pharmaceutical stocks some of which we’ve listed here as well.
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