Expected Upside Gains for Leading Pharmaceutical Companies (JNJ, PFE, AZN, BMY, MRK)

Sales for the big pharmaceutical companies are expected to be hit by pricing pressure in Europe, a lack of urgent new on the coming flu season, lower rates of prescription writing, and more competition from generics. Not as many new drugs are entering or completing late-stage trials either, which could have both a short- and a long-term impact.

We’ve taken a look implied gains at five large pharmaceutical makers based on current share price targets: Johnson & Johnson (NYSE: JNJ), Pfizer Inc. (NYSE: PFE), AstraZeneca plc (NYSE: AZN), Bristol Meyers Squibb Co. (NYSE: BMY), and Merck & Co. Inc. (NYSE: MRK). All data from Yahoo! Finance.

Johnson & Johnson (NYSE: JNJ) has a mean share price target of $70.00 from 13 brokers. In early afternoon trading today, the stock changed hands at $64.63, for an implied gain of $5.37, or 7.7%. J&J’s forward P/E is 12.2, and the company’s dividend yield is 3.5%. The stock’s 52-week trading range is $57.50-$68.05, and it’s trading today at about 12% above its 52-week low and 5% below its 52-week high. J&J made our list of one of 15 recession-proof companies and is one of the S&P Dividend Aristocrats, an index of 42 companies that have increased their dividends in each of the last 25 years. Even product recalls and bumbling management can’t seem to derail this stock.

Pfizer Inc. (NYSE: PFE) has a mean share price target of $23.00 from 15 brokers. The stock traded today at $18.99, for an implied gain of $4.01, or 17.4%. Pfizer’s forward P/E is 8.26 and the company’s dividend yield is 4.2%. The stock’s 52-week trading range is $16.25-$21.45, and it’s trading today about 17% above its annual low and 11% below its 52-week high. Pfizer’s Lipitor is one of the best selling prescription drugs in the world, but it loses its patent protection next month. Pfizer filed suit against Merck yesterday, in an effort to stop Merck from selling a generic version of Lipitor in combination with Merck’s Zetia anti-cholesterol drug.

AstraZeneca plc (NYSE: AZN) has a mean price target of $51.50 from 4 brokers. The stock is trading at $47.42, for an implied gain of $4.08, or 7.9%. AstraZeneca’s forward P/E is 7.63 and its dividend yield is 3.6%. The stock’s 52-week trading range is $40.89-$53.50, and it’s trading today at about 14% above its 52-week low and about 11% below its 52-week high. Earlier this week the company said it will build a $200 million manufacturing facility in China to meet the demand for AstraZeneca’s medicines in that country. With 1.3 billion potential sick people, China is a natural bet for drug company expansion. The company also said yesterday that it was cutting about 400 employees from its US workforce.

Bristol Meyers Squibb Co. Inc. (NYSE: BMY) has a mean price target of $32.50 from 17 brokers. The stock is trading at $33.08 today, after setting a new 52-week high earlier in the day at $33.20, well above the mean target price. The company’s forward P/E is 16.02 and its dividend yield 4%. The stock’s new trading range is $24.97-$33.20, and it’s trading today at about 32% above its 52-week low. The company’s leukemia drug, Sprycel, received an FDA safety warning today, but nothing seems to be cooling off the stock’s rising price. Bristol Meyers Squibb also made our list of recession-proof companies.

Merck & Co. Inc. (NYSE: MRK) has a mean target price of $40.00 from 17 brokers. The stock trades at $32.57 today, for an implied gain of $7.43, or 18.6%. Merck’s forward P/E is 8.46, and the company’s dividend yield is 4.70%. The stock’s 52-week trading range is $29.47-$37.68, and it’s trading today about 11% above its 52-week low and about 14% below its 52-week high. Merck won a decision in Australia yesterday that overturned that country’s first trial decision against the company’s withdrawn Vioxx painkiller.

Paul Ausick