If you ever want to look for value in a sector in the stock market, then when you see Congress calling in some of the top companies to scold them for political purposes, you may want to start buying. Last week there they were, as congressional blowhards attacked the greedy pharmaceutical industry for high drug prices. Are some too high? Sure, but failure is very expensive in the pharmaceutical arena. Politicians don’t care, and never turn down a good venue to harangue a company spokesperson for populous gains.
We have noted before, that this political rhetoric could hang around through the entire election cycle. However, huge reform and across-the-board price cuts most likely will never happen with a Republican-controlled House and Senate. We screened our 24/7 Wall St. research database for top pharmaceutical stocks that have been knocked down and are offering investors very enticing entry points.
This is one of the top global pharmaceutical stocks at Jefferies and is also on the Franchise Stock Picks list. AbbVie Inc. (NYSE: ABBV) is a global, research-based biopharmaceutical company formed in 2013 following separation from Abbott Laboratories. The company’s mission is to use its expertise, dedicated people and unique approach to innovation to develop and market advanced therapies that address some of the world’s most complex and serious diseases. AbbVie employs more than 26,000 people worldwide and markets medicines in more than 170 countries
The stock fell 10% in late October after the FDA warning about liver risk with the company’s hepatitis C (HCV) products. However, Jefferies points out that this applies to a small sub-population of cirrhotics who are up to 5% of the total patient population. Additionally, the next generation HCV product could be launched as early as 2017, and even of the entire Viekira Pak/Technivie business were lost over the next two years, it represents only 4% of net value.
The company announced last week that the supplemental New Drug Application (sNDA) for Viekira Pak to be used without ribavirin has been accepted by the FDA with priority review. The company is looking to get the product’s label expanded for use without ribavirin for the treatment of patients with genotype 1b (GT1b) chronic HCV and compensated cirrhosis (Child-Pugh A).
The company reported mixed fourth-quarter numbers, but affirmed guidance. Some on Wall Street were concerned over a new HCV drug from a rival company. Concerns over a biosimilar competition to the company’s wildly successful Humira have also made the rounds.
AbbVie investors receive an outstanding 4.3% dividend. The Jefferies price target is $85, among the highest on Wall Street. The Thomson/First Call consensus target is $72.73. Shares closed Friday at $53.12.
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This stock checks in high on the global pharmaceutical lists at many top Wall Street firms, and it is on the Merrill Lynch US 1 list. Eli Lilly and Co. (NYSE: LLY) is a global health care company with numerous core products in a number of primary-care pharmaceutical markets. The company generates revenues from its pharmaceutical product and animal health segments.
The product portfolio includes Zyprexa (for schizophrenia and bipolar disorder), Gemzar (pancreatic cancer), Evista (osteoporosis), Cymbalta (depression), Cialis (erectile dysfunction), Strattera (attention deficit hyperactivity disorder), Erbitux (cancer) and Alimta (chemotherapy). Eli Lilly also has a strong presence in the diabetes market.
Fourth-quarter earnings were in line with Merrill Lynch and consensus estimates. While the overall numbers were unremarkable in the analysts view, Merrill Lynch is still very focused on the company’s outstanding late-stage product pipeline, which it views as very undervalued. The firm also remains very positive on the “huge growth potential” prospects for Jardiance, which is a prescription medicine used along with diet and exercise to lower blood sugar in adults with type 2 diabetes.
Shareholders receive a solid 2.75% dividend. Merrill Lynch has a $108 price target. The consensus target is $99.20, and shares closed Friday at $74.32.
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