Health and Healthcare

SunTrust Says Big Pharmaceuticals Have Multiple Catalysts for the Rest of 2017

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Healthcare, which struggled mightily during the brutal election season last year and even back into 2015, has had a nice first half of 2017. Given the current nosebleed levels of the market, the sector may be a solid bet for the rest of 2017 and into next year.

In a new report from SunTrust Robinson Humphrey, analysts make the case that big pharmaceuticals may be the place to be. From a total return standpoint, which includes gains in share price and dividends, healthcare stocks might be a safer place to move more aggressive stock money now.

Healthcare stocks have been showing trading volume gains, they have solid pricing leverage, and the individual companies featured by SunTrust all have potentially significant catalysts in the coming months and years that could drive their share prices higher if the outcome is favorable.

These are four of the top-rated healthcare stocks to buy from SunTrust.

AbbVie

This stock is one of the top pharmaceutical stock picks across Wall Street. AbbVie Inc. (NYSE: ABBV) is a global, research-based biopharmaceutical company formed in 2013 following separation from Abbott Laboratories.The company develops and markets drugs in areas such as immunology, virology, renal disease, dyslipidemia, and neuroscience.

One of the biggest concerns with AbbVie is what might eventually happen with anti-inflammatory therapy Humira, which has some of the largest sales for a drug ever recorded. Last year the patent board instituted Coherus’ Inter Partes Review or IPR against the Humira ‘135 patent. The problem with Humira is that biosimilars and generics are itching to enter the market.

The SunTrust team expects the company to release ABT-494 Phase 3 readouts for rheumatoid arthritis. In addition, Risankizumab Phase 3 readouts for psoriasis are also expected. These are in addition to a host of other expected clinical results over the next year.

Shareholders are paid a solid 3.54% dividend. The SunTrust price target is posted at $85, and the Wall Street consensus price target for the shares is set at $74.50. The shares closed Tuesday at $72.23.

Eli Lilly

This is another company with substantial upside potential. Eli Lilly and Company (NYSE: LLY) is a global healthcare 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 (schizophrenia and bipolar disorder), Gemzar (pancreatic cancer), Evista (osteoporosis), Cymbalta (depression), Cialis (erectile dysfunction), Strattera (attention deficit hyperactivity disorder – ADHD), Erbitux (cancer) and Alimta (chemotherapy). Lilly also has a strong presence in the diabetes market.

The SunTrust team cite Abemaciclib Phase 3 data for 2L breast cancer (MONARCH 2) and an investor webcast at ASCO as a big upcoming event. Also, the Phase 3 readouts for galcanezumab for migraine prevention and Lasmiditan for acute migraine. Both of these are expected in the second half of 2017.

Shareholders are paid a 2.5% dividend.  The SunTrust price objective is $101, and the consensus price objective is $90.14. The stock closed Tuesday at $83.70.

Merck

This top company remains a leading healthcare stock for conservative investors. Merck & Co. Inc. (NYSE: MRK) offers therapeutic and preventive agents to treat cardiovascular disease, type 2 diabetes, asthma, nasal allergy symptoms, allergic rhinitis, chronic hepatitis C virus, HIV-1 infection, fungal infections, intra-abdominal infections, hypertension, arthritis and pain, inflammation, osteoporosis, male pattern hair loss, and fertility diseases. It also provides neuromuscular blocking agents for use in surgery; antibacterial products for skin and skin structure infections; cholesterol modifying medicines; non-sedating antihistamine; and vaginal contraceptive products.

The SunTrust team point to additional follow-up data from KEYNOTE-021G, and Phase 1 and 2 data for Keytruda with INCY’s IDO1 inhibitor for advanced solid tumors. In addition, they point to Keytruda Phase 3 readouts for 1L Non Small Cell Lung Cancer (KEYNOTE-189), as well as several other indications, all coming in the second half of 2017.

Merck shareholders receive an outstanding 3.01% dividend. The SunTrust price target is $73, while the consensus price target is set at $70.30. The shares closed Tuesday at $62.41.

Shire

This company is one of the top picks on Wall Street in specialty pharma. Shire plc (NASDAQ: SHPG) develops, licenses, manufactures, markets, distributes, and sells pharmaceutical products. It offers various products for the treatment of attention deficit hyperactivity disorder (ADHD). The company also focuses on the development of resources projects in various therapeutic areas, including rare diseases, neuroscience, ophthalmics, hematology, and gastrointestinal disorders; and early development projects primarily on rare diseases. Shire plc markets its products through wholesalers and pharmacies.

The SunTrust team points to the resolution of multiple ongoing patent litigation cases the company has with major pharmaceutical peers. It also notes that other catalysts include the ongoing Xiidra (dry eye) ramp targeting 18 million diagnosed patients in the US. Xiidra, with a European Union filing in third quarter of 2017, and the global launches of Natpara, Gattex, Firazyr, Cinryze, Kalbitor, Xiidra through the footprint of operating affiliates. Another big catalyst is Onivyde & Natpar approval in the EU for pancreatic cancer & hypoparathyroidism, respectively.

The SunTrust price target is lowered to $283 from $298, and the consensus for the company is at $237.50. The shares closed last Tuesday at $164.37.

Four top companies that all have data that could move the shares coming in 2017. These stocks make good sense for more conservative buy and hold strategies looking for total return. All have been around for years, and should remain sector leaders for years to come.

 

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