Looking ahead to the second half of 2018, three top biotech / pharmaceutical companies: Allergan (NYSE:AGN), Pfizer (NYSE:PFE), and Johnson & Johnson (NYSE:JNJ) are poised to make big moves to the upside. One of the reasons we like these three companies is that they have limited to no exposure to opioids, which carry significant legal and regulatory risk for other drug companies.
President Trump has declared opioid abuse a “public health emergency” and has vowed concerted efforts to address drug addiction and opioid abuse through education and prevention, treatment and recovery, and law enforcement and interdiction.
“Culpability for the worst drug epidemic in American history is shifting to other parts of the opioid-industrial complex, the pharmaceutical companies and distributors,” explains according to Jayen Madia, who helps manage the $15 billion investment portfolio of AXIS Capital (AXS), a Bermuda-based insurance and reinsurance company. As Head of Risk Assets, Jayen Madia oversees a diverse set of assets, including private credit, private equity, and real estate, globally.
Allergan and Johnson & Johnson do not sell or market opiates. Pfizer markets just one opioid called Embeda, which is not a big seller and already carries a “black box” warning.
Allergan
Allergan is a global pharmaceutical company headquartered in Dublin, Ireland. The company focuses on developing, manufacturing, and commercializing pharmaceuticals, devices, and biologic products. Allergan focuses its products on diseases and conditions affecting the central nervous system, eyes, gastroenterology, women's health, urology, anti-infective therapeutic categories, as well as medical aesthetics and dermatology.
Allergan's Stock Price And Performance
As of March 2018, Allergan's share price was $159.48 USD. Allergan's stock prices have fallen dramatically since its all-time high in 2015; shares are down by 50% since that period of time due to fears over the competitive landscape surrounding Botox, Allergan's leading treatment, and the upcoming patent exclusivity expiration of its dry-eye drug Restasis. However, the company's shares are estimated to grow over 35% in 2018. While Botox is being threatened by competitors, Barron's indicates that research from Cowen Inc. shows that Botox has a 70% market share, "... and sales are growing at roughly double-digit rates despite the emergence of discount-priced competition."
Another area of growth for Allergan is its CoolSculpting technology acquired in connection with its 2017 acquisition of Zeltiq Aesthetics Inc. “CoolSculpting is a non-surgical, clinically proven treatment that selectively reduces unwanted fat using a patented cooling technology,” explains Dr. Edward Fruitman, the Medical Director and founder of Trifecta Med Spa in New York City, recognized by Allergan as one of the top providers in the United States, “CoolSculpting recently received FDA-clearance for improved appearance of lax tissue in conjunction with submental fat, or double chin, treatments. This will be another strong catalyst for growth.”
Pfizer
Pfizer is a global pharmaceutical company committed to bringing therapies to improve people's lives. The Pfizer portfolio is heavy on medications and vaccines, as well as some consumer health products.
Pfizer's Stock Price And Performance
As of March 2018, Pfizer's stock shares were down over 4.78%, settling at $34.49 per share. However, based on trading volumes, Pfizer is one of the most active stocks on the market today. Analysts predict that Pfizer will grow at a rate of 6.94% over the next five years. However, as Stock News Gazette points out, Pfizer's high growth rate may not translate to value for its investors due to an overinvestment on pipeline projects that offer a low return.
Pfizer has attempted to sell its consumer healthcare business, which includes products like Advil and Chapstick. The company began shopping around the idea in late 2017 in the hopes to earn $20 billion; however, no one's biting. GlaxoSmithKline was considered a frontrunner to purchase the consumer health line, but dropped out of the bidding in late March 2018. Speculation rests on Nestle, Proctor & Gamble, or Abbott Labs acquiring Pfizer's consumer health line. Analysts say that Pfizer is holding tight to the $20 billion price for the consumer health line; if they aren't able to achieve that price, there is additional speculation that Pfizer could spin off their consumer health business into a separate entity called Zoetis, according to Pfizer CFO Frank D'Amelio.
Johnson & Johnson
Johnson & Johnson has been in business for over 130 years, creating a variety of medical and consumer health products for customers around the globe. Johnson & Johnson is seeking to capitalize on its core products, while also expected to make some acquisitions in 2018. Johnson & Johnson's pharmaceutical arm focuses on immunology, infectious diseases and vaccines, neuroscience, cardiovascular and metabolism, oncology, and pulmonary arterial hypertension.
Johnson & Johnson's Stock Price And Performance
As of March 2018, Johnson & Johnson's share price was $125.89. The company is one of the largest pharmaceutical and health companies based in the United States, with 2017 sales at $76.5 billion. Investors consider Johnson & Johnson a stable company, with a diversified portfolio and a solid growth outlook in 2018. Johnson & Johnson is a company with consistent growth, and its pharmaceutical division is anticipated to drive growth throughout 2018. For example, the drug Darzalex has performed at an 18% revenue growth rate, and the momentum from its oncology unit is also contributing to the company's overall growth.