On the heels of OxyContin maker Purdue Pharma asking a federal judge to approve a $6 billion nationwide settlement over the overdose and addiction crisis, a new company will form as a result of the plan to United States Bankruptcy Court Chapter 11 reorganization. The resulting company is known as Knoa Pharma and the proceeds will be used to fight an opioid crisis that has been linked to the deaths of more than 500,000 Americans over the past two decades.
Despite the devastating headlines related to pharmaceuticals, you can still cite dozens of reasons to invest in pharmaceuticals. The global pharmaceuticals market is should grow from $1,228.45 billion in 2020 to $1,250.24 billion in 2021 at a compound annual growth rate (CAGR) of 1.8%. The market is expected to reach $1,700.97 billion in 2025 with a CAGR of 8%.
Let’s go over a few more reasons to invest in pharmaceuticals and three stocks you might consider.
Why buy pharmaceutical stocks?
Many pharmaceutical companies pay attractive dividends, so they can be attractive for investors seeking income. In addition, the American population is aging. US Census Bureau data shows there are 76.4 million baby boomers and growing. Pharmaceutical companies can give investors a small edge in the following ways:
- Consumers cannot reduce: Consumers cannot reduce their consumption of life-enhancing drugs no matter how the economy changes. This results in reliable earnings that provide stable stock prices.
- Increased profit margins: Generally, pharmaceutical companies continue to sell more expensive drugs and increase their profit margins.
- High dividend yield in shares: Buy-and-hold investors can take advantage of pharmaceutical stock dividend yields that match or exceed the market average.
- Ever-expanding treatment options: Pharmaceutical companies are continually expanding treatment options and looking for new ways to integrate medicine into existing diseases. Pharmaceuticals often treat more than the “big” diseases, so look beyond the big ones like cancer or diabetes.
3 pharma stocks to put on your radar
These three pharmaceutical companies are probably already on your radar, but let’s review in case you haven’t pulled the trigger on any of them.
Merck & Co. Inc. (NYSE: MRK)
Merck & Co., Inc., headquartered in Kenilworth, New Jersey, provides healthcare solutions through prescription drugs, vaccines, biological therapies, animal health products and consumer care. It develops pharmaceuticals and vaccines for human health and develops, manufactures and markets animal health products such as treatments to control diseases in livestock and companion animals.
For Merck, fourth quarter 2021 worldwide sales from continuing operations were $13.5 billion, an increase of 24% from fourth quarter 2020 and fourth quarter 2021 GAAP EPS from continuing operations was 1 $.51 and non-GAAP EPS was $1.80.
Global sales from continuing operations for the year 2021 were $48.7 billion, an increase of 17% over the year 2020. Sales of KEYTRUDA, one of Merck’s key medicines, increased 20% to $17.2 billion and GARDASIL/GARDASIL9 sales increased 44% to $5.7. billion. Additionally, animal health product sales increased 18% to $5.6 billion
The company forecasts global sales for the year 2022 to be between $56.1 billion and
Amgen Inc. (NASDAQ:AMGN)
Amgen, Inc, a biotechnology company headquartered in Thousand Oaks, California, develops, manufactures and markets human therapeutic products, including the following brands: Aranesp, Aimovig, KANJINTI, EVENITY, AMGEVITA, AVSOLA, BLINCYTO, MVASI , Corlanor, Enbrel, EPOGEN, IMLYGIC, Kyprolis, Neulasta, NEUPOGEN, Nplate, Parsabiv, Prolia, Repatha, Sensipar, Vectibix, Otezla, RIABNI and XGEVA.
Total revenue increased 3% to $6.8 billion in the fourth quarter, compared to the fourth quarter of 2020, and volumes grew double digits for a number of products, including Prolia, MVASI, Repatha and EVENITY.
GAAP earnings per share (EPS) increased 22% to $3.36 in the fourth quarter, due to higher revenue and a lower weighted average number of shares outstanding.
The company generated $8.4 billion in free cash flow for the full year compared to $9.9 billion in 2020, thanks to the monetization of interest rate swaps that took place in 2020 and the timing of payments for sales incentives and rebates, as well as increased capital spending in 2021.
Bristol-Myers Squibb Co. (NYSE: BMY)
Bristol-Myers Squibb Co., headquartered in New York, New York, discovers, develops, licenses, manufactures, markets, distributes and sells biopharmaceuticals. It offers chemically synthesized drugs or small molecules and products derived from biologics.
Bristol-Myers Squibb reported fourth-quarter profit of $12 billion and full-year revenue of $46.4 billion.
Fourth quarter earnings per share were $1.07 and non-GAAP EPS was $1.83 with a full-
annual earnings per share of $3.12 and non-GAAP EPS of $7.51.
Eliquis, immuno-oncology and new product portfolios also recorded strong gains. The company achieved significant growth with its clinical and regulatory milestones and launched a $15 billion share buyback authorization.
Buy Big Pharma for the dividends
Despite the negative coverage surrounding pharmaceuticals, there are still plenty of benefits for companies that offer life-saving drugs.
As we have seen volatility in 2022, many investors are looking to put their noses in stocks that offer less volatility and more dividends. At least you can count on dividends, right? Pharmaceuticals can save the day with dividends, and if you can tap into high-yielding dividend stocks, great because you’ll get more for your money.
If you want dividends during a bumpy time on Wall Street, these pharma stocks might just hit your ticket and be the key to something good happening in 2022.
Should you invest $1,000 in Merck & Co., Inc. right now?
Before you consider Merck & Co., Inc., you’ll want to hear this.
MarketBeat tracks Wall Street’s top-rated, top-performing research analysts daily and the stocks they recommend to their clients. MarketBeat identified the five stocks that top analysts are quietly whispering to their clients to buy now before the market goes higher…and Merck & Co., Inc. didn’t make the list.
Although Merck & Co., Inc. currently has a “Buy” rating among analysts, top-rated analysts believe these five stocks are better buys.
See the 5 actions here
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