Last week was likely the peak of earnings season for Big Pharma stocks like Merck & Co. (MRK), Gilead Sciences (GILD), Eli Lilly (LLY) and Amgen (AMGN).
These companies, along with most of their peers, have already reported second-quarter results, giving us plenty of insight into each individual company, as well as into pharmaceutical stocks as a whole.
That said, in the interest of a wrap-up of the Big Pharma’s second-quarter earnings results thus far, we want to take a closer review of the best-looking major pharmaceutical companies as based on the previous quarter’s numbers and drivers of their respective performances.
Although not all of the major pharmaceutical stocks made the post-second-quarter earnings buy list, pharma stocks as a whole have been one of the few bright spots so far during the second-quarter earnings season. Any of them would be decent buys, all things considered.
But the four Big Pharma stocks we’re about to discuss should be considered the best of the best thanks to their sustainable growth and the best odds for future earnings beats.
Big Pharma Stock to Own: Merck & Co. (MRK)
Although revenue was down 10% to $9.8 billion in the most recent quarter, Merck (MRK) managed to tick up its earnings from 85 cents a year ago to 86 cents this time around. Moreover, it was the sixth consecutive earnings beat for the iconic Big Pharma brand.
While revenue in free fall is about as good as it sounds, it’s a necessary evil for Merck as it sheds distracting and less fruitful businesses. The sale of its Claratin brand of allergy pills was a bitter pill to swallow, so to speak, but has already made a difference in MRK’s margins.
In the meantime, revenue driven by its top-selling Januvia and its HPV vaccine, Gardasil, were up 1% and 4%, respectively.
Between those numbers and growing confidence in an FDA approval of its hepatitis C treatment — a combination of grazoprevir and elbasvir — Merck upped its full-year profit forecast.
Big Pharma Stock to Own: Gilead Sciences (GILD)
While Merck is on the verge of introducing a new hepatitis C treatment, Gilead Sciences (GILD) is already entrenched in that space, and it won’t be easy to topple despite the astronomical price tag for its therapy.
Last quarter, Gilead Sciences sold $4.9 billion worth of its recently unveiled hepatitis C drugs, Sovaldi and Harvoni, easing concerns that the price break it offered to the drug’s distributors was simply too great. Total sales were up 26% on a year-over-year basis, to $8.2 billion.
With momentum still going strong for the Big Pharma company, Gilead saw fit to up its full-year revenue outlook from $29 billion to $30 billion.
But even $30 billion may be too conservative of a number. Last quarter the company sold 60,000 hepatitis C treatments, but the total addressable market each year is estimated to be somewhere around 300,000.
Big Pharma Stock to Own: Eli Lilly (LLY)
Gilead Sciences and Merck weren’t the only Big Pharma stocks to up their outlook for the full-year. Eli Lilly (LLY) also ramped up expectations for the remainder of 2015.
Revenue of $4.98 billion was only up about 1%, just topping the consensus of $4.9 billion. Earnings of 90 cents per share, however, absolutely trounced the 74 cents average estimate, as newly approved drugs Jardiance, Trulicity and Cyramza chipped in on the bottom line.
The real driver for the stock from here, however, is the hope surrounding Lilly’s Alzheimer’s drug and its HDL cholesterol treatment. Both drugs have more than their fair share of critics, and though the Alzheimer’s drug in question — solanezumab — has been rejected in the past, there is a reason Lily revived the research.
Meanwhile, the phase 3 cholesterol-treatment trial of Evacetrapib has thus far shown a better safety profile than similar drugs.
Big Pharma Stock to Own: Amgen (AMGN)
Although Amgen (AMGN) shares are overbought, AMGN stock may well be worth the frothy price.
Last quarter, Amgen ramped up its revenue to the tune of 4%, reaching $5.37 billion. The number would have been even bigger were it not for the currency headwind.
Earnings of $2.57 per share handily topped estimates of $2.43, and left last year’s earnings of $2.37 even further in its rear view.
The reasons for the increases are the ones you’d expect: Sales from rheumatoid arthritis drug Enbrel grew 8% to $1.35 billion, and the still fairly new Prolia jumped 29% to $340 million YOY. Kyprolis is getting some traction too.
Like Lilly, Gilead, Merck and a handful of other Big Pharma stocks, last quarter’s numbers were solid enough to inspire an improved outlook from Amgen. The pharmaceutical outfit now anticipates a profit of between $9.55 and $9.80 per share for 2015 versus a prior outlook of $9.35 to $9.65.
As of this writing, James Brumley did not hold a position in any of the aforementioned securities.
