American drug manufacturers have raised prices again. This will have a positive effect on the income of companies and attract investors. Analysts have advised which pharmacist to choose for the investment.
US drug manufacturers have inflated the prices of popular drugs. In 2021, 20 US companies have raised the cost of more than 40 prescription drugs by an average of 13.1%, The Wall Street Journal reported.
Despite criticism from the government and the public, American pharmaceutical companies are systematically raising drug prices twice a year. This has a positive effect on their income and attracts investors. Analysts helped to figure out what choice an investor should make among companies in the American pharmaceutical sector.
What’s happening in the US medical market?
Medical device companies have the greatest potential right now. This was the opinion of analysts.
According to them, the direction of wearable electronics is gaining particular popularity. It uses the latest advances in wireless sensors to track patient health. The wearable medical device market is expected to surpass $14 billion by 2024, with a CAGR of 18% over the 2018-2024 period.
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In the first quarter, the US pharmaceutical business showed positive dynamics. This is partly due to the rise in sales in China. At the end of the reporting period, many companies raised their revenue targets for the 2019th fiscal year.
According to experts, drugs for cancer and diabetes will be the main source of growth in the long term. Trade negotiations between the United States and China will become important. What matters here is the variable nature of such negotiations and the place of the pharmaceutical industry in the future text of the agreement.
Administrative pressure on pharmacists can have a negative impact. It will reduce the number of mergers and acquisitions. In the long term, companies may also suffer from changes in pricing policies. Earlier this year, US lawmakers began hearings on the matter in an attempt to find a way to lower drug prices.
Alexion: medicines for rare diseases
The biopharmaceutical company Alexion Pharmaceuticals develops drugs for the treatment of rare diseases. Its main product, Soliris, is used to treat patients with severe disorders of the components of the immune system: paroxysmal nocturnal hemoglobinuria (PNH), genetic diseases, and blood diseases.
Soliris is the most expensive drug in the world. The annual Soliris course costs more than $500 thousand. Alexion Pharmaceuticals receives most of its revenue from the sale of this medicine. In 2021, Soliris sales accounted for 86% of the company’s total revenues.
In addition to Soliris, the company produces the drug Strensiq, intended for the treatment of a rare hereditary disease – hypophosphatasia, and Kanuma, which is prescribed for patients suffering from the rare Wolman disease.
Alexion demonstrates the best performance among the leading players in the pharmaceutical market. In the first quarter, the company increased revenue compared to the same period in 2020 to $1.1 billion. Over the past three months, sales of Soliris have grown by 20%.
Alexion has increased its guidance for 2020 due to the growth in performance. According to the new version, the forecast for earnings was $6.76-7.96 per share versus $6.14-7.26 previously. The upper limit of the forecast range for revenue changed from $4.7 billion to $4.75 billion.
The drug has a strong financial position that allows it to acquire promising clinical developments, if necessary. The company is able to generate more than $10 billion in free cash flow in the next five years.
The main concern with Alexion lately has been the expiration of patents for Soliris generics. To remove the risk of losing revenue, Alexion began selling a more efficient analogue – Ultomiris.
Ultomiris is more expensive but must be taken every eight weeks (Soliris is taken every two weeks). This will help patients save on hospital costs: the cost of a single dose of the drug can be up to $90,000.
The main risks for the company are high prices for Soliris and Ultomiris. This leaves the company vulnerable to drug price cap measures, as Alexion relies heavily on a single drug, Soliris.
According to analysts, Alexion Pharmaceuticals is one of the most interesting companies in the sector. The target price for the company’s securities is $163, which is 22% higher than the current levels.
Abbott: wearable medical devices
The American chemical-pharmaceutical corporation Abbott Laboratories was founded in 1888 but received its current name in 1915. It is currently one of the largest companies in the US healthcare sector. Abbott operates in four areas – pharmaceuticals, diagnostic equipment, baby and medical nutrition, and vascular therapy products.
The corporation has become one of the leaders in the market of wearable medical devices since it released the innovative automatic blood glucose monitoring system FreeStyle Libre. This device went on sale in 2017 and is still in high demand. In the fourth quarter of 2021, Abbott’s diabetes care revenue grew 32% to $530 million.
Since 2017, the company’s shares have shown a twofold growth and are now at a historic high. There are several reasons for this, but the main one is strong financial indicators.
At the end of the first quarter of 2020, Abbott’s net profit amounted to $672 billion, an increase of 60.8%. Revenue added 2% and was equal to $7.54 billion. Quotes have reached a record and can continue this trend up to $100 per share, experts predicted. They believe that over the next five months, shares of Abbott Laboratories will rise by 64%, to $140 per share.
Celgene: stem cells and cancer treatments
Celgene Corporation, a biotechnology company, develops and markets drugs and creates innovative treatments for cancer, autoimmune and inflammatory diseases. Two more (not quite usual) areas of activity are the collection of umbilical cord blood and the technology of extraction of stem cells from the placenta.
The main Celgene product is Revlimid, intended for the treatment of oncological and hematological diseases. The share of the drug in the company’s sales is 64%.
Celgene also owns the rights to the anti-inflammatory drug Otezla. It is a popular remedy for psoriasis. Last year, its global sales totaled $1.6 billion, which is about 10.6% of Celgene’s total revenue.
In December 2018, the company announced the successful results of the third and final phase of clinical trials of Augment for the treatment of lymphoma, a disease of lymphatic tissue. It is assumed that the new drug will be prescribed together with the already known drug Rituximab. Augment improves patient survival.
Earlier this year, one of the largest US biopharmaceutical companies Bristol-Myers Squibb announced the purchase of Celgene. If the deal goes through, it will be the largest pharmaceutical takeover ever. The deal will amount to $74 billion, and taking into account Celgene’s debt, it could reach $95 billion.
According to analysts, the upcoming merger will become an effective anti-crisis solution for both companies. In particular, it will help Celgene counter the threat of generics: Celgene will lose its US exclusive rights to its flagship drug Revlimid in 2022.
In the last quarter, the company increased its revenue by 14%, to $4 billion. Net profit rose to $1.5 billion, earnings per share – to $2.1. This is twice the value of the same period last year.
Indicators will continue to grow, experts are sure. “The growth is supported by sales of the key drug Revlimid. Revlimid sales are forecast to peak in 2022 at $13.7 billion, a 67% increase in five years. At the same time, one of the growth factors in the coming years will be combined therapies of three drugs, each of which necessarily uses Revlimid,” analysts explained their expectations.
Competition and unsuccessful trials of new drugs, as well as falling sales of old drugs, can limit growth. The target price for the period of 12 months is $120, which is 27% higher than the current levels.
And yet, market participants are pessimistic about Celgene shares. This is despite double-digit financial growth forecasts, with revenues expected to grow by 11%. Almost all analysts recommend holding the stock. This is partly due to the upcoming large repayments on the company’s debt obligations in the coming years.
“All securities are quite attractive for investments, but we would focus on the general strong trend in medical equipment and look closely at Abbott Laboratories,” analysts concluded.