The pharmaceutical industry has fared relatively well over the past year due to surging capital inflows, investor optimism, and favorable tax treatment. The industry demonstrated impressive innovative capacity and resiliency and delivered multiple vaccines for coronavirus in less than a year.
Renowned investor Cathie Wood believes the sector’s capacity to innovate will continue well into 2021 because biopharma companies are now focusing on developing cures for other life-threatening diseases. Given the ageing population in developed parts of the world, combined with inactive lifestyles amid the remote working structure, there is a huge market for therapies for critical ailments. Wood believes DNA sequencing to be the winning approach to solutions to such diseases and that it will revolutionize the healthcare industry.
Novartis AG (NVS) and Bristol-Myers Squibb Company (BMY) have made substantial progress in the field of cancer treatment and critical diseases, and are two of the top holdings in Wood’s Ark Genomic Revolution ETF (ARKG).
Novartis AG (NVS)
As one of the world’s largest pharmaceutical companies, NVS is a prime holding in Wood’s fund. ARKG holds 4.30 million shares of NVS, representing a 3.74% weighting in the portfolio. The stock has a #7 weighted ranking the fund. Wood has a 0.19% stake in the company. Shares of NVS have gained 10.8% over the past six months.
Based in Switzerland, NVS has operations worldwide , and is estimated to be the second largest company in the world based on projected sales in 2021. It has more than 170 prescription drugs in its portfolio, with its top selling arthritis treatment drug, Cosentyx, generating nearly $4 billion annually in sales in 2020. While NVS didn’t launch a COVID-19 treatment alone, it partnered with German biopharma CureVac NV to produce the latter’s vaccine candidate CVnCoV.
As one of the leading companies in cancer and critical disease research, NVS has been scaling its operations. The company has made some progress on this front, with positive data last month from its stage three trials for its prostate cancer drug. In January, received positive opinion from the Committee for Medicinal Products for Human Use (CHMP) of the European Medicines Agency (EMA) for its MS drug.
NVS’ cancer drug pipeline has been making substantial progress in the treatment of cancer, with a positive phase three clinical trial of its radioligand therapy drug. Its cardiac drug Novartis Entresto is the first and only FDA-approved therapy drug available in the United States. The company has been expanding its oncology pipeline through in-licensing Beigene, allowing NVS to commercially develop its immune-oncology drugs across North America, Europe and Japan.
NVS’ net sales increased marginally year-over-year to $12.41 billion in the fiscal first quarter ended March31, 2021. However, the company’s manufacturing restructuring and higher impairment expenses caused its earnings to decline from the same period last year. NVS’ net income and EPS came in at $3.41 billion and $1.52, respectively.
The $1.53 consensus EPS estimate for the current quarter, ending June 2021, indicates a 12.5% improvement year-over-year. Analysts expect the company’s revenues to rise 6.7% from the year-ago value to $12.63 billion in the current quarter.
NVS’ POWR Ratings reflect this promising outlook. The stock has an overall A rating, which equates to Strong Buy in our proprietary POWR Ratings system. The POWR Ratings are calculated considering 118 different factors, with each factor weighted to an optimal degree.
NVS has an A grade for Stability, and B for Value, Growth, and Quality. It is ranked #4 out of 235 stocks in the Medical – Pharmaceuticals industry. In addition to the grade we’ve highlighted, one can check out NVS Ratings for Momentum and Sentiment here.
Bristol-Myers Squibb Company (BMY)
Wood has been investing in biopharmaceutical product manufacturer BMY since January 2021. She currently holds 2.2 million shares of the company in ARKG, which represents a 1.45% weighting in the fund. The stock has a #22 weighted rank in the ETF. Wood’s holdings are relatively small compared to the volume of shares floated; she has a 0.1% stake in the company.
Known for its developments and commercialized medicines in the field of hematology, oncology and cardiovascular diseases, BMY is one of the country’s oldest and most popular biopharma companies It has been making significant progress in the development of oncology-related drugs, and tumor treatments. Its Opdivo drug received FDA approval this month for the treatment of metastatic gastric cancer in combination with chemotherapy. In March, the drug received the validation of the European Medicines Agency for adjuvant treatment. These developments demonstrate BMY’s leading position in cancer drug research and commercialization. Shares of BMY have gained 14.3% over the past six months, and 6.5% year-to-date.
BMY’s total revenues increased 39% year-over-year to $11.07 billion in the fourth quarter ended December 31, 2020. This can be attributed to a 43% rise in sales in the United States and 34% rise in international sales. Its gross margin improved 510 basis points from the same period last year to 73.70%. And its non-GAAP EPS came in at $1.46, up 20% from the prior-year quarter.
The Street expects BMY’s EPS to rise 16.6% year-over-year to $1.90 in the fiscal second quarter, ending June 2021. The company has an impressive earnings surprise history also; it beat consensus EPS estimates in each of the trailing four quarters. BMY’s revenue is projected to rise 12.8% from the prior-year quarter to $11.42 billion in the current quarter.
It’s no surprise that BMY has an overall B rating, which translates to Buy in our proprietary rating system. The stock has a B grade for Value and Growth. It is ranked #15 in the same industry.
In total, we rate BMY on eight different levels. Beyond what we’ve stated above, one can view additional BMY Ratings for Momentum, Quality, Sentiment, and Stability here.
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NVS shares were trading at $86.03 per share on Thursday afternoon, down $0.79 (-0.91%). Year-to-date, NVS has declined -6.68%, versus a 12.72% rise in the benchmark S&P 500 index during the same period.
About the Author: Aditi Ganguly
Aditi is an experienced content developer and financial writer who is passionate about helping investors understand the do’s and don'ts of investing. She has a keen interest in the stock market and has a fundamental approach when analyzing equities. More...
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