The COVID-19 pandemic accelerated a change across the global healthcare ecosystem that has led to the rapid adoption of technology. Investors’ confidence in the sector is evidenced by the Health Care Select Sector SPDR Fund’s (XLV) 7.9% returns over the past three months versus the SPDR S&P 500 ETF Trust’s (SPY) 5.8% gains.
According to the Deloitte 2021 Global Healthcare Outlook, the industry’s GDP share should average 10.3% in 2021 and 2022. An aging population, rapid clinical and technology advances, and continued healthcare spending should drive the industry’s growth. Consequently, the global healthcare and pharma market is expected to reach $1.58 trillion by 2027, registering a 4% CAGR.
Viatris Inc. (VTRS)
VTRS is a global health care company that manufactures and delivers medicines, biosimilars and generics, and over-the-counter products. In addition, the Canonsburg, Pa.-based company provides therapeutic medicines for both non-communicable and infectious diseases. VTRS operates through segments that include Cardiovascular; Infectious diseases; Oncology; Immunology; CNS and anesthesia; Women’s healthcare; Diabetes and metabolism; Gastroenterology; Respiratory and allergy, and Dermatology.
In July, VTRS and Biocon Biologics Ltd. announced that the U.S food and Drug Administration (FDA) had approved “Semglee” as the first interchangeable biosimilar product under the 351(k) regulatory pathway. This will help the company expand the reach of important diabetes medicine to patients, physicians, payers, and providers.
For its the second quarter, ended June 30, 2021, VTRS’ net sales increased 69.2% year-over-year to $4.56 billion. The company’s free cash flow grew 40% from its year-ago value to $470.1 million. Its gross profit rose to 29.4% from the prior-year quarter to $1.33 billion. Also, the company’s EBITDA increased 125.2% year-over-year to $1.28 billion.
VTRS’ revenue is expected to increase 49.2% year-over-year to $17.82 billion in its fiscal year 2021. The company has an impressive earnings surprise history; it beat consensus EPS estimates in three of the trailing four quarters. Its EPS is estimated to grow 4.1% next year.
Of the four Wall Street analysts that have provided ratings for the stock, three rated it Buy. The $21.25 consensus price target represents a 54% potential gain from the $13.80 last closing price.
Zai Lab Limited (ZLAB)
Headquartered in Shanghai, China, ZLAB is a commercial-stage biopharmaceutical and research-based company. It develops, manufactures, and commercializes transformative medicines for cancer, autoimmune and infectious diseases. ZLAB’s products include Zejula, Optune, and Qinlock.
Last month, ZLAB and Schrödinger, Inc. (SDGR) announced a global discovery, development, and commercialization collaboration that focuses on the oncology program and targets DNA damage response. With this program, the company has enhanced its discovery efforts in the DNA damage response pathway and expects to expand other related approaches, such as PARP inhibitor Zejula.
ZLAB’s revenue increased 235.9% year-over-year to $36.94 million for the second quarter ended June 30, 2021. The company’s other income grew 204.3% from its year-ago value to $7.41 million. Also, its cash and cash equivalents rose 299.6% from $442.12 million as of December 31, 2020, to $1.77 billion as of June 30, 2020.
For the fiscal year 2021, ZLAB’s revenue is estimated to be $157.21 million, representing a 221.1% year-over-year growth. Analysts expect ZLAB’s EPS to increase 37.6% next year. In addition, the stock price has climbed 22.9% over the past nine months and 85.6% over the past year.
All three Wall Street analysts that provided ratings for the stock rated it Buy. Currently trading at $137.34, the $215.67 average analyst price target represents a potential 57% upside.
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VTRS shares were trading at $14.00 per share on Monday morning, up $0.20 (+1.45%). Year-to-date, VTRS has declined -24.19%, versus a 20.47% rise in the benchmark S&P 500 index during the same period.
About the Author: Priyanka Mandal
Priyanka is a passionate investment analyst and financial journalist. After earning a master's degree in economics, her interest in financial markets motivated her to begin her career in investment research. More...
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