Momentum is equal to mass multiplied by velocity. This is the formula used in physics. But it also applies, in a way, to investing. The greatest momentum is often found in large, fast-moving companies. These companies – and their actions – can be virtually unstoppable.
We asked three Motley Fool contributors to identify unstoppable pharma stocks to buy in May. Here’s why they chose Novo Nordisk (NVO -1.28%), Pfizer (DFP 1.22%)and seagen (NES -4.08%).
Built to last
Prosper Junior Bakiny (Novo Nordisk): Over the past decades, Novo Nordisk has been a market leader in diabetes medicines. In February 2022, the company held a 30.5% share of the diabetes care market, an increase from the 29.3% share of the pie it had in February 2021.
Novo Nordisk’s dominance in this therapeutic area is one of the reasons it has outperformed the broader market in each of the past 1, 5, 10 and 20 years. I think the pharmaceutical giant still has many years of market-leading performance.
This is partly because the diabetes market is only going to get bigger. According to some estimates, about 33% of the US population could be diabetic by 2050. The need for drugs to treat this chronic condition will almost certainly increase. Novo Nordisk is well positioned to help this patient population while achieving strong financial results.
The company’s current crop of diabetes and obesity therapies includes blockbusters Victoza and Ozempic, as well as Rybelsus, whose sales are growing at a healthy pace. Additionally, Novo Nordisk has a dozen other candidates targeting either diabetes or obesity in its pipeline.
One of the most promising programs is Icodec, a potential once-weekly insulin product for type 1 and type 2 diabetes. Type 1 diabetics and the subset of patients with the type variety 2 who need insulin usually have to take it daily. A product like Icodec would greatly simplify their lives and could be very successful. Novo Nordisk has a rich history of innovation in this area, and investors can be assured it will continue to do so.
Of course, the company also has drugs and candidates in other therapeutic areas. Novo Nordisk’s programs target rare diseases such as sickle cell disease and hemophilia, as well as more common conditions such as Alzheimer’s disease and non-alcoholic steatohepatitis.
Overall, this healthcare giant has a strong lineup, a rich pipeline, and the potential to continue rewarding patient shareholders for a very long time. That’s why it’s a great stock to consider buying in May and beyond.
The goat of the pharmaceutical industry?
Keith Speights (Pfizer): Which pharmaceutical company is the greatest of all time (i.e. the GOAT)? I think Pfizer would definitely be a top contender.
Pfizer is poised to break two industry records in 2022. It is on course to generate the highest annual revenue of any drugmaker in history, with the midpoint of its range d $100 billion annual guidance. The company’s Paxlovid also looks likely to set the mark for record annual sales for a non-vaccine drug in 2022 as well. Pfizer expects the COVID-19 pill to bring in at least $22 billion this year.
Keep in mind that Pfizer’s Comirnaty already garnered the most revenue for any medicine (including vaccines) last year, with sales of $36.8 billion. And the company’s Lipitor is the best-selling drug of all time, at least for now.
The most important aspect of Pfizer’s GOAT-worthy credentials is that the drugmaker clearly has what it takes to be successful in the long run. However, that’s not the only reason I think it’s a good stock to buy in May.
Pfizer is a boon in a stock market that remains grossly overvalued despite the significant pullback. Its shares are trading at just 7.1 times expected earnings. Of course, there is some uncertainty regarding the dynamics of the COVID-19 market. However, Pfizer stock still seems well valued.
Moreover, Pfizer’s business will probably not be affected that much if the economy goes into a recession. With interest rates rising rapidly, I fear a recession is looming. If so, Pfizer is a less volatile stock to buy than most stocks. It also offers a strong dividend with a yield of over 3.2%.
Promising long-term potential
David Jagelsky (Seagen): Oncology is an area of continued strong growth that pharmaceutical investors should target. Cancer is, unfortunately, a problem that continues to require breakthrough drugs to help keep survival rates as high as possible. According to Fortune Business Insights, the global oncology drug market will be worth more than $286 billion by 2028, growing at a compound annual growth rate of 9.1% until then.
Seagen stands out as a promising company that has already developed cancer drugs. In its latest results released last month, the company reported revenue of $426.5 million, up 28% year-over-year. This is during the first three months of 2022, when COVID-19 was still disrupting hospitals due to the emergence of the omicron variant.
Many healthcare companies have struggled due to the pandemic, but not Seagen. The need for cancer treatment doesn’t stop in the middle of a pandemic, and the continued need for ongoing care and treatment is why Seagen is what I would call an “unstoppable” pharmaceutical company to invest in. .
It also has all the necessary ingredients to grow bigger and eventually become profitable. For one, its gross margins are impossibly thin, with last quarter’s cost of sales coming in at just $87.6 million. This represents only 21% of the revenue that these expenses helped generate. About 79 cents of every revenue dollar will help cover overhead and other business operating expenses.
While Seagen isn’t profitable right now (it suffered a loss of $136.5 million in the first quarter), that doesn’t mean things will stay that way. As the business grows and more revenue flows into it, the bottom line should also improve, given the company’s strong gross margins.
Seagen’s Tivdak only scratches the surface in terms of revenue. With sales of $11.4 million in the last quarter, the cervical cancer drug only started contributing to the business after winning US approval in September 2021. Tivdak has the potential to generate annual revenues of over $1.3 billion at its peak.
Shares of Seagen are currently down nearly 15% year-to-date. However, I think it might be one of the best growth stocks to buy in May.