This is the perfect time to look for offers on the stock markets. Many quality stocks continue to fall, dragged lower in part by broader market momentum, and even among those that defy the trend somewhat, some are now trading at more reasonable valuations than they might be. have been doing for some time.
The healthcare sector is a particularly smart place for investors. Medical care will remain in high demand regardless of economic conditions, so businesses in this sector can survive, and even thrive, despite the challenging environment. And in my opinion, AbbVie (ABVV 2.89%), Pfizer (DFP 4.75%)and Viatris (TRV 0.43%) everything looks like good business now.
The case of AbbVie
AbbVie shares have risen 5% since January, despite the fact that Humira, its top-selling drug, will face competition from biosimilars in the United States from next year. The market seems to be looking past this headwind, and with good reason. AbbVie has gone to great lengths to reduce its reliance on popular immunology.
First, the company has developed a pair of new immunological treatments – Skyrizi and Rinvoq – which have won approvals for most of Humira’s key indications. Both have increased their sales rapidly over the past two years. In the first half of 2022, Rinvoq’s revenue grew 55% year-over-year to $1.1 billion, while Skyrizi’s sales jumped 76% to $2.2 billion .
The successful acquisition of Allergan by AbbVie is also paying off as its Botox franchise continues to perform well. Management says competitors are unlikely to be able to create biosimilar versions of Botox, so it could continue to help drive AbbVie’s revenue growth for some time.
Sales of Humira won’t stop completely after the generic versions hit the US market, but they will drop. That said, the rest of AbbVie’s lineup is positioned to pick up the slack. The drugmaker also has a pipeline of dozens of candidates in clinical trials, some of which should eventually expand its portfolio.
For investors, it’s also worth noting that AbbVie joined the ranks of the Dividend Kings this year when management increased its payout for the 50th consecutive year (including the period before its split from Abbott Laboratories). At its current share price, it offers a dividend yield of 3.9%, making it a great choice for income investors. And trading at a forward price-to-earnings ratio of just 10.4 – compared to the pharmaceutical industry average of 12.7 – AbbVie looks like a buy.
The case of Pfizer
Pfizer is currently making big money from its coronavirus portfolio, which includes the COVID-19 vaccine Comirnaty and the antiviral therapy Paxlovid. With the pandemic threat receding (but not disappearing), demand for both products is likely to drop significantly from next year. This will make year-over-year comparisons difficult for Pfizer in 2023, especially since its non-coronavirus lineup is not performing well. But let’s look at things in perspective.
Pfizer would have had a much harder time over the past two years had it not developed and brought to market some of the most successful COVID-19 products. Unflattering year-over-year comparisons in 2023 seem like a small price to pay for the billions of dollars in revenue Paxlovid and Comirnaty have generated since last year. This money has allowed Pfizer to expand its pipeline, in part through acquisitions.
Several late-stage clinical trials are underway, many of which are for brand new products. For example, Pfizer is developing an mRNA-based flu vaccine that it hopes will fill the gaps in current options.
In September, the company announced that health regulators in the United States and Europe had accepted its application for ritlecitinib as a potential treatment for alopecia areata. Pfizer should succeed in rejuvenating its lineup over the next half-decade.
While not a dividend king (or even a dividend aristocrat), Pfizer has a long history of quarterly payouts and is a great stock for those looking for passive income.
Its current stock price yield of 3.7% is well above average and it has increased its payouts by a respectable 25% over the past five years. Pfizer’s forward price-to-earnings ratio is 6.8, making it an attractively valued stock to buy now.
The case of Viatris
Viatris is one of the largest generic drug manufacturers in the world. It has a portfolio of hundreds of products – including generics for well-known brands such as Xanax, Viagra and Lyrica – which it sells in dozens of countries around the world.
While it hasn’t been easy sailing for Viatris over the past year — its revenue and earnings growth rates haven’t been impressive — the healthcare stock does have some redeeming qualities. First, its forward price/earnings ratio is a very low 2.7. On the one hand, this partly reflects Viatris’ recent lackluster performance, but the company is improving its business.
Viatris’ pipeline is vast, allowing it to constantly expand its range. It is on track to reach $600 million in revenue from new product launches in 2022, and Viatris will continue to gain approvals for new generics in the years to come.
In addition, Viatris is in the process of selling its portfolio of biosimilars to the Indian company Biocon, with which it has partnered in several programs. Viatris will receive $3.3 billion in cash and stock from the transaction, giving it more financial flexibility, greater ability to reinvest in the business and, of course, greater ability to increase its payouts by dividends.
Viatris is committed to rewarding its shareholders with increased dividends, and the yield is already an impressive 5%. Viatris may not offer skyrocketing share price growth, but it’s a great stock to buy for income-oriented investors looking for a bargain.