) hit a 52-week high of $133.83 during the trading session on Nov
29. The German company however closed the trading session at
With more than 41% of year-to-date return and a long-term
expected earnings growth rate of 10.83%, this large-cap pharma
stock seems to be an attractive pick for long-term investors. The
average volume of shares traded over the last three months stands
at approximately 27,528 K. The stock was primarily boosted by the
company's new drugs over the last few quarters.
Despite its strong price appreciation, this Zacks Rank #2 (Buy)
stock still has enough catalysts that may further drive the stock
upward. Bayer has several regulatory decisions and pipeline
related events lined up in the coming quarters. Positive results
from these events are expected to drive the stock further.
Of Bayer's three major segments - HealthCare, Crop Science and
Material Science - HealthCare is the primary revenue generator of
the company, contributing 46.7% of the company's total revenues
in 2012. The HealthCare segment has been boosted by the addition
of new products like Xarelto, Eylea and Stivarga over the last
few quarters. The drugs contributed €259 million, €85 million and
€51 million, respectively, in the third quarter of 2013.
Xarelto, a key revenue generator at the HealthCare segment of
Bayer, is approved for several indications including stroke
prevention in non-valvular atrial fibrillation, deep vein
thrombosis (DVT), pulmonary embolism (PE) and reducing the risk
of recurrent DVT and PE. Bayer is looking to expand Xarelto's
Eye-drug Eylea, which was first approved for treating patients
suffering from the neovascular form of age-related macular
degeneration (wet AMD), offers significant commercial potential.
The drug is also approved for the treatment of macular edema
following central retinal vein occlusion (CRVO). Bayer is further
looking to expand the drug's indication.
Stivarga, another key drug at Bayer, also holds huge potential.
The drug is approved for the metastatic colorectal cancer (mCRC)
and gastrointestinal stromal tumors (GlST) indications in several
Moreover, the approvals of Xofigo (oncology), Adempas tablets
(pulmonary arterial hypertension and chronic thromboembolic
pulmonary hypertension) and Lemtrada (multiple sclerosis) are
also encouraging. These drugs are also expected to contribute
significantly to Bayer's top line in the coming quarters. The new
products are expected to contribute €1.4 billion to segmental
sales in 2013 and the figure is expected to reach €2.5 billion in
Premium Valuation Justified
On a price-to-earnings basis, Bayer is trading at 17.2x,
reflecting a huge premium of 11.2% compared with the peer group
average of 15.47x. On a price-to-book basis, the stock is also
trading at a premium to the peer group average. Given the
company's strong fundamentals, the premium valuation is
Other Stocks to Consider
Some other stocks worth considering include
Lannett Company, Inc.
AMAG Pharmaceuticals, Inc.
). All these stocks hold a Zacks Rank #1 (Strong Buy).
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