Forget Allergan & Pfizer, Buy These Drug Stocks Instead
The financial world is abuzz with discussions regarding the recently announced Pfizer Inc. PFE -Allergan plc AGN combination agreement which will see the Viagra seller and the Botox maker coming together in a deal valued at about $160 billion.
Pfizer, which had been looking to acquire AstraZeneca last year, has finally struck a deal which will see it changing its domicile (global operational headquarters will remain in New York) and benefiting from a lower tax rate.
Pfizer plc, as the company will be known once the deal goes through in the second half of 2016, will have the world's leading established products business based on revenues. The deal is expected to boost earnings from 2018.
Meanwhile, needless to say, the proposed combination has drawn a lot of flak from politicians who are slamming Pfizer for entering into a deal that will see the company paying lower taxes. Tax inversion deals, which were pretty popular a while back, had lost their luster with new guidelines being announced by the Treasury Department.
However, it seems these were not enough to deter the Pfizer-Allergan deal from being announced.
5 Attractive Stocks in the Drug Sector
While discussions regarding the record-making Pfizer-Allergan deal and the possibility of the Treasury Department coming out with new rules to deter tax inversion deals will continue, let's take a look at a few well-positioned drug companies that sport an attractive Zacks Rank (Zacks Rank #1 - Strong Buy/Zacks Rank #2 - Buy) and are seeing positive estimate revisions.
First on our list is Rancho Cucamonga, CA-based Amphastar Pharmaceuticals, Inc. AMPH , a specialty pharmaceutical company that focuses on the development, manufacturing, marketing, and selling of generic as well as proprietary injectable and inhalation products, including products with high technical barriers to market entry.
This Zacks Rank #1 company, which posted a narrower-than-expected loss in the third quarter of 2015, has a positive revision history with the Zacks Consensus Estimate for 2015 narrowing down from a loss of 55 cents to a loss of 33 cents. Amphastar currently manufactures and sells 18 products including Amphadase, and is developing a portfolio of 15 generic and 6 proprietary injectable and inhalation products.
Mylan N.V. MYL , another Zacks Rank #1 stock, surpassed third quarter earnings expectations and is seeing positive estimate revisions. The company, which has a strong presence in the generics market, is also focused on the development and sale of branded specialty nebulized and injectable products.
Morristown, NJ-based Pernix Therapeutics Holdings, Inc. PTX posted higher than expected earnings in the third quarter of 2015 and is seeing bullish estimate revisions. This Zacks Rank #2 specialty pharmaceutical company focuses on acquiring, developing and commercializing prescription drugs, primarily in the U.S.
Branded products include Treximet (acute treatment of migraine pain and inflammation), Silenor (treatment of insomnia characterized by difficulty with sleep maintenance) and Zohydro ER with BeadTek (an extended-release opioid agonist indicated for the management of pain).
Indianapolis, IN based Eli Lilly and Company LLY , a global healthcare company with core products in a number of primary-care pharmaceutical markets, is also a Zacks Rank #2 stock. Lilly's third-quarter earnings were well above expectations and the company raised its earnings outlook. Some of the company's key drugs and the animal health business should help offset the impact of genericization. Lilly also has some new products which should start contributing to revenues.
Moreover, the company's diabetes business should benefit from the Jardiance long-term cardiovascular (CV) outcomes study results - Lilly noted that Jardiance is the only glucose-lowering agent to have shown CV risk reduction in a dedicated CV outcomes study. With about 50% of deaths in type II diabetics resulting from CV disease, the addition of this data to Jardiance's label would lead to a major surge in sales. Estimate revisions remain positive for this company.
Rounding off our list is Novo Nordisk NVO , another Zacks Rank #2 stock, which surpassed third quarter earnings expectations and is seeing positive estimate revisions. In addition to having a strong presence in the diabetes market, Novo Nordisk also has hemophilia and hormone replacement therapy-related products in its portfolio.