3 Pharmas Relying on Innovation, Not Drug Price Increases for Growth
11/9/2016 6:11:41 AM
November 9, 2016
By Alex Keown, BioSpace.com Breaking News Staff
NEW YORK – With some uncertainty facing the biotech and pharma industry following the election of Donald Trump as the next president of the United States, investors should focus on companies that rely on innovation rather than price increases.
Writing in the Motley Fool, analyst Cheryl Swanson pointed to three stocks that rely more on research and development as opposed to increasing prices of old drugs – Celgene (CELG), Bristol-Myers Squibb (BMY) and Eli Lilly (LLY).
Shares of Celgene are up more than 6 percent this morning, trading at $115.50. Celgene’s innovation has been driven by its multiple myeloma drug, Revlimid, which saw revenue spike by 30.1 percent in the last quarter. Swanson, who owns stock in Celgene, said she is intrigued by its novel CAR-T therapies, which she said gives it tremendous buying power. Another appealing aspect of Celgene, Swanson said, is that Celgene has “50 potential new product approvals in over 100 indications pending by 2025.”
“Many therapies have a chance to end up best-in-class, or first-line treatments, so Celgene should rack up double-digit growth for years to come with little pricing vulnerability,” Swanson said.
Celgene is also seeing strong growth through the numerous partnerships the company has forged with the likes of Juno Therapeutics, Jounce Therapeutics, bluebird bio, Agios, Epizeme and more. Celgene’s partnership goals has been a strategic effort to diversify revenue streams so it is not so financially dependent on its blockbuster blood cancer drug, Revlimid.
BMS saw revenues jump 21 percent in the last quarter to $4.9 billion and its new products are expected to contribute to a 65 percent of company revenue by 2020, Swanson said. Shares of BMS are up more than 5 percent this morning, trading at $55.95 as of 10:52 a.m. The stock is considered a good value by Swanson after it plunged in August following the failure of its immunotherapy drug Opdivo failed a lung cancer trial that would have expanded its use. Despite that failure, Swanson said Opdivo is in more than 50 clinical trials, which means the drug could become one of the best-selling drugs in the world.
BMS is undergoing a reorganization of its R&D units. In its announcement, the company said the reorganization includes the implementation of a “more agile R&D organization” and “streamlined operations and realigned manufacturing capabilities that broaden biologics capabilities to reflect current and future portfolio.”
In a surprise move, Swanson said she thinks Eli Lilly is also a company to watch, despite modest growth of 4.7 percent – all from growing demand for recently approved products. Swanson pointed to three new Lilly drugs -- psoriasis drug Talz, gastric cancer med Cyramza, and diabetes drug Trulicity – as potential drivers of revenue for the company. Eli Lilly is also expecting to hear from the FDA regarding a new cardiovascular drug. Shares of Eli Lilly are up more than 5 percent trading at $77.91 this morning as of 11:03 a.m.
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