Over the last three decades, life expectancy in the United States has increased from 74.9 to 78.8 years, according to statistics from researchers at Harvard University and MIT. Pharmaceutical companies have made significant advancements in medical treatments over this period, one of the leading factors behind this large increase in longevity.
Going forward, pharma will only continue investing in R&D and innovation while also increasing income and earnings. Here are three biotech companies that appear to be excellent investments in that future growth.
GlaxoSmithKline (NYSE: GSK)
The U.K.-based behemoth GlaxoSmithKline stock is the first to consider. With its size, the firm is able to pursue innovative treatments on a regular basis. The recent approval of its cabotegravir injection for HIV prevention by the US Food and Drug Administration, which could generate up to $1.5 billion in peak annual sales by the end of the decade, is its latest success.
GSK's respiratory therapy sector (led by Trelegy and Nucala) has accelerated considerably, with revenue projected to rise 5% to $48.3 billion this year. While that may appear modest, it is a good performance for Glaxo Smith Kline's size. Furthermore, the future appears to be bright for GSK.
GlaxoSmithKline has numerous late-stage clinical trials for such severe diseases as rheumatoid arthritis and anemia, which may be approved by the FDA in the next few years. Analysts expect GlaxoSmithKline to generate 4% annual EPS growth in the next five years as a result of these initiatives. In addition, the firm has several more early-stage clinical trials in development that may help to compensate for any impending patent expirations in the future.
GlaxoSmithKline stock , which trades at around $45 per share and has a forward price-to-earnings (P/E) ratio of 14, offers income investors a market-smashing 4.9% payout yield at the moment. Given Glaxo's pipeline and expansion prospects, this appears to be an attractive valuation.
Sanofi (NASDAQ: SNY)
The next significant biotech firm worth regarding is Sanofi, a French company with a $129 billion market cap. Sanofi stock should perform well in the near term due to its fast-growing vaccine business and growing asthma and eczema drug Dupixent (co-owned by Regeneron). Analysts anticipate that Sanofi's earnings will rise at a annual EPS rate of 13% for the next two years.
The longer-term prospects for Sanofi stock appear equally good, with analysts predicting 10% annual EPS growth over the next five years. That's because, according to the company's pipeline, 48 of its 82 initiatives are in phase 1 or 2 clinical trials. This should translate into at least some regulatory approvals to drive sales and earnings higher in the medium and long terms.
At its current $52 price, income investors may acquire Sanofi's market-leading 3.8% dividend yield at a forward P/E ratio of just 12. For investors, Sanofi's combination of yield and growth at a reasonable valuation is a steal.
The third biotech stock to look at purchasing right now is the much larger-sized Novartis. At $201 billion in market value, Novartis is supported by solid growth from its mega-blockbuster medications Cosentyx (immunology) and Entresto (heart failure). Analysts forecast that the firm's revenue will grow at a rate of more than 5% each year through 2021 and 2022. In 2021 and 2022, respectively, analysts predict earnings growth of 10% and 5%.
Simply said, Novartis appears to be in the midst of a significant upswing. Fortunately, the firm has also spent a significant amount of money developing a long-term drug pipeline in the next five to ten years. Novartis is developing more than 150 projects in fields like oncology and immunology, which are both growing at a rapid rate. Given this context, it's not difficult to see why analysts predict the firm will grow earnings by 7% each year over the next five years.
Novartis' attractive growth profile, robust pipeline, and relatively cheap price tag have made it an appealing investment. At the current share price of $90, Novartis offers yield-starved investors a juicy 3.6 percent payout. This market-leading yield may be secured at a forward P/E ratio of 13.5, making the stock appealing at this time.