In early May, President Donald Trump announced that he would be requiring Big Pharma to list the prices of their drugs in their TV advertisements. This comes as the Trump administration has been attempting to disclose how much consumers would be paying out of pocket for their medications. The new rule sanctioned by the administration was set to go into effect this summer and would apply to drugs that cost more than $35 or more for a month’s supply. Before the new order, companies were only required to include the side effects that may follow the consumption of one of their products.
In February of this year, Johnson & Johnson JNJ became the first drug maker to announce that it will reveal the prices of its prescription medicines. JNJ’s pioneering effort comes at a time when high drug costs have become a bipartisan issue with both parties trying to fix it. Lowering medical costs for Americans has become an issue and platform that is vital for politicians to address. U.S. District Judge Amit Mehta in Washington, D.C. decided to rule in favor of drug producers by halting the U.S Department of Health and Human Services price disclosure rule.
Big Pharma companies argued that disclosing prices could be misleading and ultimately discourage people from seeking medical treatment. Companies also argued that the proposed rule by the HHS would confuse consumers by forcing them to disclose a price that is irrelevant to those with insurance. The medical companies’ lawsuit also involved the claim that the HHS lacked the authority to implement such a rule and that it violated their First Amendment right to freedom of speech. With medical companies keeping their right to continue to conduct their business in a self-favorable manner, which stocks could potentially benefit from this? Let’s take a further look into which medical stocks can bring home solid returns for investors.
Eli Lilly and Company
Eli Lilly LLY is a large cap pharmaceutical company that was involved in the lawsuit against the disclosure rule. The company is based out of Indianapolis, and is a global healthcare leader dedicated to creating medicines for those who need it most. The drugmaker is currently sitting at a Zacks Rank #3 (Hold). Consensus Estimates are calling for the company see an increase in earnings by 5.04% next quarter. Furthermore, estimates are projecting the stock’s earnings to surge 16.14% in 2020, with its revenue going up 6.26% to $23.63 billion in 2020. LLY is looking to use the favorable ruling from Judge Mehta to kickstart its stock into the second half of 2019.
Merck & Company
Merck and Company MRK is an additional large cap pharmaceutical company that was involved in the lawsuit against the HHS rule. The pharmaceutical giant is a company that has the potential to carry its solid first half performance into the second half of the year. MRK is currently listed as a Zacks Rank #2 (Buy) and is up 11% on the year. The last 12 weeks have boosted the stock 6.3%, significantly above the broader pharma industry. Merck & Company has been able to surpass our estimates the past four quarters for an average EPS surprise of 5.67%. Consensus Estimates are forecasting for the stock to see a 9.22% jump in earnings to go along with a 5.36% spike in total revenue for the current year. The positive outlook continues into 2020, making the company a solid pick for investors looking to try their hand in the field.
Supernus Pharmaceuticals SUPN is a specialty pharmaceutical company focused on developing and commercializing products for the treatment of central nervous system diseases. The company has had a rocky start to the year but has been able to see a 4% increase over the last four weeks. Supernus Pharmaceuticals is currently listed at a Zacks Rank #2 (Buy) and has been able to blow by estimates three out of the last four quarters for an EPS average surprise of 26.38%. Consensus Estimates are currently projecting for the stock’s bottom line to surge by 21.15% and top line to rally 14.16% next quarter. Looking even further ahead, estimates are predicting a 16.96% earnings jump with a sales gain of 17.51% for 2020.
Regeneron Pharmaceuticals REGN is a biopharmaceutical company that discovers, develops, and intends to commercialize therapeutic medicines for the treatment of serious medical conditions. REGN is currently sitting at a Zacks Rank #3 (Hold) and boasts some solid top line projections. Estimates are projecting the pharmaceutical company to increase revenue by 12.69% for the next quarter but also predict earnings will fall 5.28%. Peeking ahead to 2020, Estimates are forecasting the company’s bottom line to rally 16.71% on the back of a sales jump of 12.98%. The company also has a strong valuation aspect that can further attract investors. The stock is currently being traded at 14X its forward earnings with a PEG ratio of 1.22, both of which are well below the industry average. The stock has historically traded at a discount relative to its industry, trading at a median of 20.59 while the broader market had a median of 42.38 for the past two years.
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Eli Lilly and Company (LLY) : Free Stock Analysis Report
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