According to one estimate, nearly 1.7 million individuals in the United States will be diagnosed with cancer in 2019. This is likely to boost demand for oncology drugs and treatment further. Among the most terminal diseases, cancer has nearly 200 variations which can impact almost every organ and tissue of the human body.
In 2017, Roche Holding AG RHHBY, Celgene Corp. CELG and Bristol-Myers Squibb Company BMY contributed nearly 45% to global cancer revenues, with Roche commanding a 25% market share. But competition is expected to intensify by 2024, with six companies expected to hold the same market share.
Investing in the cancer space is extremely rewarding. This is why it would pay to invest in these five companies which offer present-day franchises or prospective treatments for the most dreaded of diseases.
Mergers Heat Up Sector in January
The sector witnessed an eventful January after Eli Lilly and Company LLY decided to buy Loxo Oncology for $8 billion. Analysts took the view that the Loxo acquisition was leading to resurgence in mergers and acquisitions among oncology companies. At the time, Blueprint Medicines Corp. BPMC, which is a developer of small molecule kinase inhibitors, was believed to be the next logical target.
The Loxo buyout came a week after Celgene agreed to be acquired by Bristol-Myers Squibb for $74 billion. The deal has subsequently been challenged by activist investor Starboard Value LP and Wellington Management. Meanwhile, GlaxoSmithKline plc GSK decided to take over oncology-focused firm TESARO, Inc. for $5.1 billion, a transaction which has subsequently been completed.
Market Potential, New Pipeline Trends Promising
Currently, the pace of growth in the oncology market is stunning. Worldwide revenues are projected to increase from $104 billion in 2017 to $233 billion in 2024, according to pharmaceutical data research firm Evaluate. And an extremely rich pipeline is powering this level of growth.
At present, more than 700 molecules have successfully reached late-stage development. This shows a 60% jump from a decade ago, per IQVIA Institute for Human Data Science.
In fact, nearly 14 of the world’s biggest pharma companies have more than 33% of late-stage research and development focused on oncology. Further, nearly 700 companies have ensured at least one oncology treatment in late-stage development.
This represents both a challenge and an opportunity, since the product life cycle for oncology drugs in nearly five times shorter than it was 30 years ago. In effect, drugs are replaced by newer better treatments within a few years. Though this presents oncology-focused companies with tremendous opportunity, it also increases competition by reducing periods of exclusivity.
The need for newer, safer and more effective cancer drugs continues to grow. While competition in the space continues to rise, oncology drugs have extremely bright prospects. This is exactly why pharma majors have dedicated a major chunk of their R&D spend toward oncology drug pipelines.
Investing in companies which offer blockbuster oncology drugs looks like a smart option. We have narrowed our search to the following stocks based on a good Zacks Rank and other relevant metrics.
Celgene’s key growth engine is Revlimid, which was originally intended for treatment of multiple myeloma.
Celgene REIT flaunts a Zacks Rank #1 (Strong Buy). The company’s expected earnings growth for the current year is 21%. The Zacks Consensus Estimate for current-year earnings has moved 3.5% north over the past 60 days.
Johnson and Johnson, Inc.’s JNJ fourth-quarter sales were driven by its oncology portfolio. Worldwide sales of J&J’s cancer drugs, such as Zytiga, Darzalex and Imbruvica, rose 22.1% in the quarter.
Johnson and Johnson’s expected earnings growth for the current year is 4.9%. The Zacks Consensus Estimate for current-year earnings has improved 0.1% over the past 30 days. It sports a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.
Roche has a strong presence in the oncology market. In particular, the company dominates the breast cancer space with strong demand for its HER2 franchise drugs. The HER2 franchise includes Herceptin, Perjeta and Kadcyla.
Roche has a Zacks Rank #2 (Buy). The company’s expected earnings growth for the current year is 1.2%. The Zacks Consensus Estimate for current-year earnings has moved north by 0.6% over the past 30 days.
Bayer AG BAYRY is a life science company with core competencies in the areas of health care and agriculture. Its major cancer drugs include Nexavar, Stivarga and Xofigo.
NextEra Energy has a Zacks Rank #2. The company has expected earnings growth of 9.1% for the current year. The Zacks Consensus Estimate for current-year earnings has improved 0.1% over the past 30 days.
Sunesis Pharmaceuticals, Inc. SNSS is a clinical-stage biopharmaceutical company focused on the discovery, development and commercialization of novel small molecule therapeutics for oncology. Its lead program is vecabrutinib, which is a non-covalently binding inhibitor of Bruton's tyrosine kinase (BTK). This is currently undergoing a Phase 1b/2 clinical trial in B-cell malignancies.
Sunesis Pharmaceuticals has a Zacks Rank #2. The company has expected earnings growth of 10.3% for the current year. The Zacks Consensus Estimate for current-year earnings has moved 16.5% north over the past 30 days.
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Bristol-Myers Squibb Company (BMY) : Free Stock Analysis Report
Bayer Aktiengesellschaft (BAYRY) : Free Stock Analysis Report
Johnson & Johnson (JNJ) : Free Stock Analysis Report
Eli Lilly and Company (LLY) : Free Stock Analysis Report
GlaxoSmithKline plc (GSK) : Free Stock Analysis Report
Roche Holding AG (RHHBY) : Free Stock Analysis Report
Blueprint Medicines Corporation (BPMC) : Free Stock Analysis Report
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