NEW YORK (AP) -- Jefferies & Co. analysts said Tuesday that shares of drugmakers including Sanofi and Abbott Laboratories should trade higher as the companies raise their dividend payments or create new value by restructuring their businesses.
The analysts have positive views on Novartis AG, Roche Group, and Bayer AG, but singled out Sanofi and Abbott Laboratories Inc. as their top picks in the sector. They expect Sanofi shares to trade higher as the company continues to launch its multiple sclerosis drug Aubagio and diabetes drug Lyxumia, waits for a Food and Drug Administration ruling on another MS drug, Lemtrada, and gets clinical trial data for some key experimental drugs.
Sanofi suffered some major patent losses in 2012 as generic versions of its blood thinner Plavix, blood pressure drug Avapro, and other products reached the market. But analysts Jeffrey Holford, Ian Hilliker, and Terence McManus said the Paris-based company has strong underlying growth. They said that strength should become more apparent in the second half of this year, when Sanofi is comparing its current sales to its results from late 2012, after the patent expirations occurred.
The analysts said Wall Street estimates for Sanofi in 2014 and afterward appear to be too low.
Sanofi's Aubagio is a once-per-day pill for multiple sclerosis. The drug received U.S. approval in September and European Union authorities approved it in late August. EU regulators cleared Lyxumia in February, but the Food and Drug Administration has not yet approved the product. The company's important drug candidates include Lemtrada and sarilumab, a treatment for rheumatoid arthritis.
Abbott, based in North Chicago, Ill., is the analysts' top U.S.-based drugmaker pick. The company, which earlier this year spun off its branded-drug business into a separate company called AbbVie, makes nutrition and diagnostic products, two businesses with the potential for improved margins, the analysts wrote.
"We also believe that the company may have the ability to offer better shareholder returns than currently anticipated through dividend payout increases or more aggressive share repurchases," according to the note. In June Abbott authorized the repurchase of up to $3 billion in stock and declared a regular quarterly dividend of 14 cents.
U.S.-listed shares of Sanofi rose 64 cents to $48.84 in afternoon trading, while Abbott shares gained 25 cents to $34.05. Novartis shares picked up 25 cents to $76.01.