3 Big Pharmas That Have Plenty of Cash to Pay Out Investors
July 15, 2016
By Alex Keown, BioSpace.com Breaking News Staff
NEW YORK – If you’re continuing to look at your stock portfolio and wanting to add a solid stock, analyst Cory Renauer of the Motley Fool, selected three big pharma stocks that have enough potential to raise their dividend payouts—Johnson & Johnson , AbbVie and Novartis .
Johnson & Johnson
In April, J&J increased its quarterly dividend payment by 6.7 percent, with the company’s pharmaceutical segment doing the lion’s share of work in driving the bottom line, Renauer said. One drug that’s become a solid driver for Johnson & Johnson is its multiple myeloma treatment, Darzalex. The U.S. Food and Drug Administration approved Darzalex in 2015 for the treatment of patients with multiple myeloma who have received at least three prior lines of therapy, including a proteasome inhibitor (PI) and an immunomodulatory agent, or who are double-refractory to a PI and an immunomodulatory agent. Darzalex is the first human CD38 monoclonal antibody approved anywhere in the world and the first therapeutic antibody ever approved to treat multiple myeloma. Although there is heavy competition in the multiple myeloma market, including Amgen ’s Kyprolis. Since its approval, Darzalex has been reportedly well received by patients who are showing strong response to the medication. That strong response is opening doors for exploring its use for other cancer treatments. Darzalex is currently being paired with Celgene 's Revlimid, which has increased the survivability rate after 18 months, Renauer said. With Revlimid expected to generate nearly $7 billion in revenue this year, Renauer said that will further cement J&J as one of the company’s that will have room to increase dividend payout. Shares of Johnson & Johnson are currently trading at $123.47.
AbbVie
Shares of AbbVie are currently trading for $64.04, up slightly from its opening. Since being spun out from its parent company, Abbott, Abbvie has shown strong quarterly payouts, Renauer said. Recent moves from AbbVie have increased the likelihood of increased dividends, including the acquisition of Imbruvica for treatment of chronic lymphocytic leukemia. Imbruvica generated $381 million in the first quarter of 2016 and has the potential to generate $3.6 billion annually. Abbvie also snapped up investigational cancer drug rovalpituzumab tesirine (Rova-T) in its acquisition of Stemcentrx. That drug could yield up to $5 billion in annual revenue, analysts have predicted. The company is also looking to expand approved use for its blockbuster rheumatoid arthritis drug Humira. Earlier this month AbbVie presented data showing Humira achieved at least a 75 percent improvement in their moderate to severe fingernail psoriasis compared to patients receiving placebo.
Novartis
For 19 consecutive years Novartis has increased its annual dividend, Renauer said. And, the company is poised to make sure those increases continue, thanks to new drugs like Entresto. In July, the FDA approved Novartis ’ long-awaited new cardiovascular drug Entresto aimed at treating people with chronic heart failure. The drug, which was shown to reduce risk of death and hospitalization by about 20 percent, was approved six weeks ahead of the FDA’s scheduled action date. Analysts predict the drug could generate $5 billion in annual revenue by 2020, however, since its approval sales have been sluggish in part due to reimbursement issues. In an earlier article, Renauer said there are less expensive options on the market than Entresto, but, “given Entresto's ability to reduce expensive hospital visits, I believe it's just a matter of time before it becomes the new standard of care for millions of eligible patients.” If the drug yields the revenue it promises, Renauer said Novartis won’t have any issues increasing dividend hikes.