That disclaimer that the Securities and Exchange Commission requires mutual funds to provide to investors isn't one to overlook: Past performance really may not be indicative of future results. This applies to mutual funds and to individual stocks.
For big pharma stocks, though, you can get a sense for what their prospects could look like. Current products and pipeline candidates can help investors determine which stocks have the best chances at being winners. In my view, three big pharma stocks look set to succeed: AbbVie (ABBV 0.42%), Allergan (AGN), and Celgene (CELG). Here's why.
AbbVie's past fortunes have been primarily linked to its top-selling drug, Humira. The good news is that the autoimmune disease drug should continue to make plenty of money for AbbVie. The company recently announced a deal with Amgen (AMGN 0.93%) that will keep a biosimilar rival to Humira off the U.S. market through early 2023. Although biosimilars (including Amgen's) will compete against Humira in Europe, the U.S. represents roughly two-thirds of total revenue for the drug.
Even better, though, is that AbbVie won't need to rely on Humira nearly as much in the future. Momentum is growing for the company's blockbuster cancer drug Imbruvica. In addition, AbbVie won FDA approval for promising pan-genotypic hepatitis C drug Mavyret in August.
AbbVie also claims one of the top pipelines among big pharma companies. It could have a couple of strong autoimmune disease drugs -- upadacitinib and risankizumab -- joining Humira on the market in the next few years. Late-stage candidate elagolix looks promising in treating both endometriosis and uterine fibroids. AbbVie's oncology pipeline is also loaded with great candidates, particularly Rova-T.
Another plus for investors is that AbbVie pays a solid dividend, which currently yields a little under 3%. The company appears to be in great position to increase its dividend in the coming years.
Allergan is sort of the Rodney Dangerfield of big pharma: It don't get no respect. The company's stock price is pretty much at where it started 2017, despite Allergan reporting solid revenue growth and beating consensus earnings estimates last quarter.
I think Allergan is a diamond in the rough, though. Its medical-aesthetics business continues to hum along, led by the Botox franchise. The drugmaker bolstered this business with its acquisition earlier this year of Zeltiq Aesthetics. Allergan believes it has a great pathway for additional growth by marketing to millennials and to men.
The company's management often speaks of its "six stars," a reference to six promising pipeline candidates. One of those stars isn't shining quite as brightly as hoped: Allergan recently reported mixed results from a phase 2 clinical study evaluating cenicriviroc (CVC) in treating non-alcoholic steatohepatitis (NASH). However, the pharma company still thinks the drug could be a winner. And it has the other five "stars" in its constellation in case CVC isn't successful.
Allergan does pay a dividend, but with a yield of around 1.4%, it's not the greatest in the pharma industry. However, it's another use of the company's money that could pay off more for investors: acquisitions. Allergan got to where it is through a series of strategic buyouts. Expect more acquisitions down the road.
Although past performance isn't necessarily indicative of future results, in Celgene's case, it could be. Celgene was the best-performing big biotech stock of the past five years and appears to have what it takes to repeat that success in the future.
Celgene boasts a strong current lineup, led by powerhouse blood cancer drug Revlimid. The biotech also has a couple of other blockbuster drugs with Pomalyst and Otezla. Solid tumor drug Abraxane could soon join the $1 billion annual sales club.
The blood cancer franchise currently staked out by Revlimid and Pomalyst could be joined by several other promising candidates in the next few years. Celgene has especially high expectations for luspatercept, which is in late-stage studies targeting treatment of myelodysplastic syndromes and beta-thalassemia.
Otezla was Celgene's first effort in gaining a foothold in the inflammation and immunology space, but it won't be the company's last. Celgene's pipeline includes several promising inflammation and immunology candidates, including GED-0301 and ozanimod, both of which the company thinks will be megablockbusters.