You could make a pretty good case that any time is a good time to buy shares in big drugmakers if you have a long enough investing horizon. Most major pharmaceutical companies generate lots of cash, continually invest in developing new products, and reward shareholders with juicy dividends.
But some pharma companies have better opportunities than others, and if you're going to invest in this space, it only makes sense to pick the ones with the greatest growth prospects. With that in mind, here are three top pharma stocks that you should consider buying right now.
Wall Street analysts think that AstraZeneca (NASDAQ:AZN) will be able to deliver average annual earnings growth of 19% over the next five years. Is that achievable? I think so.
AstraZeneca's current lineup includes multiple blockbusters with fast-growing sales. Its best-seller, cancer drug Tagrisso, generated year-over-year sales growth of 56% in the first quarter. The company's No. 2 product, respiratory drug Symbicort, produced sales growth of 35%. Sales for cancer immunotherapy Imfinzi, AstraZeneca's third-highest seller, soared 57% higher in Q1. Revenues from the next three top-selling drugs in the lineup also grew by strong double-digit-percentages.
Even better, AstraZeneca could have more big winners on the way. Its pipeline includes 167 programs, with 20 of them in late-stage clinical studies. Arguably its most highly anticipated candidate is AZD1222, the experimental COVID-19 vaccine that the company is developing with the University of Oxford. AZD122 is widely viewed as a leader among the coronavirus vaccine candidates in clinical testing so far.
In addition to its tremendous growth prospects, AstraZeneca offers a dividend that currently yields close to 2.4%.
2. Bristol Myers Squibb
Bristol Myers Squibb's (NYSE:BMY) growth opportunity could be even better than AstraZeneca's: Analysts project that it will grow its earnings by an average of nearly 22% annually over the next five years. Thanks to the company's acquisition of Celgene last year, this growth rate seems realistic.
Like AstraZeneca, Bristol Myers Squibb boasts a strong lineup of popular treatments. The Celgene acquisition brought blockbuster cancer drugs Revlimid, Pomalyst, and Abraxane into the fold. And the company already had its own superstars with blood thinner Eliquis, cancer immunotherapy Opdivo, and arthritis drug Orencia.
Bristol Myers Squibb's newer drugs and pipeline candidates add to the appeal of the pharma stock. Zeposia, which earned FDA approval in March as a multiple sclerosis treatment and is in late-stage studies targeting Crohn's disease and ulcerative colitis, should be a huge winner. The company awaits an FDA approval decision for liso-cel and should soon refile for approval for ide-cel. Both CAR-T cell therapies have blockbuster potential if approved.
The drugmaker's dividend is another reason for investors to like BMS. It's currently yielding 3%, and became even more attractive after Bristol Myers Squibb increased its quarterly payout by 9.8% in December.
3. Eli Lilly
Eli Lilly's (NYSE:LLY) prospects might not be quite as impressive as those of AstraZeneca and Bristol Myers Squibb. However, analysts still expect it will generate average annual earnings growth of close to 13.5% over the next five years.
The company continues to win on several fronts. Its diabetes products Trulicity, Basaglar, and Jardiance remain solid growth drivers. It ranks as a major player in oncology with cancer drugs Alimta, Cyramza, and Verzenio. And Eli Lilly is a key competitor in immunology with Taltz and Olumiant.
The drugmaker's pipeline includes 16 late-stage programs and seven programs awaiting regulatory approval. A couple of candidates that especially stand out are pain reliever tanezumab and immunology drug mirikizumab. Eli Lilly also has several COVID-19 programs, notably including antibody therapies it is developing in partnership with AbCellera and Junshi Biosciences.
Eli Lilly's dividend yield of 1.8% doesn't match up to those of AstraZeneca and Bristol Myers Squibb. But its dividend combined with its growth prospects should enable it to deliver market-beating total returns.