Bayer Aktiengesellschaft (BAYR.Y +1.86%) and AstraZeneca (AZN +0.00%) are elite healthcare companies with shares that trade for less than $100 and make excellent long-term investments because of their revenue and earnings growth, promising pipelines, and above-average dividends.
Both companies performed better than the S&P 500 in 2022, which slipped more than 19.4%. Bayer was down 11.2% in 2022 and currently trades for about $15 a share while AstraZeneca was up 16.4% in 2022 and currently trades for around $70 a share. Both appear to be safe buys for 2023.
Bayer's size and diversity give it strength
Bayer is a huge German life science conglomerate. It employs nearly 100,000 people in 374 subsidiary companies across 83 countries in three divisions -- Pharmaceuticals, Consumer Health, and Crop Science.
OTC: BAYR.Y
Key Data Points
Despite a share gain of more than 2% over the past year, the stock trades at only roughly 11 times earnings. The reason for that is a lingering concern about lawsuits regarding glyphosate, the active ingredient in the company's discontinued weedkiller Roundup, which it inherited when it bought Monsanto in 2018.
The past five Roundup lawsuits have gone in favor of Bayer. In the most recent cases, this past summer and early fall, juries in two cases in Kansas City, Missouri, and one in Jackson County, Oregon, found that Roundup did not cause the plaintiffs' cancer.
While the lawsuits remain a concern, as much as the company's $38.75 billion in net debt, I believe the company's problems, in the long run, are overblown, much like the way Johnson & Johnson (JNJ 0.15%) eventually got past the concerns about the opioid lawsuits by paying $5 billion as part of a three-company nationwide $26 billion settlement.
Bayer's financials remain more than steady. Through nine months, it reported $41.9 billion in revenue, up 17.5%, year over year, with a net income of $3.82 billion, compared to a net loss of $173.8 million in the same period a year ago. The company operates in three segments, all of which saw increased nine-month sales, year over year: crop science ($21.2 billion, up 26.3%); pharmaceuticals ($15.5 billion, up 7.5%); and consumer health ($4.9 billion, up 17.2%).
The company's lead drug, the blood thinner Xarelto, saw its nine-month sales decline 5% year over year to $3.6 billion, and it could soon be surpassed by another Bayer therapy, Eylea, an injection used to treat wet age-related macular degeneration and retina swelling, which had nine-month sales of $2.6 billion, up 11.5% over the first nine months of 2021.
The biggest surge came from prostate cancer treatment Nubeqa, which had nine-month sales of $330 million, up 105%, year over year. At last week's J.P. Morgan Healthcare Conference in San Francisco, the company said the daily pill Kerendia, which scored FDA approval last summer to treat heart disease and chronic kidney disease in type 2 diabetes patients, has the potential to bring in $3.2 billion a year in sales.
The company also said it sees $5.3 billion in potential annual sales for Asundexian, a blood thinner which is in phase 2/3 trials to treat atrial fibrillation, acute myocardial infarction, transient ischemic attack, and ischemic stroke. The drug likely won't get approved until 2026.
Bayer's dividend of $0.53 a share works out to a yield of around 2.3%, compared to the S&P 500 average of 1.74%, and has a conservative payout ratio of 38.47%.
Burgeoning pipeline paying off for AstraZeneca
British pharmaceutical company AstraZeneca, like Bayer, has the size and scope to weather short-term financial hiccups, with 83,000 employees across 130 countries. The company just got approval from the Food and Drug Administration for Airsupra as a rescue medication to treat asthma attacks. British pharmaceutical maker Avillion collaborated on the drug, which for now is only approved for adults.
NASDAQ: AZN
Key Data Points
The first-in-class therapy is an inhaler that contains albuterol and budesonide, and it treats both the symptoms of an asthma attack and the underlying inflammation, which is a step up from albuterol alone. It has a large potential patient population, as the Asthma and Allergy Foundation of America estimates there are 20 million adults in the U.S. alone with asthma.
Airsupra is one of a dozen programs the company is awaiting decisions from the FDA on this year, part of a giant pipeline that includes 179 programs. Two other big potential launches include Enhertu to treat multiple types of cancer and gastrointestinal tract cancer therapy Imfinzi.
Through nine months, the company reported revenue of $33.1 billion and earnings per share (EPS) of $5.28, up 37% and 52%, year over year, respectively, at constant exchange rates. The company said it expects a low double-digit compound annual growth rate in revenue through 2025.
AstraZeneca issues a semiannual dividend, whose annual total grew to $1.46 per share last year, up 4% over 2021. That works out to a yield of slightly more than 2%.
