If you want solid healthcare stocks that will be worth buying and holding for the next 10 years, you need to set the bar pretty high. I'm looking for pharmaceutical companies that had growth in revenue or earnings per share (EPS) in 2022, are expecting additional growth in 2023, and have new therapies that will deliver earnings growth for years to come.
I'm looking for companies like Bristol-Myers Squibb (BMY -0.27%), Vertex Pharmaceuticals (VRTX -1.02%), and Eli Lilly (LLY -1.81%).
All three stocks are up over the past year. They easily outpaced the S&P 500 average's performance -- it was down more than 8% over the trailing-12-month period -- and I believe they have more growth ahead.
Bristol-Myers Squibb is poised to pounce
For the nine-month period (ending Sep. 30), BMS reported revenue of $34.8 billion that was up 1% year over year, while the company had earnings per share (EPS) of $1.99 in the third quarter, up 3% year over year.
The company forecasts 2022 revenue of $46 billion, flat compared to 2021. But thanks to its portfolio and late-stage pipeline therapies, its next few years should feature strong growth.
BMS's rising blockbusters are the immunology drug Opdivo and blood thinner Eliquis. Opdivo reported, through nine months, $6 billion in sales, up 9% year over year. Eliquis brought in $9.1 billion that period, the company said, up 12% over the same period last year.
What's also exciting is how much BMS's new therapies will drive revenue. In the third quarter, new therapies were responsible for $553 million in revenue, up 61% year over year. These were led by Opdualag, Abecma, and Reblozyl.
Opdualag, a combination of relatlimab and Opdivo, was approved by the Food and Drug Administration (FDA) last March to treat advanced melanoma, and in less than nine months since its launch, has generated $148 million in revenue. Abecma, a cell therapy made from a patient's own white blood cells to fight multiple myeloma, made $263 million in revenue in nine months, up 99% year over year. And Reblozyl, a therapy to treat anemia, had $518 million in revenue in three quarters, up 30% over the same period last year.
While you wait for your investment to rise, BMS also offers a quarterly dividend, which it raised this year by 5.6% to $0.57, the 13th consecutive year it's increased its dividend. At its current price, the yield is around 3.11%, nearly twice the average dividend of the S&P 500 of 1.74%. The payout ratio is only 36.05%, so the company should be able to continue to increase the dividend.
Vertex Pharmaceuticals is building up and branching out
Vertex is a good example of a company that found success focusing on one malady -- cystic fibrosis (CF) -- and then used profits from its specialty to branch out.
The biotech has several therapies to treat CF and ongoing trials for other CF therapies in its pipeline, but it's also working on therapies to treat sickle cell disease (SCD), transfusion-dependent beta thalassemia (TDT), type 1 diabetes, and APOL1-mediated kidney disease.
The most promising of its pipeline therapies is exa-cel, which it's developing with CRISPR Therapeutics as a one-time curative treatment for SCD and TDT. The companies have begun their rolling submission to the FDA for the biologics license application (BLA) for exa-cel. Looking past exa-cel, the company is also excited about the prospects for nonopioid acute pain treatment VX-548, which the company has in a phase 3 trial. The current market to treat acute pain is greater than $4 billion in the United States, according to Vertex.
Through the first nine months of 2022, Vertex reported revenue of $6.6 billion, up 24% year over year, and EPS of $9.78, up 60% over the same period in 2021. The company forecast full-year revenue of $8.8 billion to $8.9 billion, up from $7.6 billion last year.
Eli Lilly looks good from all angles
Eli Lilly is looking at growth in the rearview mirror, as well as ahead. It forecast EPS in 2022 of $6.50 to $6.65, up 6% to 9% over the same period last year. It also predicts 2022 revenue to be between $28.5 billion and $29 billion, up from $28.3 billion in 2021.
This year, it said it anticipates four key launches: donanemab to treat Alzheimer's disease; immunology therapies mirikizumab and lebrikizumab; and pirtobrutinib, a BTK (Bruton's tyrosine kinase) inhibitor seen as a potential treatment for chronic lymphocytic leukemia (CLL) and small lymphocytic lymphoma (SLL).
Lilly is also planning a regulatory submission for type 2 diabetes treatment Mounjaro (tirzepatide) as an obesity drug. Mounjaro has huge blockbuster potential; just as a diabetes drug, it had $97 million in sales in the third quarter. Donanemab could also be a blockbuster, but its path will likely be rockier; the FDA just issued Lilly a complete response letter regarding the drug's accelerated approval as an early Alzheimer's disease treatment, based on the low number of patients in its phase 2 trial.
This year, the company said it expects revenue to be between $30.3 billion and $30.8 billion, with EPS of $7.65 to $7.85.
Lilly's dividend has doubled over the past five years and was just raised by 15% to $1.13 a share, the fifth consecutive year it has boosted its dividend by 15%. At the stock's current price, the yield is 1.14%; that's not spectacular, but it's well covered, considering the company's expected growth, with a payout ratio of 64.15%.
