Some decisions require lengthy deliberations and extensive analysis. Others don't.
Three Fool.com contributors think they've identified pharmaceutical stocks in the latter category. Here's why they think Pfizer (PFE 0.55%), Summit Therapeutics (SMMT -3.03%), and Vertex Pharmaceuticals (VRTX -0.23%) are no-brainer stocks to buy right now.
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Pfizer is a great option for both dividend and growth investors
David Jagielski (Pfizer): Pfizer is one of the biggest no-brainer stocks in healthcare right now. Between its low valuation, high yield, and underrated growth prospects, it can make for an appealing buy for any type of investor.
While the stock has continued to struggle this year, that's largely reflective of concerns related to tariffs, healthcare reform, and government stances on vaccines, more so than the company's actual underlying financials, which look solid. In fact, when the company reported its most recent earnings numbers in early August, it hiked its guidance for full-year adjusted earnings per share (EPS). The new guidance of between $2.90 and $3.10 in adjusted EPS is up from an earlier forecast of $2.80 to $3.00.
The company has been focusing on cutting costs and improving efficiency, and that has been paying off. Pfizer has also experienced strong growth across all its major segments in the most recent quarter (which ended on June 29), including in primary care (12%), specialty care (7%), and oncology (11%). The strong earnings numbers should give investors confidence in Pfizer's ability to continue paying its dividend, which is yielding around 6.7% right now.
And while there is near-term uncertainty around the healthcare sector as a whole, Pfizer, being a leader in the space and focused on long-term growth, still looks to be in a solid position overall. The stock is trading at a price-to-earnings multiple of less than 14, which is incredibly cheap, given that the average stock on the S&P 500 (^GSPC -0.64%) trades at a multiple of 25.
All in all, Pfizer is one of the best healthcare stocks to buy right now, regardless of whether you're after growth or dividends.
A rising biotech with more room to run
Prosper Junior Bakiny (Summit Therapeutics): Three years ago, Summit Therapeutics was a little-known small-cap biotech company. The stock has skyrocketed by almost 2,000% since and now boasts a market cap of $18 billion, a rarity for a clinical-stage drugmaker.
Summit Therapeutics' leading candidate, ivonescimab, which is already approved in China, has posted terrific results in a phase 3 study in patients with non-small cell lung cancer and PD-L1 protein overexpression. The study pitted ivonescimab against the current market leader, Keytruda, and the former more than held its own.
Ivonescimab could go on to challenge the world's best-selling drug in one of its most important turfs. That's significant. Furthermore, ivonescimab won't stop there. It could be a pipeline in a drug, that is, a medicine that continually expands its label. The therapy is being investigated across a range of different indications, from colorectal to liver cancer, and several more.
Solid results from other clinical trials could jolt Summit Therapeutics' stock price. According to some analysts, ivonescimab could generate approximately $4.4 billion in sales by 2030.
Will Summit Therapeutics produce the same kinds of returns it has in the past three years moving forward? Probably not. However, there could be plenty of upside left for the company, thanks to ivonescimab's incredible potential.
It might be too late to bag life-changing returns over a relatively short period with this stock. But buying Summit Therapeutics' shares now could still lead to solid performances over the next five years.
Three operative words with this stock: Buy the dip
Keith Speights (Vertex Pharmaceuticals): Two disappointing developments with Vertex Pharmaceuticals' pipeline programs caused its shares to sink in recent weeks. However, with Vertex's stock still down more than 20% below its previous high, I think investors should heed three operative words: Buy the dip. And, yes, it's a no-brainer decision, in my opinion.
Vertex has three relatively new products on the market, for which sales should accelerate significantly over the next few years. Alyftrek will almost certainly become the next blockbuster drug in the company's vaunted cystic fibrosis (CF) franchise. Casgevy is slowly picking up steam in treating (actually, curing) two rare blood disorders, sickle cell disease and transfusion-dependent beta thalassemia.
The third new drug, Journavx, might be the most promising of them all. It's the first new class of pain medication in more than 20 years. Journavx isn't an opioid and doesn't come with the addictive potential and nasty side effects associated with the widely used painkillers. The commercial launch for the therapy is going so well that Vertex is committing additional resources to boost its sales and marketing efforts.
Moving to the pipeline, Vertex hopes to file for regulatory approvals for povetacicept in treating IgA nephropathy and zimislecel in treating severe type 1 diabetes next year. The big drugmaker's APOL1-mediated kidney disease therapy inaxaplin is also in late-stage testing and could be a big winner if eventually approved.
While many stocks are priced for perfection in today's market, Vertex is a bargain with its growth prospects factored into the equation. Its price-to-earnings-to-growth (PEG) ratio, which is based on analysts' five-year earnings growth projections, is a super-low 0.58.
