In Big Pharma, you're only as good as your pipeline, your product lineup and how you shape up relative to the threat of a looming loss of patent protection. And by that criteria Morningstar's top pharma analyst ranks GlaxoSmithKline ($GSK) at the top of the industry heap, with AstraZeneca ($AZN) limping in at last place despite a flurry of new deals aimed at reviving its R&D efforts.
Analysts, of course, don't always see eye-to-eye when it comes to their subjective assessments of a pharma company's future. It's not unusual to see two analysts come out of the same company meeting with two completely different conclusions. And projecting future revenue potential of experimental therapies--which always have a high threat of failure--is at best a crap shoot. But these snapshot assessments also drive company executives looking to win kudos on Wall Street. And they highlight the top late-stage efforts worth a closer look.
By its own three-prong rating system, Morningstar's Damien Conover lists the top 11 pharma companies thus:
- GlaxoSmithKline's push into oncology and respiratory diseases is paying off with its top overall rating, about four years after the company restructured its pipeline to create dedicated research teams more narrowly focused on key programs.
- Bayer comes in at the number two spot after a string of new approvals and a comfortable stretch ahead with little in the way of a serious generic threat. Steady pipeline progress without a lot of nasty surprises from R&D is paying off with a top rep.
- Sanofi ($SNY) gets good marks for an improving pipeline and easing generic threats in the wake of some big patent losses. There's a thumbs up for the company's existing businesses and added optimism for U300, Lyxumia's ability to complement Lantus and a closely watched PCSK9 program underway in the clinic.
- Novartis ($NVS) comes in on the top tier with a diverse group of companies and projections of rising sales. QVA149 projections by others may be a bit overblown, says the firm, but the heart drug RLX030 is underappreciated on the Street.
- Johnson & Johnson ($JNJ) makes the better half of this survey with new product launches and a big add with the Synthes buyout. Morningstar likes daratumumab in the pipeline and the fact that J&J doesn't face big patent losses. But recent approvals have left its pipeline a little thin.
- Bristol-Myers ($BMY) gets top marks for a strong late-stage pipeline, one of the industry's best, but faces a serious threat on the patent front. On the positive side BMS has successfully executed a shift to specialty meds, but patent losses could crimp revenue more than investors expect.
- Adding Roger Perlmutter as the new head of R&D helped boost Merck's ($MRK) rep, but a change of direction in R&D strategy will take time to pull off. Top marks for MK-3475 and the company's BACE inhibitor for Alzheimer's.
- AbbVie's ($ABBV) score has a lot to do with its megablockbuster drug Humira. And with Morningstar 's Conover looking for a faster slide in sales than some other analysts, that's dragging down the overall score despite a thumbs up for elotuzumab in multiple myeloma and elagolix for endometriosis.
- Eli Lilly's ($LLY) pipeline reputation relies quite a lot on its prospects for the diabetes drug dulaglutide and the depression drug Neri. Despite Morningstar's less aggressive peak sales expectations, though, the firm believes that new product launches will help bring down the pharma giant's relatively large R&D budget--currently a hefty 25% of sales.
- Pfizer ($PFE) gets good marks for new launches--Xeljanz and Eliquis--after a brutal showdown with the patent cliff. Palbociclib in the oncology portfolio also gets good marks as a top prospect.
- Count Morningstar among the AstraZeneca skeptics. Forxiga, Epanova and lesinurad may look better to their top analyst, but Morningstar is looking for heavy losses for the Crestor and Nexium franchises. It doesn't help that AstraZeneca has been struggling to come up with new products for years. Add it all up and Morningstar sees long-term negative growth, keeping AstraZeneca in the industry cellar.
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