In light of countries around the world investing in vaccines to curb future waves of the coronavirus, five pharmaceutical companies with high financial strength and profitability are Alexion Pharmaceuticals Inc. (ALXN, Financial), Biogen Inc. (BIIB, Financial), Johnson & Johnson (JNJ, Financial), Novo Nordisk A/S (NVO, Financial) and Bio-Techne Corp. (TECH, Financial).
According to John Hopkins University statistics, global cases have eclipsed 2 million as of Thursday, with nearly 640,000 cases in the U.S. The World Health Organization added that the coming weeks are “critical” as cases in Europe reach nearly 1 million.
Companies around the globe share vaccine plans
U.K.-based GlaxoSmithKline PLC (GSK, Financial) and French drug manufacturer Sanofi SA (SNY, Financial) announced on Tuesday a partnership in which the two companies will collaborate on developing “a new, adjuvanted vaccine for Covid-19.” GSK CEO Emma Walmsley said Wednesday on CNBC’s “Mad Money” that “now is not the time to think about competition,” but rather collaboration between global companies to “invest in long-term pandemic awareness.”
Johnson & Johnson CEO Alex Gorsky said in an earnings release on Monday that the New Brunswick, New Jersey-based company is also advancing efforts on its Covid-19 vaccine candidate: The company mentioned on its website it can start clinical trials by September and start vaccines in early 2021. Despite this, Walmsley told “Mad Money” host Jim Cramer that vaccine development can take a decade to be “finalized for mass use” due to various risks regarding safety, although the typical time frame for approval is between 12 to 18 months according to experts.
Opportunities exist in biotech industry as vaccine race accelerates
With at least 70 vaccines in development according to CNBC sources, investors might seek opportunities in pharmaceutical companies that have high financial strength and profitability. The All-in-One Screener, a GuruFocus Premium feature, listed five biotech and drug manufacturing companies with a financial strength rank of at least 6, a profitability rank of at least 7 and a GuruFocus business predictability rank of at least three stars.
Alexion
Boston-based Alexion develops and markets drugs for rare, life-threatening medical conditions. GuruFocus ranks the company’s profitability 9 out of 10 on several positive investing signs, which include a high Piotroski F-score of 8, a return on equity that outperforms over 96% of global competitors and an operating margin that has increased approximately 3.70% per year on average over the past five years.
Alexion’s valuation ranks 10 out of 10 on the back of price-earnings and price-to-free-cash-flow ratios near 10-year lows and that outperform over 81% of global competitors.
Gurus with large holdings in Alexion include Pioneer Investments (Trades, Portfolio), David Carlson (Trades, Portfolio)’s Elfun Trusts and Jim Simons (Trades, Portfolio)’ Renaissance Technologies.
Biogen
Cambridge, Massachusetts-based Biogen markets drugs for multiple sclerosis and hemophilia. GuruFocus ranks the company’s profitability 10 out of 10 on several positive investing signs, which include a five-star business predictability rank, a return on assets that outperforms 97.70% of global competitors and an operating margin that has increased approximately 2.10% per year on average over the past five years.
Gurus with holdings in Biogen include Warren Buffett (Trades, Portfolio)’s Berkshire Hathaway Inc. (BRK.A)(BRK.B), the Vanguard Health Care Fund (Trades, Portfolio) and PRIMECAP Management (Trades, Portfolio).
Johnson & Johnson
Johnson & Johnson’s profitability ranks 9 out of 10 on several positive investing signs, which include a high Piotroski F-score of 7 and consistent revenue growth. Additionally, operating margins are outperforming over 89% of global competitors despite contracting approximately 2% per year on average over the past five years.
Novo Nordisk
Denmark-based Novo Nordisk markets a wide range of diabetes-care products around the globe. GuruFocus ranks the company’s profitability 10 out of 10 on several positive investing signs, which include a five-star business predictability rank, a return on equity that outperforms over 99% of global competitors and an operating margin that has increased approximately 0.80% per year on average over the past five years and outperforms over 98% of global biotech companies.
Novo Nordisk’s financial strength ranks 8 out of 10, driven by robust interest coverage and Altman Z-scores.
Bio-Techne
Minneapolis-based Bio-Techne supplies consumables and instruments for the pharma, biotech, academic and diagnostic markets. GuruFocus ranks the company’s profitability 9 out of 10 on several positive investing signs, which include consistent revenue growth and profit margins that are outperforming over 90% of global competitors despite contracting over the past five years.
Disclosure: As of writing, the author is long Biogen.
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