Whether it's thanks to a winning business model or timely good news, some companies are taking the bear market in stride, and some are even crushing it.
In particular, there are three big pharma stocks that are rising higher amid the market's decline. If you're interested in building some all-weather growth into your portfolio, they might be right up your alley, so here's a quick rundown of each.
1. AstraZeneca
Compared to the broader market's slump of around 5% in the last 12 months, AstraZeneca's (NASDAQ: AZN) stock has climbed 19%, making it a robust outperformer, to say the least. The company's success during the bear market is simply a matter of the strength of its drug development pipeline; with 184 projects in clinical trials and late-preclinical testing, it's among the largest in the world. In the last month alone, it bagged no fewer than three regulatory OKs in the E.U. and one in the U.S., and it also has 17 late-stage programs for new molecular entities. That means AstraZeneca has a very solid chance of commercializing a handful of new medicines for which there is no prior approval for any indication, likely making a lot of money in the process.
And having so many drugs on deck for approval is basically the company's normal state of being, which is part of the reason why its trailing-12-month revenue rose by 82.4% over the last three years to surpass $44 billion. Furthermore, because its pipeline enables it to churn out new drugs on such a large scale on a long-term basis, AstraZeneca's cash flows are reliable enough to pay a dividend, which also helps to stabilize its share price during downturns. Right now, its forward dividend yield is 2.2%. Though there isn't a reason to think that its dividend will rise on a yearly basis, its rapid free cash flow growth indicates that it also isn't in any danger of getting cut.
2. AbbVie
Much like AstraZeneca, AbbVie(NYSE: ABBV) boasts a massive development pipeline that commonly has four or more programs awaiting rulings from regulators and dozens of late-stage programs in progress at the same time. For instance, this year it could get up to nine approvals for expanded indications of its existing medicines, and in 2023 it expects to nab as many as eight new approvals while also submitting the paperwork for an additional nine projects. The result of such an intense research and development (R&D) tempo is an ever-increasing pile of earnings; over the last five years, the pharma's trailing-12-month (TTM) net income climbed by just over 90%.
AbbVie's performance during the bear market has been similarly strong, with the total return of its shares increasing by 6% in comparison to the market's decline of 13% this year so far. But while it might not need to worry about the market downturn, it does have a potential challenge developing. Humira, its drug for psoriatic arthritis and a slew of other conditions, is facing sharply rising competition from biosimilars in international markets, and sales are under heavy pressure. Given that the medicine was responsible for bringing in more than $17.3 billion during 2021 out of AbbVie's net revenue of $56.1 billion, if its plans to replace the falling revenue with sales from new programs falters, the next couple of years could actually end up being more difficult for investors than the bear market has been.
3. Bristol Myers Squibb
Bristol Myers Squibb's (NYSE: BMY) stock is up by 15% this year even though its pipeline isn't as jam-packed with looming approvals as AbbVie or AstraZeneca. Nonetheless, the business is growing faster than the other two, with its TTM revenue increasing by 95% over the last three years. And this year, it's still expecting six new approvals, with at least two more to come in 2023 and 2024. Beyond those catalysts, Bristol Myers is also looking to make bolt-on acquisitions to shore up its pipeline while continuing to hike its dividend, buy back its shares, and reduce its debt load of $10 billion maturing through 2024.
All of the above will help it to keep performing strongly during the bear market and beyond, especially if it can pick up a few of its smaller competitors in the precision oncology segment, as management clearly desires. Investors might want to be cautious about investing in Bristol Myers right this second, though; in its Q2 earnings update, management slashed its 2022 guidance, calling for a maximum of $3.01 in earnings per share (EPS) compared to the prior estimate's ceiling of $3.22.
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Alex Carchidi has positions in AstraZeneca PLC. The Motley Fool has positions in and recommends Bristol Myers Squibb. The Motley Fool has a disclosure policy.
