February 10, 2017
By Mark Terry
The first three weeks of the Trump administration has been marked by protests, uncertainty and a fair amount of chaos. It’s generally accepted that one thing the stock market doesn’t like much is uncertainty. To that end, George Budwell, writing for The Motley Fool, looks at three life science companies he dubs the Dividend Aristocrats that can weather stormy seas.
1. AbbVie
AbbVie (ABBV) has definitely had some problems lately, but seems to churn right along. In 2016, the company’s hepatitis C treatment Viekira Pak dropped 57.4 percent in U.S.-based revenue. Yet despite that collapse, the company reported a 13.3 percent increase in overall net revenue on an operational basis for the year.
It relies a lot on Humira sales, which increased 16.1 percent in sales and was responsible for 63 percent of the total yearly revenue. Budwell writes, "That’s not altogether great news, though, since Humira did go off patent inside the U.S. last December—meaning there’s a possibility that a copycat version, formally known as a biosimilar, could enter this all-important market sometime soon."
Amgen (AMGN) has filed with the U.S. Food and Drug Administration (FDA) for a Humira biosimilar, but AbbVie has filed a lawsuit claiming that Amgen’s biosimilar violates 10 of AbbVie’s patents. Most analysts believe some Humira biosimilar will hit the market next year, but AbbVie claims it can push it off until 2022.
Budwell’s argument is that AbbVie’s pipeline is both deep and diverse and has several potential blockbusters that should fill in when Humira inevitably begins to sag in the market. He writes, "A stacked portfolio of drugs means that AbbVie should be able to continue growing revenue even if the Trump administration comes down hard against drug prices."
AbbVie stock is currently trading for $60.63.
2. Johnson & Johnson
Johnson & Johnson (JNJ) has been around for 131 years and it seems unlikely to be broadly battered by the Trump administration’s whims. Budwell writes, "And to its credit, the company has handily beaten the broader markets over the past two decades in terms of total shareholder returns, delivering 53 consecutive years of dividend increases and producing unprecedented levels of innovation within its pharma segment over the past several years."
Part of Budwell’s reasoning is that over the years, the company has proven to be very adaptive and flexible—not qualities mega-companies are typically noted for. This year’s acquisition of Swiss-based Actelion (ALIOF.PK) for $30 billion is an interesting example, with a push into the rare-disease market that will strength its pulmonary arterial hypertension portfolio and make up for the loss of patent protection for Remicade.
Budwell writes, "This sizable acquisition is noteworthy because it comes on top of the more than $9 billion the company spent on R&D just last year, and it also underscores the company’s dedication to maintaining a top flight-pharma innovation engine."
Johnson & Johnson stock is currently trading for $114.72.
3. Medtronic
This medical device company has had consecutive dividend increases over 39 years. That’s appealing to investors, no doubt, but there are other reasons to consider investing in the company. It has four core business units—cardiac and vascular, minimally invasive therapies, diabetes, and restorative therapies. Those are fairly varied, giving it protection if one or two of them had a rough period. It has also been busy with mergers and acquisition, completing 14 deals in fiscal 2016 alone.
One of those deals was with Mazor Robotics, an attempt to break into the robotic surgery market. That’s a market largely dominated by Intuitive Surgical (ISRG)’s da Vinci Surgical System, but it’s also a market that expected to have strong growth. Grand View Research projects a CAGR of 20.03 percent in the market over the next eight years.
Medtronic (MDT) has also worked to integrate the acquisitions and streamlining overall operations. Budwell writes, "The key point is that Medtronic has placed a heavy premium on be...
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