The COVID-19 pandemic has heightened the focus on healthcare systems, with governments across the globe allocating significant budgets toward drug development and medical facilities. Per the Centers for Medicare & Medicaid Services (CMS), U.S. healthcare spending increased 9.7% to $4.1 trillion in 2020, mainly due to the pandemic.
Though the growth rate in national health spending slowed down to 4.2% in 2021, it’s worth noting that this growth was still off the exceptionally high base seen in 2020.
While focus over the last two years has been on companies developing COVID-19 vaccines and drugs, there are several other attractive companies out there developing treatments for key therapeutic areas, like cancer and diabetes.
We used the TipRanks stock comparison tool for healthcare stocks to compare Johnson & Johnson, Pfizer, and Eli Lilly across various parameters, such as yearly gains, price target upside potential, and analyst consensus ratings.
Johnson & Johnson (NYSE: JNJ)
Last year, global healthcare behemoth Johnson & Johnson announced its intention to separate its Consumer Health business (including iconic brands like Neutrogena, Listerine, and BAND-AID) to create a new company while focusing on its Pharmaceutical and Medical Device businesses.
The Consumer Health business contributed sales of $14.6 billion (15.6% of overall sales) in 2021, while the Pharmaceutical and Medical Device divisions generated sales of $52.1 billion and $27.1 billion, respectively. Overall, JNJ’s sales grew 13.6% to $93.8 billion, and adjusted EPS increased 22% to $9.80 in 2021.
JNJ’s COVID-19 vaccine generated sales of $2.4 billion in 2021. The vaccine faced manufacturing issues and safety concerns last year. JNJ expects COVID-19 vaccine sales in the range of $3 billion – $3.5 billion in 2022.
Beyond the COVID-19 vaccine, JNJ has several key drugs like immunology drugs Stelara and Tremfya and cancer drugs Darzalex and Imbruvica. It also has a strong pipeline comprising 53 late-stage programs.
Also, JNJ is a dividend king, a term used for companies that have raised their dividends for at least 50 consecutive years. Last year, the company increased its annual dividend per share by 5% to $4.24, marking the 59th annual hike.
Ahead of JNJ’s Q1 results scheduled for April 19, Cantor Fitzgerald analyst Louise Chen lowered her sales and EPS estimates as she feels that macro headwinds could impact Q1 results.
Chen lowered her Q122 sales and EPS estimates from $23 billion and $2.25 to $22.6 billion and $2.16, respectively, to reflect the impact of the Russia-Ukraine war, COVID-19 lockdowns in China, and the strengthening of the U.S. dollar.
Earlier this year, JNJ estimated 2022 sales in the range of $98.9 billion – $100.4 billion and adjusted EPS of $10.40 – $10.60. Chen’s forecasts are at the lower end of JNJ’s guidance, with sales and EPS estimates of $99.4 billion and $10.41, respectively.
Despite the near-term headwinds, Chen reiterated a Buy rating on JNJ stock and a price target of $215.
Other analysts on the Street are cautiously optimistic about the stock, with six Buys and five Holds contributing a Moderate Buy consensus rating. The average Johnson & Johnson price target of $186.36 implies 4.93% upside potential from current levels.
Pfizer (NYSE: PFE)
Pharma giant Pfizer collaborated with German biotechnology company BioNTech (BNTX) to develop a COVID-19 vaccine, Comirnaty, which became the first vaccine to win U.S. Food and Drug Administration’s (FDA) emergency use authorization and later full approval.
Comirnaty generated $36.8 billion in direct sales and alliance revenues in 2021, while sales from Pfizer’s COVID-19 anti-viral pill Paxlovid (FDA authorized emergency use in December 2021) were $76 million.
Overall, Pfizer’s revenue grew 95% to $81.3 billion and adjusted EPS surged 96% to $4.42 in 2021. Excluding contributions from Comirnaty and Paxlovid, revenue was up 6% to $44.4 billion in 2021.
For 2022, the company expects revenue of $32 billion from Comirnaty and $22 billion from Paxlovid. Overall, Pfizer predicts 2022 revenue in the range of $98 billion – $102 billion and adjusted EPS of $6.35 – $6.55.
Meanwhile, Pfizer continues to invest in drug development and innovation. Currently, 27 of the 89 programs in Pfizer’s pipeline are in Phase 3 trials.
On April 5, Citigroup analyst Andrew Baum initiated a “positive Catalyst Watch” on PFE stock for several reasons, including sizable Paxlovid sales in China as the country continues with its zero COVID strategy.
While Baum’s 2023-24 EPS estimate is 60% higher than consensus estimates, he continues to have a Hold rating on Pfizer as he expects the stock to “struggle to outperform in the absence of evidence of the next virulent variant as economically constrained western governments likely downsize planned Paxlovid orders.”
However, Baum does not rule out the possibility of upgrading Pfizer’s rating and EPS estimate in the event of the emergence of a new COVID-19 variant and increased government spending on Paxlovid.
Overall, Pfizer scores a Moderate Buy consensus rating, which breaks down into seven Buys and eight Holds. The average Pfizer price target of $60.64 suggests 18.35% upside potential from current levels.
Eli Lilly & Co. (NYSE: LLY)
Eli Lilly has a strong product portfolio and is a prominent player in the diabetes space, with drugs like Trulicity, Humalog, Jardiance, Humulin, and Basaglar. The company’s best-selling drug Trulicity contributed revenue of $6.5 billion in 2021, reflecting growth of 28%.
Eli Lilly also has a solid oncology portfolio (including drugs like Verzenio and Alimta) and immunology drugs offerings (like Taltz and Olumiant). In 2021, the company’s oncology and immunology portfolios generated revenue of $5.7 billion and $3.4 billion, respectively.
Overall, Eli Lilly’s revenue grew 15% to $28.3 billion in 2021, with COVID-19 antibodies generating sales of $2.2 billion. Excluding revenue from COVID-19 antibodies, the company’s revenue growth rate was 10% in 2021. Adjusted EPS increased 20% to $8.16.
Looking ahead, Eli Lilly expects adjusted EPS in the range of $8.50 – $8.65 in 2022, reflecting growth of 4% to 6%. The company anticipates 2022 revenue of between $27.8 billion and $28.3 billion.
Eli Lilly boasts a robust pipeline of potential new medicines and new treatment indications, including tirzepatide (a potential treatment for type 2 diabetes), lebrikizumab (for atopic dermatitis), and mirikizumab (for active ulcerative colitis).
In a research note to investors, Berenberg Bank analyst Kerry Holford stated, “Lilly remains our top pick among US pharma, as we forecast premium growth and returns on R&D investment (RORI). Lilly boasts the largest late-stage pipeline NPV in the global peer group and has a variety of near-term catalysts.”
Holford reiterated a Buy rating and a price target of $305.
All in all, Eli Lilly earns the Street’s Strong Buy consensus rating based on nine Buys and one Hold. The average Eli Lilly price target of $294.30 indicates that shares are fully priced at current levels.
Conclusion
Analysts are more bullish on Eli Lilly as reflected in the Street’s Strong Buy consensus rating. That said, following the 60% rally in Eli Lilly stock over the past year, analysts feel that the stock is fully valued at current levels. On the basis of higher upside potential over the next 12 months, Pfizer stock seems to be a better pick. What’s more, Pfizer scores a “Perfect 10” on TipRanks’ Smart Score system, indicating that it could outperform market averages.
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