Can Investors Bet on These 3 Pharma Companies?

Madhukar is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.

According to the World Health Organization, there are 347 million people around the world who suffer from diabetes.

It is expected that the death rate from diabetes will top 50% in the next ten years, which will make it a leading cause of death worldwide. As such, the overall market for diabetes therapies and diagnostics is estimated to increase from $38 billion in 2010 to $53 billion in 2015. Because of the increasing global trend of more and more people developing diabetes, companies which provide products and services in this domain will benefit.

Here are three companies with big plans to tap the global market with their presence and new product pipeline.

Global leader in diabetes drug

Sanofi (NYSE: SNY) has had nine consecutive quarters of growth in its diabetes drug segment. In the first quarter of 2013, this segment's sales surged to around $2.41 billion, a growth of 19.6%, year-over-year. Moreover, sale of its diabetes drug, Lantus, increased to around $1.77 billion, growing at around 21.3%, quarter-over-quarter.

Novo Nordisk’s (NYSE: NVO) diabetes drug Tresiba was disapproved by the FDA, and will not come to market before 2017 or 2018. As a result of this, Sanofi’s Lantus will gain a direct advantage, as it fills the gap in the diabetes segment that Tresiba was expected to compete in.

Moreover, Sanofi announced an investment of about $58 million in Waterford, Ireland, to increase Lantus' production capacity. As a result, the company is expecting higher profits in the third and final quarter of 2013, as well as next year.

Sanofi is expecting the European drug authorities to approve its new drug, Lemtrada. This drug is used in the treatment of neurological disorders, and it was obtained through the acquisition of Genzyme in 2011 for around $20.1 billion. The FDA has approved this drug in the U.S, and it has patents until 2017. Approval for Lemtrada in European countries is likely to come in the current fiscal year. It is expected that this drug will boost the revenue of the company. Here's the drug's estimated revenue:

<table> <thead> <tr><th> <p><strong>Year</strong></p> </th><th> <p><strong>Estimated revenue from Lemtrada</strong></p> </th></tr> </thead> <tbody> <tr> <td> <p>2014</p> </td> <td> <p>$243 million</p> </td> </tr> <tr> <td> <p>2015</p> </td> <td> <p>$395 million</p> </td> </tr> <tr> <td> <p>2016</p> </td> <td> <p>$554 million</p> </td> </tr> <tr> <td> <p>2017</p> </td> <td> <p>$657 million</p> </td> </tr> <tr> <td> <p>2020</p> </td> <td> <p>$837 million</p> </td> </tr> </tbody> </table>

Banking on a new drug

Johnson & Johnson (NYSE: JNJ) has a new product pipeline that will strengthen its pharmaceuticals portfolio. The company is expecting to file approvals for 10 new products, and as a part of a multi-branding strategy, will market 25 new products in the next four years.

Recently, J&J's drug “Invokana” received FDA approval. Invokana is used to treat type 2 diabetes. This drug will have a wholesale price of around $8.77 per tablet and expected dosage is one tablet per day. Invokana was tested on 10,000 patients before getting FDA approval, and the tests showed positive results. There are 26 million people in the U.S. currently suffering from Type 2 diabetes;it's estimated that Invokana will earn around $111 million in revenue by the end of the current fiscal year, and will rise significantly $667 million by the end of 2016.

The company is focusing on research and development of its immunology and oncology segments. Both these segments account for around 25% of Johnson and Johnson's (J&J) total pharmaceutical sales. The company's immunology segment showed a 16% increase in revenue, while global sales of oncology drugs grew by 32% in the first quarter of 2013, year-over-year. With this growth, J&J has almost doubled its footprint in the world's emerging markets. It is further planning to strengthen its product pipeline in countries like China. Due to its expansion in emerging markets, its total global sales from immunology and oncology segment will rise from $7.87 billion in the previous year to $8.82 billion in the current fiscal year.

Betting Upon Galvus and Exelon

More than 20% patients suffering from diabetes type 2, are above the age of 65 years. Controlling sugar in elderly patients is bit more challenging, and in this patient group, Novartis (NYSE: NVS) “Galvus” has proved its efficiency. This drug reported the sales growth of 43%, year-over-year, amounting to $910 million in 2012. To increase its market share, Galvus was recently launched in China. It is estimated that there are around 75 million diabetes type 2 patients in China, which accounts for around 20% of the total medical expenditure of country.

Galvus has also received approval in the EU region last year. It is expected that this will help the company to post revenue growth of more than 34% in this year compared to last year.

Novartis's two blockbuster drugs, namely, “Glivec” and “Diovan,” had combined revenue of $9.1 billion, last year. Glivec, used to treat leukemia, is patented in around 40 countries, including China, Russia, and Taiwan. Glivec generated revenue of $4.67 billion in the previous year, and expected revenue is around $4.75 billion for the current fiscal year. Moreover, Glivec dominates the $6 billion market of leukemia drugs. However, the patents for Glivec will expire in 2015 and 2016, in the U.S., and Europe, respectively. 

In 2011, there were around 30 million patients diagnosed with Alzheimer's. Novartis is selling its Exelon drug, which is used in the medical treatment of Alzheimer's.  It is expected that, by 2015, the number of patients with Alzheimer will increase to 35 million globally. The global market size for Alzheimer's therapies is expected to remain above $19 billion in 2015. Novartis expects Exelon to generate revenue of around $1.04 billion in the current fiscal year, down from $1.05 billion in previous fiscal year. Revenue growth is flat, in comparison with previous year; however, looking at the potential market to capture; Novartis has a big opportunity to tap in with its drug Exelon.


Sanofi will get the benefits of its monopoly, while its new drug will help in offsetting the revenue hit from expiring patents.

Johnson & Johnson’s increasing footprints in emerging markets will result in a broader marketplace for its drugs, and its new drug Invokana will add revenue to the company.

Judging the potential market for the drug Galvus and Exelon, Novartis's profits look poised to surge. However, the patent on Glivec will expire in 2015, which will reduce Novartis' revenue at that.

All of these stocks are a "buy."

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Madhu Dube has no position in any stocks mentioned. The Motley Fool recommends Johnson & Johnson. The Motley Fool owns shares of Johnson & Johnson. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. Is this post wrong? Click here. Think you can do better? Join us and write your own!

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