Want to do Blockbuster Investing?

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

A popular drug that crosses a benchmark sale of $1 billion for the manufacturer is called a blockbuster drug. To create a blockbuster drug is a big achievement for any pharmaceutical company- both financially and operationally. In this article, I have discussed three drug manufacturers that are known for producing such drugs in the past. Let's see what future blockbusters they have in their portfolios:

Sanofi (NYSE: SNY)

The guidance by the company for the EPS of fiscal 2013 was somewhat disappointing; the company expects a flat to even a decline of about 5% in the EPS of 2013. The decline is expected because of the headwinds caused by a weak Euro and another half-year drag from the generic competition like Plavix, Avapro and Eloxatin. To me, this is more of a near-term rough patch in a long-term smooth road. And, to support this, recently the long-term unsecured rating of the company was upgraded by Moody's Investors Service.

I see Genzyme, a wholly-owned subsidiary of Sanofi, as an important component of its growth platform for the future. I am particularly positive about the rare diseases segment of the company. The rare diseases space represents a pool of opportunities for the company as therapy is available for only 200 of the 6,000-7,000 rare diseases and currently this represents a market of about $10 billion. The market is expected to reach $18 billion by 2015 and Genzyme has the ability to demonstrate efficiency, safety, and gain repayment in orphan diseases. The sale of this segment should reach around $4 billion by the end of 2015.

Moreover, rare diseases drugs like Fabrazyme and Cerezyme should continue to grow in the future as well. Cerezyme, the star drug of the company, had already collected revenue of $811 million in the year 2012 and is expected to become a blockbuster drug by 2014. Fabrazyme's sale grew by 67% in 2012 and should cumulatively collect $1.75 billion in the next three years.

The Company's inclination towards the rare diseases segment and blockbusters like Fabrazyme and Cerezyme strengthens the prospects for the future performance of the company.

Novartis AG (NYSE: NVS)

Recently Novartis filed a lawsuit against 13 generic manufacturers, who filed ANDAs against the company's drugs - Zometa and Reclast. The lawsuit doesn’t trigger a stay on the full FDA approval, but requires generic manufacturers to launch their products at their own risk. This may curtail the overall launches of generic variants of both the drugs in 2013 which should provide an upside to the profitability of the company. Together the sales of Zometa and Reclast were $915 million in 2012. This stay helps the company maintain its market share for some additional time.

Apart from this, I also see ample opportunities in chronic heart failure (CHF) drug market for the company. I feel so because there are 5.7 million patients with CHF in the U.S. and a further 6.5 million in the EU. There is a high probability that in five years the LCZ696, the company's drug under testing for CHF, could very well become the standard of care for the disease. This drug could reach a peak sale of approximately $6 billion. The current ongoing PARADIGM-HF trial on about 8,000 patients is testing LCZ only on patients with impaired ejection fractions (LVEF ≤ 35%) and the report is due in April 2014. LCZ696 has the potential to become the first agent in over a decade to win the regulatory approval for improved outcomes in CHF patients with impaired ejection fraction HF.

This drug should have significant influence on the future cash flow of the company. I feel that LCZ696 could provide some meaningful upside to the stock in the future.

Johnson & Johnson (NYSE: JNJ)

In the past two years, the company had launched several new drugs and indications like Zytiga, Xarelto, Edurant/Complera and Incivo that have played a key role. The prime focus of the investors has been on the commercial performance of these products. But the clinical data flow from the next wave of the company's late-stage pipeline should gather increasing attention. The company's key phase-3 pipeline products include canagliflozin, simeprevir, ibrutinib and Simponi IV. If successful, these products should help to sustain the pharma sales growth in the long run.

In late December, 2012 the FDA approved Zytiga’s label expansion to include pre-chemo prostate cancer, which is expected to help fuel the continued growth of the drug in 2013. Zytiga's global sales for 2012 were about $961 million, and it should cross the $1 billion benchmark in 2013. On the other hand, the European Committee for Medicinal Products for Human Use (CHMP) recommended approval of Xarelto 2.5mg twice daily in combination with standard anti-platelet therapy for the prevention of atherothrombotic events, including myocardial infarction (MI), and cardiovascular death or stroke, in adults in the post ACS (acute coronary syndrome) setting. The approval of Xarelto from the European Medical Agency for the ACS is expected in the first-half of 2013, if materialized it could boost the sale to a new level. Although, FDA approval of Xarelto in the US is still foggy, but if approved this could be the next blockbuster drug of the company.

The product pipeline of the company has some promising drugs and it has been known to produce blockbusters in the past. This increases my faith in the upcoming products. Hence I'll recommend a buy on the stock.

The bottom line

All the three stocks have robust pipelines and have loads of blockbuster drugs in their pocket. Sanofi is increasing its tilt towards the rare drugs market and its subsidiary Genzyme can help conquer the same. Its products like Fabrazyme should be a blockbuster by the next year and an upgrade in ratings by Moody's brings in faith in the long-term position of the company.

Novartis's drugs Zometa and Reclast should bring in some additional profitability to the company's stock and the possibility of the peak sale of company's drug LCZ696 makes me bullish about the stock.

As for Johnson & Johnson, its previous launches have started paying-off, Zytiga’s and Xarelto should be blockbusters soon and its future product pipeline could very well achieve the same.


Shweta Dubey 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!

blog comments powered by Disqus

Compare Brokers

Fool Disclosure