Companies that have managed to beat the market and stay in the green during this difficult year are rare, but they do exist. But investors should not rush to buy shares of such companies for this reason alone. Outperforming during a bear market is great. What’s more important is to deliver above-market returns over the long term. And thankfully, some of these recent overachievers seem capable of doing just that. Let’s take two examples: Novo Nordisk (NVO 0.28%) and Amgen (AMGN -0.51%).
1. Novo Nordisk
Novo Nordisk is a Danish-headquartered pharmaceutical giant specializing in diabetes care. It has been a leader in this field for several decades, which partly explains its performance since the beginning of the year. Diabetes patients won’t stop taking the drugs they need to control this chronic disease, and doctors won’t stop prescribing these therapies either.
Novo Nordisk held a 31.6% share of the diabetes care market in August, up 1.7% year-on-year. Novo Nordisk should continue its momentum next year. Some of its products are still working well, especially the diabetes drugs Rybelsus and Ozempic. In the first nine months of the year, sales of Rybelsus soared 140% year-over-year to 7.2 billion Danish kroner (about US$1 billion).
Ozempic’s revenue jumped 86% year-on-year to DKK 42.8 billion (about $6.1 billion). Novo Nordisk’s total sales for the period were DKK 128.9 billion ($18.4 billion), up 26% from the prior year quarter. The company is also considering a critical regulatory development that could shake up its share price next year. Novo Nordisk is working on icodec, a new insulin product this could greatly simplify life for diabetic patients since it is a once a week option.
Icodec has already provided strong results in various late-stage clinical trials. Novo Nordisk expects to submit regulatory applications in the first half of next year. This once again underlines Novo Nordisk’s ability to innovate in its core therapeutic area. And it will serve him well in the years to come. The prevalence of chronic diseases, including diabetes, is increasing as the world’s population ages.
These two factors will only increase the need for new breakthrough treatments for diabetes. Few have been able to follow Novo Nordisk in this area. The company also develops therapies in other fields, including various rare diseases, Alzheimer’s disease, etc. After crushing the market for years, Novo Nordisk is not about to stop now as its ability to develop new therapies – a key factor in its success – is alive and well.
2. Amgen
Although Amgen has outperformed the stock market this year, the company’s financial results have not been as impressive. In the third quarter, the drugmaker’s revenue fell about 1% year over year to $6.7 billion. Some of the company’s legacy products are seeing sales drop due to competition. That includes rheumatoid arthritis drug Enbrel, whose third-quarter revenue fell 14% year-over-year to $1.1 billion.
Despite these headwinds, focusing on the long game is key. Amgen has earned significant endorsements over the past two years and is well positioned to continue to do so. Some of its most important new drugs include the cancer drug Lumacras, which first got the green light in the United States in May 2021.
Tezspire, an asthma treatment, first got the knot in the country in December 2021. And in addition to its already rich pipeline, Amgen recently announced acquisitions that will help it down the line. In October, the biotech acquired ChemoCentryx, a drugmaker specializing in autoimmune diseases, for $3.7 billion in cash.
The key asset in this transaction is Tavneos, which was first approved in October 2021 in the United States to treat vasculitis, a rare autoimmune disease. Some analysts see Tavneos’ annual potential at around $2 billion by 2030. More recently, Amgen announced that it would acquire Therapeutic Horizona biotech focused on rare diseases, for $27.8 billion in cash.
The transaction is expected to close by the first half of 2023 and help Amgen expand its pipeline and pipeline. Another Amgen business unit that looks promising is its biosimilar segment. According to a study by the Kaiser Family Foundation, in the United States, 83% of adults say that the cost of prescription drugs is unreasonable. Biosimilars often provide cheaper options for breakthrough but expensive drugs, and as such have saved patients and the US healthcare system billions over the years.
Amgen is currently working on several biosimilars, including one for the cancer drug Stelara, marketed by Amgen Johnson & Johnsonanother for the treatment of eye diseases Eylea, marketed by Regenerateand another for Soliris, which belongs to a subsidiary of Astra Zeneca and treats a rare blood-related disease called paroxysmal nocturnal haemoglobinuria.
Whether through the development of new drugs or biosimilars, Amgen has many candidates to replace its older products and reinvigorate revenue growth. This will allow the pharmaceutical company to be successful for a while.
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