all eyes are on Eli Lilly (LLY 1.00%) in recent times as it looks to increase its earning potential in the billion-dollar weight loss treatment market. Lilly already makes tremendous revenue from Monjaro, a diabetes drug doctors also prescribe for weight loss. And now development can really move forward. The company scored a big win earlier this month when regulators approved the drug Zepbound for weight management.
Lilly’s success and further prospects in this market have driven the share price and valuation higher, meaning some good news could price the stock at today’s levels. I still think Lilly is a great long-term stock, but right now, some other pharma companies represent better buying opportunities. They are trading at cheap prices and can also give you top rewards over time. So today, you’ll probably want to ignore Eli Lilly and grab these inexpensive but promising players instead.
Many investors fled, leaving stocks down 40% this year Pfizer(PFE 0.20%) COVID-19 vaccines and treatments are facing a decline in demand. As we move towards a post-pandemic world, it is not surprising that these products will generate less revenue than they did at the peak of the health crisis. Additionally, Pfizer expects some other key products to lose exclusivity this decade, which would impact earnings.
Now here’s why I won’t let it stop you from buying shares of Pfizer. The company has prepared for these challenges through one of its biggest product launches ever. It aims to release 19 new products in 18 months and 13 have already been completed. These products acquired through business deals could help the company reach revenues of $84 billion by 2030. This is 65% more than pre-coronavirus days.
That revenue forecast does not include coronavirus-product revenues, and those vaccines and treatment products could still bring in billions of dollars for Pfizer. Therefore, as recurring revenue sources, primarily during the flu/vaccination season, they can contribute to annual growth.
AbbVie (ABBV 0.01% ) also faces a huge challenge today, but like Pfizer, the pharma giant entered this moment with the tools to drive a new era of growth. The company’s best-selling drug – which is also the world’s best-selling drug – recently lost its exclusivity. At its peak last year, Humira generated more than $21 billion in revenue across seven treatment areas.
However, product sales are now declining, and this is clearly impacting AbbVie’s earnings. In the most recent quarter, Humira sales fell 36% to $3.5 billion, and AbbVie reported declines in revenue and profit.
But, if you look at ABV from a long-term perspective, the situation looks brighter. The company is preparing two new immunology drugs — Rinvoq and Skyrizi — to take on Humira, and it’s already getting started. AbbVie has received approval for both drugs combined in eight indications. Rinvoq and Skyrizi are set to deliver more than $11 billion in revenue this year. And the company estimates that their revenue will surpass that of Humira by 2027.
AbbVie also sells several other blockbusters in areas including neuroscience, oncology and aesthetics that could contribute to growth over time.
Why is it better to buy Pfizer and AbbVie?
Both Pfizer and AbbVie have strong long-term prospects, even if they may be a bit stagnant in the near term. This near-term pressure means they are trading for bargains right now and at much lower levels than Lily.
PFE PE Ratio (Forward) data by YCharts.
Of course, it’s important to keep it in perspective. Lilly’s revenue reached double digits in the most recent quarter, and the company doesn’t face the same headwinds as Pfizer and AbbVie. Therefore, Lilly’s valuation is not ridiculous given today’s earnings and future prospects.
But, as mentioned earlier, the reason for choosing Pfizer and AbbVie over Lilly is all about opportunity. These struggling players offer bright prospects for the future, but you can buy them at a bargain price today. And that is why now is the time to get into these stocks, which can provide you huge upside from these levels if held for the long term.
Adria Cimino has no position in any stocks mentioned. The Motley Fool has a position in and recommends Pfizer. The Motley Fool has a disclosure policy.