5 Drug Stocks That Could be Big Winners in Q2 Earnings

As the pharma and biotech industry rolls to the end of another quarter, some investors are keen to pick up information about possible stock surges due to positive pipelines, favorable regulatory news and the overall economic health of the country.

As investors look for companies, analyst Arpita Dutt, a founding partner at Brahams, Dutt, Badrick, French LLP, pegged five companies that could be big winners by the end of the second quarter. 

1. Merck

New Jersey-based Merck & Co. (MRK) is expected to report its second quarter earnings by the end of this month. Dutt noted the company has exceeded expectations for the past four quarters and is likely to do so again, due to its deep pipeline. Although Merck has seen some recent setbacks with its blockbuster anti-PD-1 drug Keytruda and is facing some generic drug challengers, Dutt said the company should continue to see long-term growth, which bodes well for investors. Shares of Merck are down slightly this morning, trading at $62.41 as of 10:34 a.m.

2. Eli Lilly

Like Merck, Indiana-based Eli Lilly (LLY) is expected to report its second quarter earnings by the end of the month. In two of the last four quarters, Dutt said the company surpassed expectations, including the most recent quarter. Eli Lilly has seen some challenges, including last year’s failure of its Phase III Alzheimer’s treatment, but the company does have a strong pipeline. Earlier this month, the U.S. Food and Drug Administration (FDA) granted priority review for its breast cancer treatment, Abemaciclib. Dutt said the company is expected to see earnings growth of about 16.7 percent this year. Dutt said Lilly’s stock has performed better than the Zacks-categorized Large Cap Pharmaceuticals group, gaining 13.5 percent. The industry as a whole, according to the group, was up about 11.3 percent. Shares of Eli Lilly are slightly down this morning, trading at $83.34 as of 10:39 a.m.

3. Celgene

Celgene (CELG) has investments across the pharma industry, which has earned it the BioSpace moniker of "pharma’s best friend." The company’s second quarter should see some growth due to increased sales of Otezla and Pomalyst. Otezla, approved for psoriatic arthritis, saw revenue increase 116 percent in 2016 compared to 2015 sales. The drug generated $1.2 billion. Pomalyst is an effective drug for patients with multiple myeloma and is used by patients who have either not responded to Revlimid or have seen the blood cancer return. Celgene is also benefitting from its multiple partnerships that the company has forged with the likes of Juno Therapeutics (JUNO), Jounce Therapeutics (JNCE), bluebird bio (BLUE), Agios (AGIO), Epizeme and more. Celgene’s partnership goals has been a strategic effort to diversify revenue streams so it is not so financially dependent on Revlimid and its own pipeline. Celgene is expected to report its quarterly earnings later this month. In the near future, Dutt said Celgene is looking for the possible approval of Idhifa for acute myeloid leukemia in August, and is also looking to file for approval of multiple sclerosis treatment, ozanimod, by the end of the year. Shares of Celgene are trading at $132.43 as of 10:46 a.m.

4. Gilead

California-based Gilead (GILD) has faced dwindling revenue in the hepatitis C market due to the efficacy of the drugs it has developed. The company does have revenue drivers in the HIV market. The company is expected to report quarterly earnings by the end of July and Dutt expects they will be positive overall. If Gilead finally pulls the trigger and flexes its M&A muscle, share prices could go much higher than anticipated. Shares of Gilead Sciences are trading at $59.81 as of 10:50 a.m.

5. Shire PLC

For three of the past four quarters, Ireland-based Shire (SHPG) has surpassed analyst expectations. In early August, Dutt expects the company will continue that trend. Earlier this month Shire submitted an Investigational New Drug Application to the FDA for SHP654, also known as BAX 888, a factor VIII (FVIII) gene therapy for the treatment of hemophilia A. The filing indicated the company’s commitment to cutting-edge gene therapy treatments. In June, the FDA approved Shire’s combination treatment Mydaysis for patients 13 years and older with attention deficit hyperactivity disorder (ADHD). Shares of Shire are down this morning, trading at $161.65 as of 10:56 a.m.