The Safer Bet: J&J vs. Pfizer

The pharmaceutical sector, amid the ongoing disruption caused by technological advancements, is well-positioned to grow in the next decade. The use of AI in drug discovery is proving to be a game-changer, enabling pharmaceutical companies to analyze complex, large data sets efficiently, accelerating the pace at which groundbreaking drugs are being approved by the FDA. Technological advancements are also promoting deeper studies related to gene editing, which is now becoming a key technology used to identify the underlying causes of terminal illnesses such as cancer. In addition to these tech-related tailwinds, the pharmaceutical sector benefits from the aging global population, which is expected to boost the demand for pharmaceutical products in the long run. According to Vision Research, the global pharmaceutical industry will grow at a CAGR of 6.15% through 2033 to a staggering market value of $2.8 trillion. Investing in the pharmaceutical sector will expose investors to defensive stocks that perform well during market downturns as well.

The Case For Pfizer

Pfizer, Inc. (NYSE: PFE), a long-standing pharmaceutical giant that shot to fame during pandemic days, is one of the safest bets in the sector given its strong pipeline of products, which includes potential blockbuster drugs targeting diseases and conditions such as cancer, Pulmonary Arterial Hypertension, Respiratory Syncytial Virus Infection, and Hemophilia A. The company’s exposure to fast-growing markets such as Brazil, India, and China is also one of the biggest strengths of Pfizer as it enables the company to enjoy better-than-average growth rates. In addition to this, Pfizer will benefit from the planned cost-cutting measures that will save the company $4 billion by the end of this year.

Investors, however, will have to keep an eye on a few risks, including near-term patent expiry for key drugs such as Eliquis and Ibrance. Failure to commercialize a few other blockbuster drugs by 2027 will lead to a major decline in revenue. The increasing competition in the market, especially from well-established drugmakers such as Merck and Novartis, is also another key risk that needs to be monitored carefully.

The Case For J&J

Johnson & Johnson (NYSE: JNJ), established in 1886 and headquartered in New Jersey, is a pharmaceutical giant that is followed by many investors. The company has a promising drug development pipeline which includes immunology drug Tremfya and oncology drug Carvykti. Successful commercialization of these drugs will boost J&J’s revenue growth in the next five years. One of the key strengths of J&J is its exposure to different market segments within the healthcare sector, including pharmaceuticals, medical devices, and consumer health products. This diversified portfolio helps the company weather economic downturns, making J&J a good investment for investors looking to hedge some of the risks of investing in stocks.

Similar to Pfizer, however, J&J also faces the risk posed by near-term patent expiries, especially for the blockbuster drug Stelara. The company also faces rising competition from its rivals and drug pricing pressures amid regulatory intervention.

Dilantha DeSilva has positions in Pfizer. Stocks.News has positions in Johnson & Johnson.