Over the course of past 10 years, the dividends offered by Novartis have been increasing with a very discreet ratio; due to increase in sales coupled with large amount of Free Cash Flow. Merck & Co., Inc. (NYSE:MRK) on the other hand has provided a flat dividend yield over the year, on contrary dividend yield for Pfizer Inc. (NYSE:PFE) has cut back on its dividend yield after 2010, in the wake of decline in sales due to patent expiration.
Pfizer Inc. (NYSE:PFE) outperforms in terms of net income growth over the period last 3 years, which is due to its large scale and diversified portfolio. On contrary Merck & Co., Inc. (NYSE:MRK) has a negative income growth in the face of massive decrease in its revenues this quarter, due to declining sales of its two blockbuster drugs, namely Singulair and Januvia. Merck & Co., Inc. (NYSE:MRK) and Novartis AG (ADR) (NYSE:NVS) both struggle with their return on equities, where as Pfizer is in a much position considering this metric.
My pick and final thoughts:
While Pfizer Inc. (NYSE:PFE) and Merck struggle with the patent expiry drugs, Novartis AG (ADR) (NYSE:NVS), continues to enhance the drugs in its pipeline, which gives it an added advantage over the others. Novartis AG (ADR) (NYSE:NVS) has great prospects in major markets; where it has been able to surge its operations, which indeed are very promising. To top that, the company is also growing very rapidly in Chinese markets, which puts it in a better position to provide reasonable returns to its investors as compared to its rivals. Pharmaceutical division which contributes the most towards Merck’s total sales leaves the company vulnerable to take a nose dive in terms of profits, considering stiff competition offered from generic drug businesses, after the expiry of majority of its patents.
Pfizer and Merck on the other hand are aggressively pursuing share buybacks to bloat per share earnings to appease the investors, which in the longer term is not very sustainable. Moreover Pfizer is experiencing sluggish growth in its top new pills, which paints a disappointing picture for the company profits. Analyzing the drug pipelines for these giant businesses, we come to notice, that Novartis promises to treat a wide array of cancers with the help of its upcoming CART-19, which seems to be a mega blockbuster. In the light of the above mentioned, Novartis is my confident pick of the day.
The article Which Pharmaceutical Giant Is the Best Investment? originally appeared on Fool.com and is written by Zain Raza.
Zain Raza has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Zain is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.
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