Their products are readily available to pharmacies and other commercial outlets throughout the United States, which has made them attractive to investors in recent years due to their presence and stability.
While they both may seem like similar investments at first glance, there are some crucial differences between the two business models that need to be analyzed. This information should be considered along with specific data about the future of their relative markets that can be consulted before making any investment decisions.
Strengths & Weaknesses Of Drug Makers As Investments
One positive aspect of investing in drug makers is the size and consistency of their markets.
Pharmaceutical companies obviously have a large and consistent presence in the American economy, and many people need to use their products daily. This translates into consistent demand for their products, which translates into consistency as an investment.
They also tend to be good innovators, which means that even if a drug is found to cause problems, they can quickly develop alternatives and market them aggressively.
Drugs are also not cheap for consumers due to heavy regulations and controls, even though they are easily mass produced. This means that they tend to have higher profit margins than companies dealing with other products.
This potential for huge returns and quick growth means that drug companies are always a favorite for investors looking to get the best returns in their portfolio.
A major problem with investing in these kinds of companies is the potential for litigation and negative publicity. Eli-Lilly [NYSE: LLY] has been named in high profile lawsuits in the past, and the recent opioid epidemic has already affected shares of a number of pharmaceutical companies as they face scrutiny.
The Attorney General’s Office in several states has already announced lawsuits against drug companies who engaged in deceptive marketing practices that were a factor in overdoses and deaths. Some of these allegations can lead to serious long-term consequences.
While these actions can certainly lead to some short term volatility, most major drug makers tend to bounce back quickly even after controversy or losses due to litigation.
Due to this potential for problems after a drug hits the market, the FDA approval process and other hurdles or delays can sometimes be a barrier to drug companies reaching their full financial potential in any given year.
Evaluating AbbVie As Potential Buyer
AbbVie [NYSE: ABBV] is the owner of the anti-inflammation drug Humira that is widely used to treat arthritis, psoriasis, and other related ailments. This drug has a huge market and AbbVie will continue to be a major player.
Many cancer treatment regimens also include drugs owned by AbbVie, and there is hype focused on an upcoming cancer drug that may be a game changer in their market.
AbbVie is already known for having some of the largest profit margins for their drugs when compared to most other comparable companies.
They are also in the process of getting FDA approval for several other drugs that have billions of dollars in market potential.
This is in addition to the fact that AbbVie [NYSE: ABBV] has been giving large dividend payouts in recent years and their stock is projected to have solid growth for at least another five years. These factors make AbbVie an attractive option for almost any investor.
Is Eli-Lilly A Good Investment?
Eli-Lilly [NYSE: LLY] has a drug similar to Humira along with other drugs prescribed to diabetics that have all experienced explosive growth recently.
EliLilly shares have also performed better over the last several months than AbbVie, making them seem like a safer bet based on recent data.
However, the company has experienced a lot of competition recently from generic drugs, including those for erectile dysfunction and insulin products that will certainly continue to eat into their market share.
These concerns will likely hang around for some time, as the market for generic drugs in these areas will only continue to grow and become an attractive option for consumers.
They also have several new drugs in the late stages of approval that may prove to be very profitable, especially considering some of these are focused on common conditions like migraines and immune disorders.
Annual growth is expected to be consistent for Eli-Lilly [NYSE: LLY] over the next several years, although their dividend payout is a much smaller percentage than AbbVie, which would mean that comparable performance between the two stocks will still favor investing in AbbVie.
AbbVie Vs Eli-Lilly: The Bottom Line
AbbVie [NYSE: ABBV] will probably be a better option for most investors due to less foreseeable problems, strength of current products, and the potential for larger dividend payouts.
While Eli-Lilly’s stock is strong and they are a comparable major player in the same industry, the company faces more competition from generics and other established companies who already have a foothold in their core areas of business.
AbbVie [NYSE: ABBV] will probably yield a better return on investment over the next several years for the reasons discussed above.
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The author has no position in any of the stocks mentioned. Financhill has a disclosure policy. This post may contain affiliate links or links from our sponsors.