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Are Biohaven, Eli Lilly and Thermo Fisher inflation-proof stocks?

Healthcare stocks such as Thermo Fisher, Biohaven Pharmaceuticals and Eli Lilly have been popular buys in recent weeks as hedge funds look for defensive positions amid rising inflation and recessionary fears.

Healthcare stocks Biohaven Pharmaceuticals [BHVN], Eli Lilly [LLY] and Thermo Fisher [TMO] have been popular buys with hedge funds in recent weeks as money managers look for defensive positions amid recessionary risks.

According to data from InsiderScore seen by CNBC, Soros Fund was the top hedge fund buyer of Biohaven in the second quarter. Avidity Partners and Lone Pine Capital were the top buyers of Eli Lilly and Thermo Fisher, respectively.

The boost in investor sentiment has driven the share prices of Biohaven Pharmaceuticals and Eli Lilly higher in recent weeks, while Thermo Fisher has trended lower.

Biohaven set for Pfizer acquisition

In August, migraine drugmaker Biohaven reported sales of its blockbuster oral treatment Nurtec rising 57% sequentially to $194m in the second quarter of 2022.

The company didn’t hold an earnings call because it’s currently “focused on workstreams related to the closing” of its $11.6bn takeover by cash-rich Pfizer [PFE] announced back in May.

The deal values Biohaven at $148.50 per share and is expected to close in early 2023. The Biohaven share price closed on 6 September slightly higher at $149.61, up 8.6% year-to-date.

“We believe Pfizer is uniquely positioned to help [Biohaven’s] portfolio reach its full potential given our leading scale and capabilities, including comprehensive field force engagement with primary care physicians, specialists and health systems delivering the right information at the right time,” Nick Lagunowich, Pfzier’s global president of internal medicine, said.

Eli Lilly’s weight loss and Alzheimer drugs

Back in May, Eli Lilly saw its weight loss drug tirzepatide, which is branded as Mounjaro, approved by the US Food and Drug Administration for blood glucose management in patients with type 2 diabetes. Eli Lilly’s Alzheimer’s drug, donanemab, is also currently under review as of August.

Analysts at Citi wrote in a note to clients at the end of last month that any weakness in data from rival Alzheimer’s drugs — Elsai’s [4523.T] lecanemab and Roche’s [ROG.SW] gantenerumab — could present a buying opportunity for Eli Lilly investors.

Furthermore, the analysts are impressed by the progress being made on tirzepatide. “Our ongoing feedback from physicians [and] payers continue to fuel our optimism for broader access, reimbursement and adoption given the previously unforeseen glucose and weight lowering properties,” they wrote, as reported by Investing.com.

Citi believes it is “good to be Lilly in 2022”. The bank reiterated a ‘buy’ rating on the stock and raised its price target from $285 to $370, implying an upside of 20.6% from the 6 September closing price of $306.82.

As of 6 September, the Eli Lilly share price is up 12.3% year-to-date and up 2.15% in the past month. Recent drug approvals boosted the stock to an all-time high of $335.33 on 15 July.

Thermo Fisher faring well amid inflation

No medical research is possible without world class laboratory supplies, equipment, chemicals and materials. This makes Thermo Fisher a strong play on the healthcare theme.

At the start of August, Jim Cramer named the medical manufacturer as one of seven “Covid era winners” that have staying power amid rising inflation and fears of a recession.

According to Baird analyst Catherine Schulte, pricing and inflation pressures haven’t affected Thermo Fisher’s end markets and activity levels. “We continue to view [Thermo Fisher] as a core holding and top idea into H2 2022 and 2023,” Schulte wrote in a note to clients seen by TipRanks.

On its Q2 earnings call in July, Thermo Fisher raised its full-year revenue guidance by $700m to $43.15bn, which would represent 10% growth year-over-year. Its earnings guidance was raised slightly by $0.28 to $22.93 per share.

Despite this optimistic outlook, the Thermo Fisher share price is down 18.2% year-to-date and 7.6% in the past month.

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