These 3 healthcare companies had the best selling drugs last year

You might think that if a drugmaker has a best-selling drug, it would be a lock to be a top-performing stock and a no-brainer buy. This may be true in some cases. In others, it can be a source of risk as investors grow concerned about what a company’s growth opportunities will look like after the relevant patent expires, especially when the drug is a significant part of the company’s sales.

The three best-selling drugs in 2023 came from Merck (MRK 0.32%), AbbVie (ABBV 0.26%)and Novo Nordisk (NGO -1.58%). Here’s a closer look at these blockbusters, how much revenue they brought in, what their growth prospects look like, and whether these stocks are good investments today.

Merck: Keytruda ($25 billion)

At a whopping $25 billion in sales in 2023, Keytruda was by far Merck’s best-selling drug last year. It accounted for just under 42% of the company’s revenue. The cancer drug has been extremely successful in helping to extend the lives of patients, and the Food and Drug Administration has approved it for many different indications. Keytruda sales rose 21% last year when you exclude the currency impact. Analysts believe its sales could grow further, surpassing $33 billion in 2027, before biosimilars begin to enter the market.

The big question for Merck is how it can account for the looming patent cliff and offset the inevitable decline in sales. The company developed new drugs and acquired businesses to soften the blow. A particularly attractive asset is Winrevair, a drug for pulmonary arterial hypertension; at its peak, it can generate $5 billion in sales.

Merck still has several years to bring new products to market, but there’s no doubt that Keytruda’s patent cliff could become a problem. Now trading at 14 times estimated earnings, the stock is a bit underpriced. If you’re comfortable with a bit of risk and uncertainty going forward, it might be worth adding to your portfolio.

AbbVie: Humira ($14.4 billion)

Humira is AbbVie’s best-selling arthritis drug. At $14.4 billion, it brought in plenty of revenue in 2023 — 27% of the company’s total sales. Sales of the drug have already begun to decline due to increasing competition and fell by more than 32% last year.

However, the company has a couple of fast-growing immunology drugs in Skyrizi and Rinvoq, which management expects to combine for higher top-line sales than Humira. Last year, their sales already totaled 11.7 billion dollars.

As a result, there is a little less risk because the business has worked on the growth strategy. By next year, it expects a “return to robust growth” and forecasts a high single-digit annual growth rate thereafter. AbbVie stock is trading at 18 times its forward earnings estimates and is a potentially undervalued stock for investors to buy and hold right now.

Novo Nordisk: Ozempic ($13.9 billion)

The only drug on this list that isn’t facing patent expiration anytime soon is Ozempic. In most markets, including the US, it won’t lose patent protection until the next decade. That’s good news for Novo Nordisk: Not only did the drug grow 66% in revenue last year (excluding currency), but it also accounted for more than 41% of the company’s total sales.

The bigger risk for investors is that new weight-loss treatments could emerge that could destroy Ozempic’s sales growth. Although it’s technically approved for diabetes, patients have been taking Ozempic off-label for weight loss because it can help people lose an average of more than 15 percent of their body weight. I wouldn’t expect it to remain a top drug, just because Novo Nordisk now has a weight loss drug approved in Wegovy that could overtake Ozempic in the not-too-distant future.

Regardless, Novo Nordisk is a top healthcare stock to invest in; provides a great way to take advantage of potential growth opportunities in both weight loss and diabetes care. That’s why the stock is the only one on this list that isn’t cheap — it’s trading at a forward price-earnings multiple of 38. But despite its high price, it may still be a good buy given the company’s price. fantastic growth opportunities. Novo Nordisk expects revenue growth of 22% to 28% this year.