President Donald Trump’s trade strategies have stirred up chaos in the financial sector on Wall Street. He has advocated for imposing steep tariffs on foreign-made products as a means of encouraging domestic manufacturing.
It was thought that certain sectors, particularly healthcare, might be exempt; however, it’s now clear that this won’t happen. Increased tariffs on imports could lead to higher costs for companies, compressing their profitability and impacting their share prices. Nevertheless, amidst this challenge, there are still some promising healthcare stocks to consider, such as Eli Lilly (LLY) and Novartis (NVS).
1. Eli Lilly
For several years, Eli Lilly has been growing its U.S. production capabilities substantially, but it has lately stepped up these expansion plans significantly. In fact, this pharmaceutical pioneer has pledged or actually invested around $50 billion since 2020 to either construct new facilities or renovate existing ones within the nation. Approximately half of this investment was unveiled during the first quarter.
As reported by management, upon wrapping up their current projects, they will have the capability to produce all medicines intended for U.S. patients domestically. This move not only allows for increased domestic production but also boosts exportation. Essentially, this pharmaceutical company aims to become less vulnerable to tariffs under Trump’s administration by primarily manufacturing within the country itself.
And there are other reasons to invest in Eli Lilly. Here are three:
Initially, the firm has shown exceptional progress in its primary focus on diabetes and obesity over the past few years. The more recent product releases, specifically Mounjaro and Zepbound, are yielding substantial profits and contributing significantly to the company’s revenue and profit growth.
During the initial three months of operation, its total revenue increased by a substantial 45% compared to the same timeframe last year, amounting to approximately $12.7 billion. Its net earnings also showed a significant improvement, reaching $2.8 billion – an increase of 23% compared to the previous year. Over the next five years, such impressive results should ideally become standard practice.
Next, Lilly boasts a broad range of upcoming projects. Recently, Lilly announced positive phase 3 findings for an oral GLP-1 candidate, orforglipron. This is significant as it offers a more convenient option for patients, as the company’s current GLP-1 medicines are given subcutaneously. Additionally, there are numerous other promising candidates in development, extending beyond diabetes and obesity management.
3rd Point: Despite having a relatively low forward dividend yield of 0.8%, the company is a strong choice for dividend investors. It has significantly boosted its payout by an impressive 102.7% over the past five years. Whether you’re looking for growth or income, Eli Lilly is a top stock to consider buying now and holding for the long term, even amidst the potential impact of tariffs.
2. Novartis
In response to tariff implications, Novartis plans to adopt a comparable strategy. They’ve declared their intention to invest approximately $23 billion over the next five years to enhance their manufacturing presence within the United States.
In the short term, the company might experience a slight setback due to tariffs, but if these persist, it has the potential to adapt effectively. Given its robust financial performance and bright future outlook, it stands as an outstanding healthcare stock worth considering in the current scenario.
During the initial three months of our operations, our total sales soared by 12% compared to the same timeframe last year, reaching a staggering $13.2 billion. Our net profit also rose significantly, amounting to $4.5 billion, which represents a 22% increase when compared to the corresponding period in the previous year.
It’s possible that people may mention that Novartis will no longer have exclusive U.S. patent protection for its heart failure medication Entresto this year. Despite this, it was its leading drug in terms of sales during the first quarter, raking in approximately $2.3 billion, which represents a 20% increase compared to the same period last year.
I find myself reflecting on the impending change, as it’s clear that Entresto, along with its alternatives Fabhalta for paroxysmal nocturnal hemoglobinuria and Scemblix/Pluvicto for cancer treatments, will soon be phased out. However, it’s reassuring to know that the management has been proactive in preparing for this transition, and they are readying newer medications to take their place.
Between 2021 and 2023, each one of them gained U.S. approval first. In the initial quarter, Pluvicto, which is the highest-selling among the group, yielded a revenue of $371 million, marking a 20% rise compared to the previous year. Additionally, Novartis’ robust pipeline promises even more product launches ahead. The company presently manages over 100 ongoing projects.
In conclusion, Novartis is not only a reliable income-generating stock but also stands out with its consistent dividend growth. For 28 years in a row, it has increased its dividends, and currently, it provides a projected yield of 3.3%. This is notably higher than the average yield of 1.3% offered by the S&P 500.
For those who are willing to wait, it’s expected to provide substantial rewards, even amidst the approaching challenge of a significant patent expiry and possible repercussions from tariffs.
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2025-07-20 18:04