1. Merck
Although 2024 hasn’t been kind to Merck, with its shares declining by 4%, the pharmaceutical giant still has plenty of reasons to be optimistic. One concern for investors is the potential competition for Merck’s blockbuster cancer drug, Keytruda, which has been a significant growth driver for the company. Summit Therapeutics is developing a drug called Evonesimab, which could rival Keytruda in the non-small cell lung cancer (NSCLC) market, one of its key areas.
Additionally, Keytruda is set to lose patent exclusivity in the U.S. in 2028, opening the door to generic competition. However, revenue from Keytruda is expected to continue growing until then, even with the advent of Evonesimab. The FDA has granted multiple indications for Keytruda, most of which are not likely to be challenged by Evonesimab before 2028. Merck is also working on a subcutaneous formulation of the drug, which should hold its ground even after patent expiration.
While these challenges are not uncommon for pharmaceutical companies, Merck’s long-term viability lies in its ability to innovate and develop new drugs. The company has an extensive pipeline with numerous programs underway and is expanding through acquisitions, such as the recent purchase of Acceleron Pharma, which brought in a new pulmonary arterial hypertension drug, Vyndamax.
Merck also has collaborations with smaller biotech firms, including Moderna, to develop personalized cancer vaccines. It’s important for investors not to focus solely on the challenges related to Keytruda, as Merck has numerous avenues for growth. The company has a strong track record for dividends, increasing payments by 71% over the past decade, currently yielding 2.96%, significantly higher than the S&P 500’s average of 1.32%.
2. Medtronic
Medtronic, a leader in the medical device industry, boasts a rare dividend history, having raised its payment for 47 consecutive years. This consistency is indicative of a robust business model, supported by a diverse range of products across multiple categories. Operating in over 100 countries worldwide, Medtronic is positioned to leverage various long-term growth opportunities.
The diabetes care segment has emerged as one of Medtronic’s biggest growth drivers recently. Its MiniMed 780G, the only insulin pump equipped with food-recognition technology, automatically adjusts insulin levels based on patient needs, addressing the needs of the approximately half a billion adults affected by diabetes globally. Additionally, Medtronic is developing a robotic-assisted surgical device, the Hugo System, which could prove significant for future growth.
With an increasing global population and rising healthcare demands, minimally invasive robotic surgery systems are becoming essential. These systems often result in smaller incisions compared to traditional surgery, reducing patient discomfort, blood loss, and recovery time. The Hugo System is currently undergoing clinical trials in the U.S.
While Medtronic has faced some revenue growth challenges in recent quarters, it is poised for recovery in the long term, especially as the healthcare sector continues to expand. The company is on track to become a Dividend King in the coming years, with the expectation that it will continue to grow its dividend payments.
In summary, Merck and Medtronic exemplify solid choices for income-focused investors. Both companies have robust business models, strong dividend histories, and exciting growth prospects that can offer investors stability and peace of mind in an uncertain economic landscape.