Summary

Revenue and Earnings Growth

The recent earnings reports from major global healthcare companies highlight a trend of robust financial performance, marked by better-than-expected earnings per share (EPS) and revenue. Most companies exceeded revenue expectations, showcasing resilience and adaptability in a challenging market. For instance, Roche Holding AG and Thermo Fisher Scientific Inc reported strong revenue growth driven by their diversified product portfolios and strategic expansions. Similarly, companies like AbbVie Inc and Danaher Corp reported EPS figures that surpassed estimates, underscoring their effective cost management and operational efficiencies.

Innovation and Product Development

Significant investments in research and development are paying off for these healthcare giants, with many reporting notable progress in their clinical pipelines. Vertex Pharmaceuticals Inc showcased advancements in its cystic fibrosis and pain management programs, while Pfizer Inc and Johnson & Johnson highlighted their efforts in oncology and immunology. The introduction of new, high-impact products continues to drive growth, with Thermo Fisher Scientific launching the Thermo Scientific Stellar Mass Spectrometer and Abbott Laboratories introducing new diabetes care products, bolstering their market positions.

Strategic Acquisitions and Collaborations

Strategic acquisitions and collaborations are playing a crucial role in enhancing capabilities and market reach. Companies like Thermo Fisher Scientific, with its acquisition of Olink, and AbbVie, with their Ex-Humira Growth Platform, are strategically acquiring new technologies and products to strengthen their market positions and expand capabilities. Expansion into emerging markets and strategic partnerships are also prominent, as seen with Thermo Fisher Scientific’s new facilities and partnerships in Indonesia and Singapore, and Pfizer’s reinforced vaccine portfolio globally.

Operational Efficiency and Cost Management

Effective cost management strategies have led to improved gross and operating profit margins for several companies. Danaher and Intuitive Surgical Inc, for instance, reported margin improvements due to efficient cost management. Initiatives such as Pfizer’s cost realignment and manufacturing optimization programs are setting the stage for future margin expansion and operational efficiency, reflecting a broader trend of enhancing operational effectiveness across the sector.

Regulatory Approvals and Market Leadership

Achieving key regulatory approvals has been a common theme among these companies. Roche’s multiple regulatory wins and Johnson & Johnson’s upcoming milestones for new products demonstrate their commitment to maintaining regulatory compliance and market leadership. Market leadership is also being solidified, with Pfizer maintaining a strong position in the pneumococcal vaccine market and AbbVie reporting substantial contributions from SKYRIZI and RINVOQ, underscoring their dominance in the immunology segment.

Challenges and Strategic Responses

Despite the overall positive performance, companies have faced challenges from competition and market pressures. AbbVie and Amgen Inc, for example, encountered difficulties from biosimilar competition and declining sales in certain segments. However, strategic planning and new product launches are being employed to mitigate these impacts. Global economic challenges have also been reported, with Danaher noting difficulties in China and the life sciences segment, but effective cost management has helped improve margins.

Top Portfolio Holdings

Roche Holding AG (RHHBY)

Portfolio weight: 5.66%

• EPS: ₣10.23 reported vs ₣9.24 estimated
• Revenue: ₣29.85B reported vs ₣29.38B estimated

Roche reported an 8% increase in group sales, with significant growth in both Pharma and Diagnostics divisions, excluding the impact of COVID-19 sales. The company’s operating profit increased by 11%, and it received multiple key regulatory approvals, including for Ocrevus and a biosomal prefilled syringe. Positive phase two data for its obesity medicine, CT868, and several product launches in the Diagnostics division, including FDA EUA approval for the COVID-Lia respiratory panel, highlight the company’s ongoing growth and innovation. Roche confirmed its guidance on group sales, projecting continued strong growth and increased its core EPS outlook to high single-digit growth. However, the company faced setbacks with disappointing data in the Terra Golemap program and the discontinuation of the phase two study of ASO factor B in geographic atrophy.

Danaher Corp (DHR)

Portfolio weight: 5.60%

• EPS: $1.72 reported vs $1.58 estimated
• Revenue: $5.74B reported vs $5.58B estimated

“Our team executed well during the second quarter, delivering better-than-expected revenue, earnings and cash flow. We were particularly pleased with the sustained positive momentum in our bioprocessing business and with strong performance at Cepheid, which we believe gained market share in molecular testing again this quarter. There’s a bright future ahead for Danaher. The transformation in our portfolio over the last several years has created a focused life sciences and diagnostics leader positioned for higher long-term growth, expanded margins, and stronger cash flow.” – Rainer M. Blair, CEO.

Danaher reported a better than expected Q2 performance with notable revenue, earnings, and cash flow, alongside market share growth in its Cepheid business and a positive outlook for its bio processing business despite a low single digit core revenue decline expected for the full year 2024. However, the company faced a 3.5% core revenue decline in Q2, with significant challenges in China and the life sciences segment. Despite these challenges, improvements in gross and operating profit margins were achieved through effective cost management. Danaher also highlighted its commitment to innovation and sustainability, introducing new products in the bio processing market and committing to science-based emission reduction targets.

Thermo Fisher Scientific Inc (TMO)

Portfolio weight: 5.66%

• EPS: $5.37 reported vs $5.12 estimated
• Revenue: $10.54B reported vs $10.51B estimated

“Our excellent execution enabled us to deliver another quarter of strong financial performance and share gain. We continue to see the benefit of our proven growth strategy and the impact of our PPI Business System in our performance. Shortly after the quarter ended, we were also pleased to welcome our Olink colleagues to Thermo Fisher and are excited about the power of this new combination to better serve our customers and advance science.” – Marc Casper, CEO.

Thermo Fisher reported a strong Q2 2024 with revenue of $10.54 billion and an adjusted EPS increase of 4% year over year, leading to raised guidance for the full year. The company introduced high-impact products like the Thermo Scientific Stellar Mass Spectrometer, demonstrating a commitment to innovation. It also expanded its global reach and services, including a new ultracold facility in the Netherlands and collaborations in Indonesia and Singapore. Thermo Fisher’s acquisition of Olink enhances its proteomics capabilities, signaling strategic growth in this area. Despite varied segment performance and the impact of foreign exchange, the company’s focus on operational efficiency and sustainability initiatives underscores its positive outlook and strategic positioning.

AbbVie Inc (ABBV)

Portfolio weight: 5.42%

• EPS: $2.65 reported vs $2.56 estimated
• Revenue: $14.46B reported vs $14.03B estimated

“Our business continues to perform exceptionally well, with second quarter results meaningfully ahead of our expectations. Based upon the significant momentum of our ex-Humira growth platform, our continued investments in the business and our pipeline progress, we are very well positioned to deliver our top-tier long-term outlook.” – Robert Michael, CEO.

AbbVie’s Ex-Humira Growth Platform is set to exceed initial sales guidance by over $1 billion, highlighting strong performance in immunology and oncology. SKYRIZI and RINVOQ have significantly contributed to this success, with combined sales of more than $4.1 billion this quarter. Despite facing biosimilar competition leading to a 28.9% operational decline in HUMIRA’s global sales, AbbVie’s strategic planning has mitigated the impact. The company’s oncology portfolio showed mixed results, with strong performances from VENCLEXTA and ELAHERE offsetting declines in IMBRUVICA sales. AbbVie has raised its full-year guidance, reflecting confidence in continued growth.

Pfizer Inc (PFE)

Portfolio weight: 5.26%

• EPS: $0.60 reported vs $0.46 estimated
• Revenue: $13.28B reported vs $12.99B estimated

“This was Pfizer’s first quarter of topline revenue growth, on a year-over-year basis, since the fourth quarter of 2022 when our COVID revenues peaked. Importantly, the strong 14% operational revenue growth of our non-COVID products in the second quarter demonstrates our continued focus on commercial execution. In support of our stated strategic priority to realign our cost base, we continue to progress our cost realignment program. Additionally, with our more recent announcement of the first phase of our Manufacturing Optimization Program, we believe we are setting the foundation for future margin expansion.” – David Denton, CFO.

Pfizer reported significant year-over-year revenue growth, marking a recovery from the decline in COVID revenues and showcasing the company’s ability to drive growth beyond its COVID-related products. The company highlighted strong performance in its oncology portfolio and is advancing the development of DANUGLIPRON for obesity, targeting a rapidly-growing market. Pfizer is also expanding its vaccine portfolio, with Prevnar-20 reinforcing its leadership position in the US pneumococcal vaccine market. The company raised its full-year 2024 guidance for revenue and adjusted diluted earnings per share, reflecting strong business performance and confidence in its financial outlook. Additionally, Pfizer is on track to deliver substantial savings from its Manufacturing Optimization Program and cost realignment program, aiming to improve operational efficiencies and financial health.

Johnson & Johnson (JNJ)

Portfolio weight: 5.25%

• EPS: $2.82 reported vs $2.71 estimated
• Revenue: $22.45B reported vs $22.32B estimated

“Johnson & Johnson’s second quarter performance reflects our relentless focus on advancing the next wave of medical innovation and resulted in strong sales and adjusted operational earnings per share growth. With a robust pipeline, upcoming regulatory milestones for RYBREVANT and TREMFYA, the integration of Shockwave, and continued expansion of newly launched products, including ACUVUE OASYS MAX 1-Day contact lenses and our VARIPULSE platform, we have a strong foundation for near and long-term growth.” – Joaquin Duato, CEO.

Johnson & Johnson reported a 6.6% increase in worldwide sales to $22.45 billion in Q2 2024, with significant growth in the U.S. and internationally, excluding COVID-19 vaccine impacts. The Innovative Medicine segment led with a 7.8% increase, driven by key oncology brands. Adjusted EPS grew by 10.2% to $2.82, reflecting strong profitability. Strategic acquisitions totaling approximately $17 billion are highlighted as future growth drivers. The company raised its full-year 2024 sales guidance, signaling confidence in continued strong performance despite anticipating challenges from the STELARA biosimilar entry.

Abbott Laboratories (ABT)

Portfolio weight: 5.09%

• EPS: $1.14 reported vs $1.10 estimated
• Revenue: $10.38B reported vs $10.38B estimated

“We achieved another quarter of strong growth in our underlying base business. We have a lot of positive momentum heading into the second half of the year and are raising our full-year guidance.” – Robert Ford, CEO.

Abbott Laboratories raised its full-year guidance for organic sales growth to 9.5% to 10% and adjusted earnings per, reflecting strong performance in Q2 2024 and confidence in its market position. The company achieved over 9% organic sales growth in Q2, driven by double-digit increases in medical devices and high single-digit growth in established pharmaceuticals and nutrition. Abbott received FDA approval for two new diabetes care products, Lingo and LibreRIO, expected to drive significant revenue growth. The company is expanding its presence in emerging markets with a strategy for biosimilars focusing on oncology and women’s health. However, Abbott faces litigation concerns over its infant nutrition products and noted an unfavorable foreign exchange impact of 3.5% on Q2 sales.

Vertex Pharmaceuticals Inc (VRTX)

Portfolio weight: 5.07%

• EPS: -$12.83 reported vs -$12.47 estimated
• Revenue: $2.64B reported vs $2.66B estimated

“Vertex delivered another strong quarter of revenue growth coupled with outstanding execution across the business, and we are increasing our full year product revenue guidance. Our focus for the second half of the year remains on commercial execution in CF and the global launch of CASGEVY, readying for the upcoming potential launches of the vanzacaftor triple in CF and suzetrigine in acute pain, while rapidly advancing a robust pipeline that is poised to deliver value for patients and shareholders for the long term.” – Reshma Kewalramani, CEO.
Vertex Pharmaceuticals showcased significant advancements in its pipeline, including the acceleration of the Cicetrogene LSR Phase 2 study, expansion of the VX880 study for Type 1 diabetes, and the initiation of the POVITASISEP Phase 3 trial in IgA nephropathy. The company also highlighted the success of the Vantacaptor Triple Program in cystic fibrosis, demonstrating a greater reduction in sweat chloride than Trikafta. Additionally, Vertex announced the launch of the Phase 3 Pivotal Program for SucetraGene in Painful Diabetic Peripheral Neuropathy. However, the acquisition of Alpine Immune Sciences has led to over $4.4 billion in AIP R&D charges, significantly impacting Q2 24 operating expenses. Despite this, Vertex reported strong Q2 performance and growth, driven by demand for CF treatments and the launch of CASGEVY.

Amgen Inc (AMGN)

Portfolio weight: 5.01%

• EPS: $4.97 reported vs $4.98 estimated
• Revenue: $8.39B reported vs $8.34B estimated

“With a strong, balanced portfolio of in-market products and a rapidly advancing pipeline of innovative medicines, we are confident in our ability to deliver attractive long-term growth.” – Robert Bradway, CEO.
Amgen reported a 20% year-over-year sales growth in Q2, driven by strong performance across all regions and significant growth of key products, with a record $8.39 billion quarterly revenue, marking the highest in the company’s history. The approvals of MDeltra for small cell lung cancer and Blincito for B-cell precursor acute lymphoblastic leukemia, along with Euplizma’s Phase III success, underscore Amgen’s commitment to expanding its oncology portfolio and addressing unmet medical needs. However, the company faces challenges with Otezla and MREL sales declining due to competitive pressures. Despite this, Amgen plans to launch biosimilars Lana and Bikambi in 2025, aiming for future growth in the biosimilar space. The company anticipates a decline in non-GAAP earnings per share in 2024.

Intuitive Surgical Inc (ISRG)

Portfolio weight: 5.01%

• EPS: $1.78 reported vs $1.54 estimated
• Revenue: $2.01B reported vs $1.97B estimated

“Our business was healthy this quarter, and we are pleased by feedback on da Vinci 5 as well as the continued adoption of SP and Ion. We remain focused on delivering the goals we share with our customers, centered on improving patient outcomes.” – Gary Guthart, CEO.
Intuitive Surgical reported a solid 17% procedure growth in Q2 2024, driven by various surgeries globally and general surgery in the US, indicating strong demand for its surgical systems. The company is making progress with the rollout of the da Vinci Five system, expected to drive efficiency improvements in surgeries. Despite challenges in multiport procedures, strong capital placements of 341 da Vinci systems were reported, including notable placements in the US, Japan, and India. Intuitive also announced a 14% revenue growth and margin improvement, with product margins above expectations due to cost reductions. Additionally, the company received FDA clearance for thoracic procedures using the SP system and made significant improvements in the supply of the Ion platform, contributing to an 82% increase in procedures during the quarter.

LIFE ETF: Investing in Global Healthcare

Investing in ETFs can be one way to add cutting-edge healthcare to your portfolio.

Evolve Global Healthcare Enhanced Yield Fund (LIFE ETF) provides investors with exposure to twenty global blue-chip companies in the healthcare industry, with a covered call strategy that is actively managed to provide increased yield potential while helping mitigate risk. For more information about the Evolve Global Healthcare Enhanced Yield Fund or any of Evolve ETF’s lineup of exchange-traded funds, please visit our website or contact us.

 

Portfolio weight as at July 31, 2024. Amounts in USD, Roche Holdings AG in Swiss Francs. EPS and Revenue data via Bloomberg.

Header image source: Getty Images Credit: choi dongsu

The contents of this blog are not to be used or construed as investment advice or as an endorsement or recommendation of any entity or security discussed. These contents are not an offer or solicitation of an offer or a recommendation to buy or sell any securities or financial instrument, nor shall it be deemed to provide investment, tax or accounting advice. The information contained herein is intended for informational purposes only.

Commissions, trailing commissions, management fees and expenses all may be associated with exchange traded funds (ETFs) and mutual funds. Please read the prospectus before investing. The indicated rates of return are the historical annual compound total returns net of fees (except for figures of one year or less, which are simple total returns) including changes in unit value and reinvestment of all distributions and do not take into account sales, redemption, distribution or optional charges or income taxes payable by any securityholder that would have reduced returns. ETFs and mutual funds are not guaranteed, their values change frequently and past performance may not be repeated.