In recent years, the healthcare sector as a whole has underperformed the broader market, yet there are still high-quality companies worth watching. For long-term investors, Zoetis (ZTS) and BioNTech (BNTX) hold significant appeal.
Zoetis focuses on animal health. Over the past two years, the company has faced certain challenges, including intensified competition for Apoquel—one of its key growth drivers, used to treat allergic itching in dogs—and increased scrutiny over Solensia and Librela, which treat osteoarthritis pain in cats and dogs, due to potential side effects.
Nevertheless, Zoetis is ultimately expected to stage a rebound. Even with stiffer competition for Apoquel, the company still holds a strong position in this segment, and according to its own estimates, millions of dogs remain untreated or undertreated. Meanwhile, Zoetis has received approval for Portela and Lenivia, new osteoarthritis pain relievers for cats and dogs. These two drugs offer the advantage of long-acting efficacy, requiring administration once every three months, whereas previous similar drugs required monthly dosing.
These two new products are expected to capture significant market share. In the long run, Zoetis should continue to launch new products and benefit from increased pet spending. Additionally, Zoetis is an outstanding dividend stock, having grown its dividend by 458% over the past decade, making it a preferred choice for income-seeking investors.
BioNTech has underperformed due to serious issues in the COVID-19 vaccine market. Recent regulatory changes in the U.S. have made it more difficult for many people to get vaccinated, following existing uncertainties in the field.
However, BioNTech is developing new products. The company has a substantial R&D pipeline, with over 25 Phase 2 or Phase 3 clinical trials in oncology alone. Some of these drug candidates are particularly noteworthy, such as BNT327, an investigational cancer drug being developed in collaboration with Bristol Myers Squibb. This candidate is a bispecific antibody, belonging to a newer class of drugs. BioNTech believes BNT327 has the potential to establish new treatment standards across multiple indications.
Over the next five years, as significant clinical and regulatory progress is made, the stock is expected to rebound and perform well.
Summary: For long-term investors, Zoetis represents a solid choice due to its leading position in the animal health sector, continuous product innovation, and excellent dividend track record. BioNTech, though recently weighed down by the COVID-19 vaccine market, possesses a deep oncology pipeline that provides a strong foundation for a future rebound.
