With the combination and upgrading of drugs, Bristol Myers Squibb Co. (NYSE:BMY) will earn $16.3 billion this year, followed by $17.3 billion in 2014. The company expects free cash flows of $3 billion this year, which the management will distribute to its shareholders with a dividend yield of 3.1%.
Insomnia is big business
Merck & Co., Inc. (NYSE:MRK) spent $400 million developing a new insomnia drug, Suvorexant. The uniqueness of this drug is that it has minimal side effects. This drug contains orexin, a neurotransmitter which regulates wakefulness, appetite and arousal. Unlike other insomnia drugs, this drug reduces or prevents wakefulness instead of inducing sleep. The company expects FDA approval in the second half of 2013, and expects the drug to bring additional revenue of $180 million in 2014 and double in 2015.
Merck & Co., Inc. (NYSE:MRK) also manufactures Gardasil, the only vaccine that is used to prevent cancers caused by human papillomavirus, or HPV, and to prevent four types of HPV. This drug showed double-digit growth last year. The company has developed the next generation of Gardasil – a V503 drug for preventing HPV. The new drug will reduce HPV infection rates in patients by more than 70%, which is higher in comparison to Gardasil. This will have a huge impact on reducing HPV rates in the population, leading to greater future effectiveness in eradicating the disease. Merck & Co., Inc. (NYSE:MRK) expects FDA approval for this drug in the second half of 2013. With this improvement, Gardasil vaccine revenue will increase to $2 billion this year, up from $1.6 billion last year.
With these strategies, the company expects to generate free cash flow of $9 billion this year and will distribute to its shareholders with a dividend yield of 3.7% or more.
Investors’ take away
GlaxoSmithKline plc (ADR) (NYSE:GSK)’s new drugs for melanoma and respiratory disease will bring additional revenue for the company. Its long-term drug development strategy brings additional revenue to the company, which it then uses to pay dividends to its investors.
Bristol Myers Squibb Co. (NYSE:BMY) is showing initiative by combining drugs to cure the patients with lower white blood cell counts. The company is making higher sales as a result.
Merck & Co., Inc. (NYSE:MRK) has developed a new drug for insomnia with minimal side effects and improving its vaccine for human papillomavirus. These improvements will increase the company’s revenue.
These companies will continue to generate good cash flow, which they will utilize for paying dividends. These three stocks are a “buy.”
The article If You Are an Income Investor, You Will Love These Pharma Companies originally appeared on Fool.com and is written by Madhu Dube.
Madhu Dube has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Madhu is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.
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