It’s been a sad year for most investors, at least so far. With the S&P500; in bearish territory (a decline of 20% or more from its most recent highs) and ongoing geopolitical and economic issues, it is not certain that an end to these troubles is in sight. But some stocks are doing very well. Consider two examples in the biotech industry: Eli Lily (THERE IS 0.15%) and Jazz Pharmaceutical (JAZZ 1.65%). Are these stocks worth buying today?

THERE IS given by Y charts.

1. Eli Lily

Eli Lilly shares are up 17% year-to-date. Although the company has achieved strong financial results, the forward-looking market is perhaps more excited about its prospects.

Lilly’s lineup includes promising newly approved products, while its pipeline also offers exciting programs. In the first category, the company recently won regulatory approval in the United States for Mounjaro, a therapy designed to help patients with type 2 diabetes (T2DM) control their blood sugar.

Lilly will also seek Mounjaro’s approval to help treat obesity. Diabetes and obesity are two serious health problems that cause millions of deaths worldwide. The economic cost of obesity in the United States alone is estimated at over $1 trillion. There is an urgent need for innovative drugs to fight these two diseases, and Mounjaro could be one of them.

The company is also working on a treatment for Alzheimer’s disease called donanemab. Alzheimer’s disease is estimated to affect some 5.8 million Americans in 2020, with this number increasing, so there is also a need for effective therapies.

Lilly’s pipeline also includes Basal Insulin-Fc (BIF), an insulin product for people with T2DM that could be very effective if approved. BIF would be given once a week, whereas patients with T2DM who need insulin usually take it daily.

The pipeline, including some promising immunological products, is estimated to be in the billions. Last year, research firm Evaluate Pharma estimated Mounjaro’s net present value (NPV) at around $22.1 billion, while it estimated donanemab’s NPV at $12.4 billion.

Of course, drugmakers may face clinical and regulatory headwinds, but Eli Lilly’s overall pipeline, with several dozen programs underway, will almost certainly see significant gains in the years to come. Meanwhile, the company’s existing lineup remains strong, with products continuing to grow in sales, including diabetes treatments Trulicity and Jardiance, as well as cancer drug Verzenio and immunosuppressant Taltz.

One concern is stock valuation. With a forward price-to-earnings (P/E) ratio of 38.7, it looks expensive compared to the biotech industry average of 11.2. Eli Lilly might encounter some volatility due to its lofty valuation metrics, but for investors focused on the long game, I believe the company will more than justify its premium over time.

2. Jazz Pharmaceuticals

Jazz Pharmaceuticals’ revenue jumped 34% year-over-year in the first quarter to $813.7 million. While this is very impressive for a biotech company, there is a catch. Last year, Jazz acquired GW Pharmaceuticals, a drugmaker focused on developing cannabidiol drugs. The $7.2 billion cash and stock transaction closed in May 2021. During the first quarter of this year, the company’s lineup included products it did not have during the period. comparable to last year.

Even so, assuming the acquisition of GW Pharmaceuticals had closed on January 1, 2021, Jazz Pharmaceuticals’ product net sales would have jumped 7.1% year-over-year to $809.8 million. dollars, which remains a respectable performance in the industry. More importantly, there are excellent reasons to be optimistic about the company’s prospects.

For example, there is its line of newer products such as Xywav, a treatment for daytime sleepiness in patients with narcolepsy and idiopathic hypersomnia. There is also the cancer drug Zepzelca; both won approval in the United States in 2020, which means they won’t run out of patent protection anytime soon.

Epidiolex, to which Jazz obtained the rights when it acquired GW Pharma, still has a lot of potential. It is approved to treat Lennox-Gastaut syndrome, Dravet syndrome and seizures associated with tuberous sclerosis complex. The first two of these conditions are rare types of epilepsy. Epidiolex is also being studied as a possible treatment for epilepsy with myoclonic-atonic seizures.

The pipeline includes many other candidates, and the company expects to launch at least five new products by the end of the decade. It also aims to register $5 billion in revenue by 2025. By comparison, the company’s revenue in 2021 was around $3.1 billion.

Despite its recent good stock market performance, Jazz Pharmaceuticals remains reasonably valued with a forecast P/E of 9.1. This is another reason why it could continue to challenge the struggling stock market.