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Big pharma is expecting a healthy 2021. Importantly for investors, that bright future doesn’t necessarily depend on the course of the coronavirus pandemic.

Eli Lilly said Tuesday it expects revenue of $26.5 billion to $28 billion next year, which is about 11% higher from this year’s forecast. That growth is primarily from drugs already on the market, such as diabetes treatment Trulicity and anti-inflammatory drug Taltz. Lilly boosted its dividend payout by 15% and shares rose in early trading. Lilly also announced a deal to acquire gene-therapy startup Prevail Therapeutics for $880 million in upfront cash.

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Similarly on Monday, AbbVie increased its long-term guidance for the two immunology drugs Rinvoq and Skyrizi. The company now expects the two drugs to combine for $15 billion in revenue by 2025, up from a previous forecast of $10 billion. That seems like a tall order, since those drugs have combined for just $1.3 billion in sales in the first nine months of 2020. But fresh clinical data announced last week make that possibility seem more realistic: Rinvoq, which is taken orally, was shown to be more effective for atopic dermatitis patients than the current standard of care in a late-stage clinical trial. While the pandemic has slowed new drug launches across the industry, dermatology is a lucrative and growing market.

Hitting that guidance is essential to keep investors happy, because AbbVie faces cheaper competition for its anti-inflammatory drug Humira in the U.S. in the coming years. With global sales of nearly $15 billion so far this year, Humira is the world’s bestselling drug and accounts for about half of total company sales.

The outlook for these companies looks even better when one considers that they aren’t counting on Covid-19 treatments to make it happen. After all, the duration of the pandemic, and the resulting sales opportunities for drugmakers, is highly uncertain. With vaccines now being distributed, Wall Street is likely to place a low value on profits from drugs like Lilly’s antibody treatment for Covid-19. Lilly expects between $1 billion to $2 billion in Covid-19-related sales next year, a fraction of the overall top line. It also plans to spend $300 million to $400 million on pandemic-related research. The impact of the pandemic on AbbVie’s financial performance is minimal.

And with the election in the rearview mirror, the industry has become more comfortable with risks like tougher regulations on prescription-drug prices. That means more deals could be in store, even with many biotech stocks trading at bubble valuations that are unpalatable to buyers. There is still value for disciplined buyers: AstraZeneca announced a deal to acquire Alexion Pharmaceuticals for $39 billion in cash and stock last week. That valued Alexion at less than 15 times 2020 earnings, even with a large deal premium.

While the shares are no screaming bargain, valuations are reasonable in a market where many stock prices have become divorced from underlying business reality. Lilly trades at about 21 times this year’s adjusted profit forecast, while AbbVie trades at 10 times. The fact that these businesses are largely undisturbed by the course of the pandemic should make them more attractive to investors, as the timetable for full recovery remains uncertain and market values in many industries could swing wildly if expectations for a return to normal change.

In that investing environment, exposure to big pharma should help Wall Street keep a steady pulse.

This story has been published from a wire agency feed without modifications to the text

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