3 Top Pharmaceutical Stocks to Buy in February

By Keith Speights Markets Fool.com

Any time is a good time to buy the stock of a well-run company with great prospects. An even better time to buy that kind of stock, though, is when there's a potential upcoming catalyst. Three top pharmaceutical stocks check off all these boxes -- Celgene (NASDAQ: CELG), Merck (NYSE: MRK), and Pfizer (NYSE: PFE). Here's why to consider buying these stocks in February.

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Celgene: Revlimid and more

Celgene's stock price fell after the big biotech announced stellar fourth-quarter results and a solid 2017 guidance. Why? Apparently some investors were disappointed that the company didn't increase its forecast of 22% annual growth through 2020. Perhaps these folks' theme song needs to be the Rolling Stones' "I Can't Get No Satisfaction."

I suspect Celgene's shares will quickly shake off these effects of over-inflated expectations, though. The company's product lineup should generate strong growth pretty much across the board in 2017. Celgene also has a couple of potential catalysts coming up soon.

The U.S. Food and Drug Administration (FDA) is scheduled to make an approval decision for Revlimid as a maintenance treatment in patients with newly diagnosed multiple myeloma after receiving an autologous stem-cell transplant by Feb. 24. This decision isn't an enormously important one for Celgene, but the company would certainly like to have another indication for its blockbuster blood cancer drug.

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News about a promising pipeline candidate should be a bigger deal for Celgene. The company expects to announce results from a late-stage study evaluating ozanimod in treating multiple sclerosis (MS) in the first half of 2017. If those results are positive, Celgene anticipates filing for regulatory approval later this year. Ozanimod has the potential to reach peak annual sales of between $4 billion and $6 billion if it ultimately wins approval for all three indications it's targeting -- MS, Crohn's disease, and ulcerative colitis.

Merck: Lots of decisions on the way

For Merck, the focus in 2016 was primarily on Keytruda. While the cancer drug will no doubt be a primary driver of Merck's success this year also, the drugmaker has plenty of other irons in the fire.

The FDA should make a decision in February on a biosimilar to Johnson & Johnson's Remicade developed by Merck's partner, SamsungBioepis. It's almost a certainty, though, that J&J will fight to keep the biosimilar off the market for as long as possible.

Other key approvals are expected in March and April. The FDA is scheduled to announce its decision on approval for Keytruda in treating patients with advanced microsatellite instability-high cancer by March 8. The agency should also decide on approval for the drug in treating relapsed orrefractory classical Hodgkin lymphoma by March 15.The FDA should also give its decision onMK-1293 for treatingtype 1 and type 2 diabetes by early April.

That's not all, though. Merck hopes to win approval for Keytruda as a first-line treatment ofmetastatic or advanced non-squamous non-small cell lung cancer. The FDA is scheduled to announce its decision for the additional indication by May 10. Another decision for an additional indication for HIV drug Isentress is expected by May 27.

Pfizer: Two cancer drugs awaiting approval

Pfizer basically bought growth in 2016 with the acquisitions of Anacor and Medivation. The Anacor deal brought promising atopic dermatitis drug Eucrisa into Pfizer's fold. The Medivation buyout allowed Pfizer to pick up fast-growing prostate cancer drug Xtandi.

But one of Pfizer's biggest success stories these days is a home-grown product: Ibrance. The cancer drug became the company's latest blockbuster in 2016.

Although Ibrance is already on the market as a treatment forER+, HER2- metastatic breast cancer, it won a green light from the FDA through the agency's accelerated approval process. Pfizer submitted more data in a supplemental filing and hopes to gain regular approval by the FDA in April.

Pfizer could have yet another cancer drug on the market soon as well. The FDA is scheduled to announce its decision onavelumab in treatingmetastatic Merkel cell carcinoma (MCC) by late May. There are currently no approved drugs in the U.S. for MCC, which is a rare and aggressive form of skin cancer. Pfizer is partnering withEMD Serono, a business unit of German pharmaceutical companyMerck KGaA, on development and commercialization of avelumab.

Best of the best

Although there's always a risk of failure, I suspect all three of these drugmakers will get good news in the next few months. While positive FDA decisions and clinical study results will help, Celgene, Merck, and Pfizer should be successful even the companies encounter setbacks.

Which is the best stock right now? I like Merck's prospects with Keytruda. I also like Pfizer's opportunities with Ibrance and a very strong pipeline. However, my view is that Celgene is the best choice for investors.

It's hard to beat Celgene's growth potential. Even though the company doesn't pay a dividend like Merck and Pfizer do, I expect Celgene's stock performance to more than make up the difference in total return. If I could only buy one of these stocks in February, my pick would be Celgene.

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Keith Speights owns shares of Celgene. The Motley Fool owns shares of and recommends Celgene. The Motley Fool recommends Johnson and Johnson. The Motley Fool has a disclosure policy.