As we brace ourselves for another uncertain year, large-cap biotechnology and healthcare companies continue to be viewed as attractive options for a defensive play. These businesses offer a chance at insulating some capital from the slippery slope many investors still anticipate in 2023.

That perspective boosted the stock prices of several names in the healthcare industry in 2022. Some of the biggest companies in this sector are up, including UnitedHealth (UNH), Eli Lilly (LLY), and Johnson & Johnson (JNJ). In fact, the Health Care Select Sector SDPR fund (XLV) is only down by 4.6% compared to the S&P 500, which slid by roughly 20%.

With 2022 coming to a close, it’s reasonable to expect the trend to continue next year. Looking at the industry, there are still many names with a lot of room to grow.

One of them is Pfizer (PFE).

Given its performance and plans, Pfizer stands out as one of the best risk-adjusted options to own in this sector. Actually, this stock could give the likes of AbbVie (ABBV) and Bristol-Myers Squibb (BMY) a run for their money.

While its minimal gains have not kept pace with other Big Pharma names, Pfizer still easily bested the -14% recorded by the S&P 500. This is because investors remain anxious over the company’s future post-COVID. However, Pfizer has aggressively developed its pipeline and leveraged its COVID-19 profits to create more blockbusters.

One promising project is its migraine franchise, which Pfizer received following its $11.6 billion acquisition of Biohaven. The company estimates $6 billion in peak sales yearly from this program.

Another asset that Pfizer added via acquisitions is ulcerative colitis treatment etrasimod, which the company received following its $6.7 billion deal with Arena Pharmaceuticals. Given the decent-sized market for this condition, the candidate is expected to rake in $1 billion to $2 billion in peak sales.

Multiple myeloma treatment Elranatamab is projected to turn into a blockbuster as well. Although this market is already a bit crowded, with Legend Biotech (LEGN) and Johnson & Johnson leading the charge, Pfizer’s candidate can still attract its own share. So far, Elranatamab is projected to rake in $4 billion in peak sales.

The company is also leveraging its established reputation in the vaccine world. Pfizer’s vaccine candidate for the respiratory syncytial virus (RSV) is anticipated to become another blockbuster, with estimated annual sales to reach more than $2 billion.

Aside from these, there are 13 more candidates in the company’s pipeline. All these short-term catalysts are expected to deliver a compounded annual revenue growth rate of roughly 6% from 2020 up until 2025. Notably, this projection does not include the profits from its COVID-19 franchise.

Meanwhile, there are several longer-term catalysts queued in Pfizer’s R&D plans.

One is the expansion of its mRNA vaccine dominance, which is projected to become a $10 billion to $15 billion yearly business in the long run. While sales for its COVID-19 vaccines and boosters are expected to decline, the combination vaccine targeting the flu and COVID-19 could realistically be the primary driving force for this program. Even the shingles vaccine looks promising, with peak sales projected to reach $6 billion by 2030.

Its sickle cell disease program, which Pfizer received via its acquisition of Global Blood Therapeutics, is anticipated to rake in $3 billion in peak sales. If approved, this could go head-to-head against Vertex (VRTX) and CRISPR Therapeutics’ (CRSP) much-awaited candidate.

Overall, Pfizer is an excellent defensive player in this tumultuous period. Its resilience and ability to withstand recessions and bear markets are clearly top-notch. Its core business and pipeline look promising. Plus, despite its strong financial resources and incredible track record, its low valuation makes it an underrated stock with a value notably stronger than the average investor can appreciate.

Given the volatility of today’s market, anxious investors look into dividend stocks for safety and security. After all, dividends are excellent sources of passive income—something that would definitely be handy when facing a 40-year-high inflation and seemingly never-ending market losses.

However, not all companies that pay out dividends are created equal. With the current economic climate and financial turmoil, choosing businesses that would less likely lower or suspend their payouts becomes even more crucial.

One of the companies that meet these qualities in the biotechnology and healthcare sector is Merck (MRK).

Merck is one of the biggest biopharmaceutical companies across the globe, with a remarkable portfolio of drugs and treatments.

Merck’s resiliency at a period when so many companies have been struggling to keep afloat has indubitably attracted investors’ attention. One of its recent accomplishments is the promising results of its personalized cancer vaccine project with Moderna (MRNA). Needless to say, this will be a massive game-changer if the two companies manage to successfully launch the product.

However, none is more widely known among its products than Keytruda, with the drugmaker continuously raking more indications for its crown jewel with no signs of stopping anytime soon.

Keytruda contributes a considerable share of the company’s total revenue. This cancer therapy is also the fastest-growing treatment when it comes to sales. In the third quarter alone, Keytruda generated $5.4 billion, growing by an impressive 20% year over year. This accounts for more than 33% of Merck’s top line, which showed off a 14% jump year over year to reach $15 billion in the third quarter.

On top of expanding the application of Keytruda to cover new indications, the company has been developing a version of the treatment that can be given subcutaneously rather than the current intravenous delivery method.

Offering Keytruda as a subcutaneous injection or a shot administered into the fatty tissues just beneath the skin would notably reduce the future damage that biosimilars could inflict on the top-selling treatment in 2028. This is because patents protecting this particular formulation of Keytruda could be extended until the late 2040s.

Apart from that, Keytruda’s subcutaneous version would be able to provide several advantages over the current intravenous delivery method. For one, the time needed to administer the drug would be substantially reduced from the current 30 minutes since patients can easily self-inject in their own homes. This will also decrease their dependency on hospitals.

This version would also ease the discomfort of patients and significantly lower their expenses, which will consequently motivate more insurance companies to opt to prescribe this branded product instead of the biosimilar alternatives.

Other critical products in Merck’s portfolio include its HPV vaccines Gardasil and Gardasil 9. The two managed to deliver combined sales of $2.3 billion in the third quarter, which recorded a 15% jump from their performance in the same period in 2021. Meanwhile, cancer treatment Lynparza racked up $284 million, which was up by 16% year over year.

Overall, Merck has a solid lineup of products and treatments and an extremely promising pipeline of candidates, which would allow the company to develop additional blockbuster drugs to beef up its portfolio. Moreover, its stable business will undoubtedly help to sustain its dividend.

To date, Merck shares offer a 2.68% yield. This surpasses the average of S&P 500, which is 1.82%. More impressively, the company has boosted its dividend payouts by roughly 20% in the last three years despite the pandemic and severe financial and economic turbulence. Looking at its history and trajectory, Merck will most likely continue to reward its investors with dividend boosts in 2023 and beyond, regardless of what the market throws at it next.

Many quality stocks are experiencing annual declines. The bear market has heavily and negatively affected investor sentiment and, of course, the economic climate, which hurt earnings. Nonetheless, some stocks still managed to show signs of a rebound this year.

In the biotechnology and healthcare market, Moderna (MRNA) is putting up a pretty impressive fight to bounce back. In fact, it has posted a double-digit increase over the last three months. As this biotech gains more traction, it’s reasonable to wonder if it’s time to get in on it before 2023.

The latest update that pushed the stock higher was about the company’s cancer vaccine, which it has been working on with Merck (MRK).

Based on Phase 2 trial results, adding the experimental messenger RNA-based cancer vaccine of Moderna, called mRNA-4157, to the standard Keytruda treatment of Merck and administering the combination to high-risk melanoma patients lowered the risk of death or the recurrence of cancer by 44%.

Suppose this momentum is sustained until Phase 3 in the same category of patients, as well as in similar trials expected in other indications. In that case, this could signify the beginning of a monumental shift in cancer therapies. That is, it would create a market for mRNA-based personalized cancer vaccines that can be administered in combination with readily available treatments like Keytruda.

The results, which showed a decrease in the risk of relapse or death by almost half, also demonstrate a notable vindication for Moderna and represent a significant step towards realizing its ambitions to expand and diversify its profile as a COVID-19 vaccine maker.

This collaboration between Moderna and Merck on personalized cancer vaccines dates back to 2016, with the latter exercising its option to co-develop mRNA-4157 in October 2022.

Basically, mRNA-4157 is a tailored approach based on every patient’s specific tumor. According to Moderna, the procedure typically only takes a few weeks to complete. The idea behind adding Keytruda is rooted in boosting the immune response of the patient’s T-cells, while mRNA-4157 guides the T-cells to the specific tumor.

Apart from the proteins included in the personalized cancer vaccine, mRNA-4157 is actually identical to the COVID-19 vaccine distributed by Moderna across the globe. Both have the same mRNA chemistry, same lipid, same intramuscular route, and same manufacturing process.

If this treatment shows conclusive evidence that it can work on melanoma patients, then Moderna and Merck can expand their application to other indications. After all, Keytruda has several approvals under its belt, making it convenient for both companies to keep testing the combination.

To date, Moderna has fallen by roughly 30%. However, it has managed to bounce back by over 20% in the past three months. While the broader market downturn definitely hurt Moderna shares, another primary reason for its decline is the concern over its post-pandemic performance.

Realistically speaking, vaccine sales will likely not surpass the approximately $18 billion that Moderna recorded in 2021 and expects this year. Still, revenue will probably remain within the blockbuster territory.

Looking at the demand, the coronavirus booster market is projected to follow in the footsteps of the flu vaccine sector.

For context, the flu market worldwide reaches 500 million to 600 million doses yearly. Depending on the pricing, this demand could rake in somewhere between $12 billion to $24 billion.

On top of these, Moderna has been working on two additional candidates in Phase 3 trials: vaccines for the flu and respiratory syncytial virus. Both are anticipated to hit commercialization by 2024 and 2025.

Overall, Moderna could become an overwhelming success with its mRNA candidates in the years to come. However, the most challenging question is still estimating the company’s earnings for the next five years or more.

There remain notable uncertainties surrounding its pipeline. While I could always take a stab at estimating its profits, that’s just guesswork at this point. So despite Moderna’s impressive results over its personalized cancer vaccine program, I don’t think it’s a safe bet—for now.