The pharma sector, which had a challenging 2016 mainly due to the drug pricing controversy, has bounced back nicely this year with the NYSE ARCA Pharmaceutical Index gaining 11% year-to-date (YTD). Last year, the Index had declined 9.7%.
The sector has also performed better than the broader market YTD.
Evolving pipelines, increasing contribution from new drugs and the approval of breakthrough treatments are some of the factors that have helped put this sector back on the growth trajectory. Of course, challenges remain in the form of additional competition, high profile pipeline setbacks, slowdown in growth of mature products and loss of exclusivity for certain key drugs. The drug pricing issue also remains a major headline risk in 2017.
Meanwhile, the FDA has approved more drugs so far into 2017 than it did during the same period last year. Till the end of Jun 2016, the agency had approved 14 new drugs while so far this year, 21 new drugs have gained FDA approval. In fact, the total tally for the whole of 2016 was 22.
With the drug approval process expected to speed up, expectations are that there will be more innovation in the sector and, maybe, a surge in new drug approvals. According to a report from the QuintilesIMS Institute, the future for innovative treatments is bright over the next five years due to a strong late-stage pipeline comprising more than 600 cancer drugs.
With the Zacks-categorized Large Cap Pharmaceuticals industry being among the top 21% of the 256 Zacks-ranked industries, it would make sense to look at some Buy-ranked stocks in this sector. Here is a look at four large-cap pharma companies that sport a favorable Zacks Rank -- #1 (Strong Buy) or #2 (Buy).
Lundbeck A/S HLUYY : Denmark-based Lundbeck specializes in psychiatric and neurological disorders. The company's key areas of focus include depression, schizophrenia, Parkinson's disease and Alzheimer's disease. According to Lundbeck, about 700 million people across the world suffer from psychiatric and neurological disorders with many receiving inadequate treatment.
YTD, Lundbeck has outperformed the Zacks-categorized Large-Cap Pharmaceutical industry with shares gaining 37.6%. In addition to delivering a positive earnings surprise of 64.52% in the first quarter, Lundbeck raised its outlook for the year. Estimated earnings growth for the current year is 30.1%.
Bayer AG BAYRY : Germany-based Bayer has a strong presence in the Life Science fields of health care and agriculture. The company reported better-than-expected results in the first quarter of 2017 and raised its outlook as well on the back of Covestro's performance. Estimated earnings growth for the current year is 9.3%. YTD, Bayer has outperformed the Zacks-categorized Large-Cap Pharmaceutical industry with shares gaining 32%.
Sanofi SNY : French pharma giant, Sanofi, has a strong presence in several markets including diabetes, cardiovascular, rare disorders, vaccines and consumer healthcare. The company, which had recorded a decline in share price last year, has outperformed the Zacks categorized Large Cap Pharmaceuticals industry this year with shares gaining 20.1% YTD.
Although Sanofi's diabetes segment will remain under pressure in 2017, the company got a boost this year with the FDA approval of two drugs with blockbuster potential -- eczema treatment, Dupixent, and rheumatoid arthritis treatment, Kevzara. As the pipeline continues to deliver and new product sales ramp up, Sanofi could well be poised for a turnaround.
AstraZeneca plc AZN : British pharma major, AstraZeneca, is focused on three key therapeutic areas -- oncology, cardiovascular and metabolic diseases and respiratory diseases. The company has a deep pipeline covering all three areas and has 12 new treatments in phase III or the registration stage. YTD, AstraZeneca's shares are up 26.7%.
While Bayer, Sanofi and AstraZeneca are all Zacks Rank #2 stocks, Lundbeck is a Zacks Rank #1 stock. You can see the complete list of today's Zacks #1 Rank stocks here .
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Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Sanofi (SNY): Free Stock Analysis Report Astrazeneca PLC (AZN): Free Stock Analysis Report Bayer AG (BAYRY): Free Stock Analysis Report H Lundbeck A/S (HLUYY): Free Stock Analysis Report To read this article on Zacks.com click here.