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Zacks Industry Outlook Highlights: Sanofi, Celgene, Bioverativ, Juno and Merck

For Immediate Release

Chicago, IL - March 8, 2018 - Today, Zacks Equity Research discusses the Ecommerce, including Sanofi SNY , Celgene CELG , Bioverativ BIVV , Juno Therapeutics, Inc. JUNO and Merck MRK .

Industry: Pharma, Part 1

Link: https://www.zacks.com/commentary/152269/pharmaceutical-industry-outlook---march-2018

The year 2017 was rewarding for pharma and biotech stocks, with the sector witnessing some positive developments that led to a much-awaited recovery.

The NYSE ARCA Pharmaceutical Index gained 11.8%, while the Nasdaq Biotechnology Index was up 18.7% in 2017. This is in sharp contrast to 2016, which was tough for pharma and biotech stocks following criticisms about rising drug prices.

A key reason for the sector's improved performance was the willingness of investors to look beyond the drug pricing controversy and focus on fundamentals instead. Although the drug pricing controversy will remain a headline risk, investors seem more comfortable with the issue.

Moreover, a significantly higher number of FDA approvals in 2017 restored investor confidence in the sector. The approval of the first gene cell therapy last year was a major breakthrough.

Though the sector was off to a strong start in 2018, it has been struggling recently with the NYSE ARCA Pharmaceutical Index and Nasdaq Biotechnology Index down 1.8% and 2.8% year to date, respectively, probably on broader market correction. Also, the mention of high drug prices by President Trump in his State of the Union address dampened investor sentiment. However, the sector is largely expected to rebound as the year progresses.

New product sales ramp up with rising demand, successful innovation and product line expansion, strong clinical study results, more frequent FDA approvals, continued strong performance from key products, growing demand for drugs especially for rare-to-treat diseases, an aging population and increased health care spending are some of the factors that should keep the sector on track in 2018. A faster drug approval process and the proposed removal of outdated regulations that push up costs and slow down innovation should also provide benefits.

Hopes of more mergers and acquisitions (M&As) have also gone up with the tax reform in place and big players on the lookout for companies with innovative pipelines/technology. There has already been quite a bit of M&A buzz this year about potential deals. Sanofi and Celgene have already announced two deals each.

However, headwinds include drug pricing scrutiny, pricing pressure, increasing competition, the growing presence of biosimilars, generic competition, a slowdown in the growth of legacy products, concerns regarding Amazon's interest in entering the healthcare arena and major pipeline setbacks.

We are discussing some factors in details here.

Mergers and Acquisitions (M&As) on the Rise

The year started off with expectations that M&A activity would pick up. The new tax law, which cuts corporate tax rate from 35% to 21% and encourages companies to bring back huge cash held overseas at a one-time tax rate of 10%, is expected to spur merger activity this year.

This was held true with biotech/pharma M&A activity already starting to gather steam. Sanofi, earlier this year, announced deals to buy Belgian biotech company, Ablynx and haemophilia focused biotech, Bioverativ. Celgene also announced deals to buy Juno Therapeutics, Inc., which focuses on the development of CAR-T therapies and Impact Biomedicines, which will add a late-stage JAK2 kinase inhibitor, to Celgene's pipeline.

Merck recently announced that it has proposed to buy Australian oncolytic immunotherapies maker Viralytics Ltd. to strengthen its presence in the fast-growing immuno-oncology market.

In fact, most big pharma CEOs believe the tax cuts will place American companies on a level playing field as they can compete better with their foreign counterparts, which operate in better tax environments.

Meanwhile, in-licensing deals continue to be popular with several big companies tying up with smaller and mid-sized players with promising mid-to-late stage pipeline candidates or interesting technology. These deals make sense for both sides -- the larger companies are able to boost their pipelines with promising candidates while the smaller ones gain access to a non-dilutive source of funds that allows them to continue investing in those pipelines.

Some companies that often find themselves on the acquisition radar include Exelixis, Incyte, BioMarin and TESARO, among others.

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Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit http://www.zacks.com/performance for information about the performance numbers displayed in this press release.

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Sanofi (SNY): Free Stock Analysis Report

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BIOVERATIV INC (BIVV): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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