Why Biotech Stocks Will Outperform The Dow & S&P

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Tech stocks may hog the headlines but investors are paying close attention to biotech stocks and big pharma. These groups have recorded strong gains over the last month, and publications like the Wall Street Journal record the returns could continue on top of big pharma stocks 4% hike and biotech’s 8% advance during that time period.

Big pharma companies such as Pfizer, Inc. (PFE), Amgen (AMGN), Biogen Inc. (BIIB), and Gilead Sciences Inc. (GILD) are leading the sector. There has been a few catalysts for the surge, there has been an increase in M&A activity but primarily President Trump’s bombast and campaign trail commitments to rein in expensive drug prices have not gained any ground in Washington.

Now, while the White House remains quiet and returns continue to gain, investors should pay close attention of some legislative activity by Senate Democrats who are paying attention more on a single-payer health insurance proposal. The Journal stated this would be an extension for the drug industry and stocks but that its “years away at best.”

Mergers and Acquisitions in the sector is also implementing a bid into the group, with bigger deals forcing investors to pay attention. The most recent M&A in the biotech sector is Gilead Sciences, which hiked after announcing August 28th that it was acquiring Kite Pharma, whose goal is to cure cancer, for nearly $12 billion. That is unusual since the buyer’s stock often drops following an announcing a deal, but it seems like investors are waging the deal will hike Gilead’s bottom line in the short order.

On Top of that, positive clinical data is adding a third prong to the drug stock run. AbbVie Inc.,(ABBV) shares have hiked 25% in the last month, following the company announced results for its experimental medicines in atopic dermatitis and rheumatoid arthritis.

Respectively, Johnson & Johnson (JNJ) and Bayer also recently revealed new data near the anti-clotting drug, Xarelto, which has been reported to foreshadows a large increase in potential sales for the drug.

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