3 Stocks Raising Hopes In Troubled Large-Cap Pharma Industry
Zacks Investment Research | Jun 03, 2018 09:39PM ET
In spite of a strong start in 2018, the pharma/biotech industry is struggling currently, presumably due to a shift in focus to lowering of high drug prices and faster approval of generics. Moreover, quite a few negative pipeline and regulatory updates announced this year so far have probably had an unfavorable impact on the industry.
However, we expect the industry to turn around as the year progresses. Demand for drugs is rising worldwide due to increasing ailing and elderly population, frequent approval of new drugs as well as line extensions of already marketed drugs, and increased healthcare spending.
Moreover, reduction in tax and one-time low tax window for cash repatriation has boosted the cash position of large pharma companies. This has led to an increase in merger & acquisition activity and may boost innovation and capital building in the biotech industry. With the $62 billion price tag, the proposed acquisition of Shire plc (NASDAQ:SHPG) by Japanese-firm Takeda is the biggest deal in the industry. Earlier in the year, we have seen Sanofi (NYSE:SNY) and Celgene Corporation (NASDAQ:CELG) acquiring smaller biotech companies. Impax Laboratories merged with Amneal. Other large pharma companies are also on the lookout for acquisition targets.
Why Large Caps?
Given the current dampening mood, we focus on some large-cap companies to lower portfolio risk.
Putting your money in large-cap companies reduces risk due to their diversified portfolio and a large cash base. Moreover, the companies' stability and dividend payments provide a safety cushion to one’s portfolio. Moreover, in a flat or downtrend market, it is better to focus on specific stocks. Large caps also give high returns and are less risky than small and mid-caps.
However, the large-cap pharma Zacks Investment Research
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