Will These 4 Large-Cap Drug Stocks Be Big Winners This Earnings Season?

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

A key reason for the sector’s improved performance was the willingness of investors to look beyond the drug pricing controversy and focus more on fundamentals instead. Although the drug pricing controversy, which was a major overhang in 2016, will remain a headline risk, investors seem more comfortable with the issue. Moreover, a significantly higher number of FDA approvals in 2017 has restored investor confidence in the sector. The approval of the first gene cell therapy last year was a major breakthrough for the sector.

Hopes of more mergers and acquisitions (M&As) have also gone up with 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 with Celgene rumored to be interested in buying Juno (NASDAQ:JUNO) , Biogen (NASDAQ:BIIB) in Acorda and Sanofi (NYSE:SNY) in Bioverativ. Meanwhile, Novo Nordisk (CO:NOVOb) recently confirmed that it is looking to acquire Belgium-based biopharma company Ablynx though Ablynx rejected Novo Nordisk’s offer.

Looking forward, new product sales ramp up, R&D success and innovation, continued strong performance from key products, more M&A activity, 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 momentum in 2018.

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.

4 Biotech & Pharma Stocks to Keep an Eye on This Earnings Season

According to the Zacks Earnings ESP Filter .

Alexion Pharmaceuticals, Inc. (NASDAQ:ALXN) : Alexion has a strong presence in the rare diseases market. Marketed drugs include Soliris (for the treatment of patients with paroxysmal nocturnal hemoglobinuria (“PNH”), atypical hemolytic uremic syndrome (aHUS), and anti-acetylcholine receptor (AchR) antibody-positive generalized myasthenia gravis (gMG)), Strensiq (enzyme replacement therapy for patients with hypophosphatasia (“HPP”)) and Kanuma (enzyme replacement therapy for patients with lysosomal acid lipase deficiency (LAL-D)).

Alexion is focusing on growing and maximizing its presence in the rare disease business. Core areas of focus include hematology, nephrology, neurology and metabolic disorders. Alexion has consistently surpassed earnings expectations in each of the last four quarters with an average surprise of 11.9%. The Zacks Rank #3 stock, which will report fourth quarter results on February 8, has an Earnings ESP of +5.93% for the quarter. While 2017 Soliris revenues are expected in the range of $3,090 million - $3,125 million, metabolic revenues are expected in the range of $385 - $400 million.

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Celgene Corporation (NASDAQ:CELG) : Celgene is focused on the discovery, development and commercialization of treatments for cancer and inflammatory diseases through next-generation solutions in protein homeostasis, immuno-oncology, epigenetics, immunology and neuro-inflammation. Earlier this month, the company announced preliminary results for the fourth quarter with revenues expected to be about $3.5 billion and earnings to be approximately $2.00 per share. Celgene has surpassed earnings in each of the last four quarters with an average surprise of 2.5%. The Zacks Rank #3 stock, which will be reporting fourth quarter results on January 25, has an Earnings ESP of +0.94%.