Almost every corner of the broader healthcare sector has been on a tear since October. Among the all industries, Pharmaceuticals gained the most in October itself, adding 8.7%. Pharma was followed by Biotechnology (up 6.9%), Health Care Services (up 3.8%) and Healthcare Equipment (up 1.1%).
Inside the Rally
Earnings Trends issued on Nov 6, 2019, total earnings of 91.6% of the entire healthcare market capitalization that has reported so far are up 7.0% on revenue growth of 7.8%. The earnings growth rate seems to be the fifth highest among the 16 Zacks classified sectors. Revenue growth rate was the third-highest. Blended beat ratio was 69.6%, which was the third highest. Medical – Drugs belongs to a top-ranked Zacks industry (top 23%). Shares of the industry can be availed at 17.53x forward earnings or less against the S&P 500 ETF IVV’s P/E multiple of 19.04x. Though low P/E does not indicate future stock performance, cheaper valuation is always lucrative amid a spate of good news. The projected ESP growth rate of the sector was 9.49% versus 5.68% of IVV. Debt-to-equity ratio of the industry (0.2x) is much lower than that of 0.72x. Large Cap Pharmaceuticals also belongs to a top-ranked Zacks industry (top 36%). The industry has a forward P/E ratio of 14.63x, which ensures its undervalued status. Debt-to-equity ratio of the industry (0.71x) is in line with that of the S&P 500.
There was positive news in the industry. Biogen (
BIIB Quick Quote BIIB - Free Report) spread optimism into the broad healthcare sector following its Alzheimer’s treatment report. The biotech company decided to go ahead with the approval of aducanumab, a treatment for early Alzheimer’s diseases, after the drug met the primary endpoint of a Phase 3 Emerge study (read: Healthcare ETFs Win in October: Here's Why).
Hepion Pharmaceuticals also led the sector higher following data that showed potential for its CRV431 as a drug candidate for liver disease treatment.
Alexion Pharmaceuticals agreed to acquire a clinical-stage biopharmaceutical company Achillion Pharmaceuticals . All these positive developments fueled the rally in the pharma and biotech sectors in October.
Below we highlight top-performing ETFs and stocks from the sector in the past four-week period (as of Nov 6, 2019) (see
all Health Care ETFs here). Top Stocks GlycoMimetics Inc. ( GLYC Quick Quote GLYC - Free Report) – Up 31.6%; Zacks Rank #2 (Buy) Rigel Pharmaceuticals Inc. ( RIGL Quick Quote RIGL - Free Report) – Up 31.1%; Zacks Rank #2 Ironwood Pharmaceuticals Inc. ( IRWD Quick Quote IRWD - Free Report) ) – Up 28.3%; Zacks Rank #1(Strong Buy) Dermira Inc. ( DERM Quick Quote DERM - Free Report) ) – Up 23.5%; Zacks Rank #1 Top ETFs SPDR S&P Pharmaceuticals ETF ( XPH Quick Quote XPH - Free Report) – Up 9.6%; Zacks Rank #3 (Hold) Invesco Dynamic Pharmaceuticals ETF ( PJP Quick Quote PJP - Free Report) – Up 6.3%; Zacks Rank #3 VanEck Vectors Pharmaceutical ETF ( PPH Quick Quote PPH - Free Report) – Up 6.1%; Zacks Rank #3 First Trust Nasdaq Pharmaceuticals ETF ( FTXH) – Up 5.2%; Zacks Rank #3 Want key ETF info delivered straight to your inbox?
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