Healthcare: Valuations Improve as Concerns Over Drug Pricing Pressures Begin to Abate
Innovation, clearing regulatory picture, corporate restructurings, and capital redeployment should continue for healthcare stocks in the fourth quarter.
Within the healthcare's largest industry of drug and biotech companies (by market capitalization), we expect the recent strong launches of innovative new drugs and pipeline advancements to reinforce the economic moats in the industry and support steady growth. We expect several recently launched drugs to continue to gain market share and grow not dependent on pricing, but on strong efficacy data that will displace older drugs. In immuno oncology, several recently launched drugs exemplify this trend. The immuno oncology drugs offer some patients a near cure over older drugs that typically just delay progression of certain cancer types. In addition to tracking well with the initial indications, these immuno oncology drugs are also posting excellent data in new indications, setting up a strong outlook for future growth. Beyond immuno- oncology, advancements in other therapeutic areas, such as immunology and cardiology, are also supporting major innovative advancements that are driving strong sales growth.
Damien Conover does not own shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.