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Big Pharma, Wide Moats

Innovation and M&A may drive these firms' fortunes.

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Pricing pressure is weighing on pharmaceutical and biopharmaceutical companies, but Morningstar’s analysts are optimistic that the major players will continue to support their wide moats, as they explain in a recent Healthcare Observer featuring Morningstar’s annual drug pipeline report. Firms that can develop innovative drugs for critical needs can protect themselves as existing drugs lose patent protection. Meanwhile, this environment is ripe for large-scale consolidation.

I spoke with co-author Damien Conover about opportunities for the industry and investors. Conover, CFA, is director of healthcare equity research with Morningstar Research Services. Our conversation took place on Feb. 19, and valuation data is as of that date. The discussion has been edited for length and clarity.

Laura Lallos has a position in the following securities mentioned above: PFE, SNY. Find out about Morningstar’s editorial policies.