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Major Pharma Group Outlook In 2016: Fundamentals To Outweigh Political Headwinds

Jennifer Lynn

The global pharmaceutical industry has experienced a plethora of successful new products within the sector, more than offsetting global pricing pressures and supporting an outlook change to positive from stable for the entire industry.

JPMorgan projects several important product launches and pipeline updates for Major Pharma in 2016.

Bristol-Myers Squibb: Opdivo

Heading into 2016, JPMorgan predicts Bristol-Myers Squibb Co (NYSE: BMY) to ramp up its Opdivo sales.

"We see Opdivo-driven upside in 2016. We view Bristol-Myers Squibb Co (NYSE: BMY) as a clear leader in the market from both a time-to-market and breadth of clinical program perspective," said JPMorgan, during Friday morning's pharma conference call.

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"While we believe BMY shares already reflect ~$8 billion in peak I/O sales, we see the potential for further upside to this figure (and BMY shares) from a number of important PD-1 as well as next-gen I/O updates over the next 6-12 months," the company executives said.

AbbVie: Humira And Biosimilars

AbbVie Inc (NYSE: ABBV)'s inexpensive valuation will show potential EPS upside, according to JPMorgan executives.

AbbVie is considered a leading value name for investors within the major pharma sector; however, many questions still linger over the debate around the durability of Humira franchise to continue.

"We see AbbVie's 2020 guidance as helping to better frame the upside opportunity in shares to the extent the company's IP estate around Humira results in delayed biosimilar competition," added JPMorgan. The firm estimates reflect 11 percent from 2015-2020 EPS CAGR, assuming Humira biosimilar entry in 2018, increasing to 15 percent, assuming no biosimilar competition.

Furthermore, any delay in biosimilar entry, along with expense management and positive pipeline catalysts, represents significant upside potential for shares at current levels.

Merck: Januvia And Anacetrapib,

Merck & Co., Inc. (NYSE: MRK) looks very promising for its long-term pipeline optionality. "While we see Merck as having a number of promising emerging franchises (I/O, HCV, Alzheimer's), we see the focus in 2016 on the core franchises (especially Januvia) and capital deployment," said JPMorgan. "On the pipeline, we see a lower probability of success of anacetrapib following the recent failure of LLY's CETP, but in the long-term see the BACE inhibitor representing an important pipeline driver. Further, we see business development, significant restructuring and pipeline success as potential upside drivers for Merck shares," stated JPMorgan.

Eli Lilly: Upcoming Launches

Investor focus is predicted to be centered on Eli Lilly And Co (NYSE: LLY)'s long-term earnings recovery, forecasted to be affected by several of its new product launches and several longer-term opportunities.

Lilly's R&D investment will translate into a healthy stream of new product/pipeline flow including Jardiance, baricitinib (RA), ixekizumab (psoriasis), Trulicity (diabetes), abemaciclib (oncology), as well as a leading Alzheimer's portfolio, according to JPMorgan.

For investors, keeping a lookout for data from the phase III EXPEDITION-3 study in mild Alzheimer's patients in early 2017 is expected to be a key catalyst for the stock.

Zoetis: Clear Leader In The Space

While well positioned, Zoetis Inc (NYSE: ZTS)'s valuation reflects a strong competitive positioning and growth profile.

JPMorgan executives highlighted Zoetis to hold a clear leadership position within its industry and operate a business model that is capable of generating at least mid-single digit top-line growth and low to mid-teens EPS growth over time. "We see Zoetis well-positioned to drive sustained growth given healthy industry dynamics, and a healthy new product pipeline," said JPMorgan. The company's shares are currently up over 40 percent since mid-2014 and trading at 23x JPMorgan's 2016 estimates.

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