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Pharma Sector Tops in October: Best ETFs & Stocks

Sanghamitra Saha

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

Per the 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 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 ALXN agreed to acquire a clinical-stage biopharmaceutical company Achillion Pharmaceuticals ACHN. 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) – Up 31.6%; Zacks Rank #2 (Buy)

Rigel Pharmaceuticals Inc. RIGL – Up 31.1%; Zacks Rank #2

Ironwood Pharmaceuticals Inc. (IRWD– Up 28.3%; Zacks Rank #1(Strong Buy)

Dermira Inc. (DERM– Up 23.5%; Zacks Rank #1

Top ETFs

SPDR S&P Pharmaceuticals ETF (XPH) – Up 9.6%; Zacks Rank #3 (Hold)

Invesco Dynamic Pharmaceuticals ETF (PJP) – Up 6.3%; Zacks Rank #3

VanEck Vectors Pharmaceutical ETF (PPH) – Up 6.1%; Zacks Rank #3

First Trust Nasdaq Pharmaceuticals ETF (FTXH) – Up 5.2%; Zacks Rank #3

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VanEck Vectors Pharmaceutical ETF (PPH): ETF Research Reports
 
SPDR S&P Pharmaceuticals ETF (XPH): ETF Research Reports
 
Invesco Dynamic Pharmaceuticals ETF (PJP): ETF Research Reports
 
Alexion Pharmaceuticals, Inc. (ALXN) : Free Stock Analysis Report
 
Biogen Inc. (BIIB) : Free Stock Analysis Report
 
Achillion Pharmaceuticals, Inc. (ACHN) : Free Stock Analysis Report
 
Dermira, Inc. (DERM) : Free Stock Analysis Report
 
GlycoMimetics, Inc. (GLYC) : Free Stock Analysis Report
 
Rigel Pharmaceuticals, Inc. (RIGL) : Free Stock Analysis Report
 
Ironwood Pharmaceuticals, Inc. (IRWD) : Free Stock Analysis Report
 
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