What’s Ahead for Health Care This Week: GILD, ICPT

This week looks to be a good one in health care

Jan 13, 2014 at 9:29AM

This week brings us the 32nd Annual JP Morgan Healthcare Conference in San Francisco, where a wide diversity of companies will showcase pivotal clinical trial results and key business developments to prospective investors.

Why does this conference matter to the average investor? If you are interested in health-care stocks, this is a seminal event because it's often accompanied by a sector wide rise in share prices. Not only do I believe this year will be no different, but the buying could be more frenzied than usual.

Why are buyers still hungry for health care stocks?

Personally, I find it rather surprising that the rumors ahead of the conference are so bullish in nature. The sector, in general, has already more than doubled in value over the last two years alone, and several individual stocks have blasted off into the stratosphere lately.

Yet, there are a couple of solid reasons behind this rosy outlook.

Buyouts are expected to be at record numbers in 2014

Firstly, the so-called 'patent cliff' is going to drive mergers and acquisitions this year, probably at record numbers. Top pharmas like Bristol-Myers Squibb (NYSE:BMY) and Merck (NYSE:MRK) have already openly  stated their intentions to make deals that will bolster their commercial and clinical pipelines this year. And I expect Pfizer (NYSE:PFE) to be aggressive again this year in the buyout arena. In sum, mergers and acquisitions should help drive share price appreciation, as speculation runs rampant about the next buyout candidate.

The regulatory process is easing up for breakthrough therapies

Possibly one of the biggest causes of this sector's wide leap forward in value is the record number of approvals coming from the U.S. Food and Drug Administration, or FDA. Although the number of approvals slipped in 2013 compared to 2014, this drop was more of a function of fewer New Drug Applications than anything else. Drugs for diseases with no approved therapies or hard-to-treat diseases saw approvals come at the speed of greased lightning in 2013.

The FDA has long been criticized for holding up innovative new products for life-threatening diseases, and apparently the agency has finally heard the call. With the new 'breakthrough therapy' designation in place, you can expect even more drugs to come to market in record time this year.

Drugs for rare diseases that receive the agency's Orphan Drug Status have also been seeing approval times falling. Put simply, the FDA appears to be facilitating innovation these days, instead of hindering it. That's a welcome change, and helps to explain why so many companies are attracting new investors in droves.

New drugs are doing the unthinkable: curing diseases

One of the absolute coolest trends in the sector is the development of functional cures for nasty diseases like leukemia, hepatitis C, and liver disease. Drug companies are oft-panned in the popular media for developing drugs that do little more than alleviate symptoms, whereby creating repeat customers. And there is little doubt that chronic disease states that lack cures are by far the most profitable in the industry.

But this year marks a paradigm shift in the industry. Gilead Sciences' (NASDAQ:GILD) new orally administered hepatitis C drug, Sovaldi, had cure rates exceeding 90% in clinical trials, meaning the drug could go a long way toward eradicating the disease one day. Indeed, some patients suffering from the disease have reportedly put off treatment until now, hoping to try the new oral therapy. That's how much hope has been pinned on this new treatment option. So you should keep tabs on this compelling story this year. 

And unless you were hiding under a rock last week, the amazing story of Intercept Pharmaceuticals' (NASDAQ:ICPT) experimental drug for liver disease being halted early in a mid-stage trial, because it was so effective, is yet another example of this promising trend. Intercept's fourfold increase in a single day sent shock waves through the sector, as investors seemingly bought any and every company researching liver disease drugs.

More broadly, I expect investors to be on the hunt this week for more game-changing drugs like Gilead and Intercept's, with the hopes of finding the next biopharma home run. 

Foolish final thoughts

The week ahead looks to be a good one in the health care sector. With buyouts looming, new drugs coming to market faster than ever before, and the industry serving up functional cures for devastating diseases, investor enthusiasm is at fever pitch. That said, you should be wary of the bloated market caps for many developmental stage biopharmas. And as always, you should keep value at the forefront of any buying decisions, no matter what the sector is doing in the short-term. 

Don't miss checking out these two game-changing biotechs

The best way to play the biotech space is to find companies that shun the status quo and instead discover revolutionary, groundbreaking technologies. In the Motley Fool's brand-new FREE report "2 Game-Changing Biotechs Revolutionizing the Way We Treat Cancer," find out about a new technology that big pharma is endorsing through partnerships, and the two companies that are set to profit from this emerging drug class. Click here to get your copy today.

George Budwell owns shares of Bristol-Myers Squibb Co. and Gilead Sciences. The Motley Fool recommends Gilead Sciences. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Money to your ears - A great FREE investing resource for you

The best way to get your regular dose of market and money insights is our suite of free podcasts ... what we like to think of as “binge-worthy finance.”

Feb 1, 2016 at 5:03PM

Whether we're in the midst of earnings season or riding out the market's lulls, you want to know the best strategies for your money.

And you'll want to go beyond the hype of screaming TV personalities, fear-mongering ads, and "analysis" from people who might have your email address ... but no track record of success.

In short, you want a voice of reason you can count on.

A 2015 Business Insider article titled, "11 websites to bookmark if you want to get rich," rated The Motley Fool as the #1 place online to get smarter about investing.

And one of the easiest, most enjoyable, most valuable ways to get your regular dose of market and money insights is our suite of free podcasts ... what we like to think of as "binge-worthy finance."

Whether you make it part of your daily commute or you save up and listen to a handful of episodes for your 50-mile bike rides or long soaks in a bubble bath (or both!), the podcasts make sense of your money.

And unlike so many who want to make the subjects of personal finance and investing complicated and scary, our podcasts are clear, insightful, and (yes, it's true) fun.

Our free suite of podcasts

Motley Fool Money features a team of our analysts discussing the week's top business and investing stories, interviews, and an inside look at the stocks on our radar. The show is also heard weekly on dozens of radio stations across the country.

The hosts of Motley Fool Answers challenge the conventional wisdom on life's biggest financial issues to reveal what you really need to know to make smart money moves.

David Gardner, co-founder of The Motley Fool, is among the most respected and trusted sources on investing. And he's the host of Rule Breaker Investing, in which he shares his insights into today's most innovative and disruptive companies ... and how to profit from them.

Market Foolery is our daily look at stocks in the news, as well as the top business and investing stories.

And Industry Focus offers a deeper dive into a specific industry and the stories making headlines. Healthcare, technology, energy, consumer goods, and other industries take turns in the spotlight.

They're all informative, entertaining, and eminently listenable. Rule Breaker Investing and Answers are timeless, so it's worth going back to and listening from the very start; the other three are focused more on today's events, so listen to the most recent first.

All are available for free at www.fool.com/podcasts.

If you're looking for a friendly voice ... with great advice on how to make the most of your money ... from a business with a lengthy track record of success ... in clear, compelling language ... I encourage you to give a listen to our free podcasts.

Head to www.fool.com/podcasts, give them a spin, and you can subscribe there (at iTunes, Stitcher, or our other partners) if you want to receive them regularly.

It's money to your ears.


Compare Brokers