After an incredible 2014, the health care sector is crushing the overall market this year too. This is largely owing to the bullish trend in both the pharma and biotech segments from strong earnings growth, a merger and acquisition frenzy and encouraging industry trends.
The health care sector was the second contributor to earnings growth in Q4 trailing autos and the largest contributor to revenue growth. It is expected to deliver earnings growth of 11.8% and revenue growth of 9.1% in Q1. While the results will be hurt by negative currency translations, new products will likely contribute to the results.
Mergers & Acquisitions
Recent mergers and acquisition activities at big giants like AbbVie (ABBV), Pfizer (PFE), Shire (SHPG) and Salix Pharmaceuticals (SLXP) have given a big boost to both pharma and biotech stocks this year. AbbVie is set to acquire Pharmacyclics (PCYC) for nearly $21 billion in one of the biggest deals of recent times while Pfizer (PFE) will buy Hospira (HSP) for $17 billion.
Meanwhile, Shire acquired rare-disease treatment developer NPS Pharmaceuticals for $5.2 billion and Salix will be taken over by VValeant Pharmaceuticals (VRX) after Endo International (ENDP) withdrew its proposal. With this, the mergers and acquisitions targeting both biotech and pharma reached $59.3 billion this year, up 94% year over year.