For Immediate Release

Chicago, IL – March 27, 2014 – Today, Zacks Equity Research discusses the Pharma & Biotech, including Eli Lilly (LLY-Free Report), AstraZeneca (AZN-Free Report), Shire (SHPG-Free Report), Salix (SLXP-Free Report) and Cubist Pharmaceuticals (CBST-Free Report).

Industry: Pharma & Biotech

Link: http://www.zacks.com/commentary/31870/

The pharmaceutical sector has been slowly but steadily recovering from the impact of the patent cliff being faced by several companies over the past few years. The worst of the patent cliff is over and the NYSE ARCA Pharmaceutical Index (^DRG) is up 21.4% over the last year. So far in 2014, the index is up 6.9%.

Several companies which had been struggling to post growth in the face of genericization over the past few years are now on the recovery path. New products should start contributing significantly to results, and increased pipeline visibility and appropriate utilization of cash should increase confidence in the sector.

Products that lost exclusivity recently include Eli Lilly’s (LLY-Free Report) Cymbalta and Evista. AstraZeneca’s (AZN-Free Report) Nexium could also start facing generics from May 2014 in the U.S. where sales were $2.1 billion in 2013.

Collaborations, Acquisitions and Restructuring

The pharma sector witnessed major merger and acquisitions (M&A) activity over the last couple of years. Going forward, we expect small bolt-on acquisitions to continue. In-licensing activities and collaborations for the development of pipeline candidates have also increased significantly. Several pharma companies are focusing on in-licensing mid-to-late stage pipeline candidates that look promising, instead of developing a product from scratch, which involves a lot of funds and time.

Small biotech companies are open to in-licensing activities and collaborations. Most of these companies find it challenging to raise cash, thereby making it difficult for them to survive and continue with the development of promising pipeline candidates. Therefore, it makes sense for them to seek deals with pharma companies that are sitting on huge piles of cash.

We recommend biotech stocks that have attractive pipeline candidates or technology that can be used for the development of novel therapeutics. Therapeutic areas which could see a lot of in-licensing activity include immuno-oncology, oncology, central nervous system disorders, diabetes and immunology/inflammation. The hepatitis C virus (:HCV) market is also attracting a lot of attention.

Some recent acquisitions/deals include Shire’s (SHPG-Free Report) acquisition of ViroPharma, Salix’s (SLXP-Free Report) acquisition of Santarus as well as the acquisition of Optimer Pharmaceuticals and Trius Therapeutics by Cubist Pharmaceuticals (CBST-Free Report), among many others.

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