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In the case of the former, pharmaceutical stocks are more than just high-dividend yielders. They now have the potential for multiple expansion as top- and bottom-line earnings-per-share growth recovers. The patent cliff is behind them, and the industry is leaner, and more focused on driving higher returns. Most importantly, pipelines are improving, and the Food and Drug Administration is more accommodative.
Big news at the recent American Society of Clinical Oncology of advances in cancer treatment moved the stocks of companies large and small; Merck, Bristol-Meyers Squibb, Celgene and Tesaro, to name a few.
In hepatitis C virus research, new all-oral 12-week drug regimens have the potential to cure 90 percent of HCV patients, and many companies are playing in that space; Gilead Sciences, Bristol-Myers, Merck and AbbVie.
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Those new drugs are just what the doctor ordered for higher biopharma stock multiples.
Bottom line, the stocks are more than just high-yielding bonds, there is an equity kicker as EPS and multiples improve. And biotech's gains can likely keep pace with cyclicals leveraged to an economic recovery (especially since no one is calling for the hockey stick variety).
All this means, I suggest that the pharma-biotech sector will not be a proxy for rates, and trade in sympathy, but rather can stand on their own.