Drugs stocks are now more than just bond-proxies, trading on the basis of their generous yields, and improved capital allocation—although these are still, and certainly have been, part of their appeal.
Investors will be peppering managements for commentary on the next class of drug launches, with particular emphasis on the immunotherapies such as PD-1s for treating cancer from Bristol-Myers Squibb and Merck, and hepatitis C agents from AbbVie, Bristol and Merck.
(Read more: Why the tick up in rates is not a bad Rx for pharma stocks)
Leading biotechs such as Celgene, Gilead Sciences and Biogen Idec are set to report strong earnings growth and to beat Street forecasts on hopped up demand for their new therapies.
Two new drugs for multiple myeloma, Celgene's Pomalyst, and Onyx's Kyprolis, are expected to complement strong results for both companies, while Biogen's new oral multiple sclerosis pill, Tecfidera, is surging out of the gate.
Life sciences companies continue to rise above the recent "ratescare," with new drug pipelines, and active merger-and-acquisition activity serving as rocket fuel to the biotech sector.
Evidence abounds that innovation is alive and well. This was underscored by the important clinical data presented at the American Society of Clinical Oncology (ASCO), the International Liver Congress (EASL) and the American Diabetes Association (ADA) conferences as well as by Amgen's hostile bid for Onyx, recent rumors of a possible bid for Alexion by Roche and a round of successful life sciences initial public offerings.
In fact, 16 biotech companies have gone public this year, including Bluebird, Prosensa and Epizyme, and the market has given them a warm welcome with an average price gain for the entire group of a whopping 48 percent so far this year.
And it seems that when it rains, it pours, now even a friendly Food and Drug Administration has approved 39 new drugs in 2012—a level not seen since 1997—and has given 28 drugs breakthrough status designations this year. This means investors enthusiastically await another bumper crop of new drug launches over the next 18 months.
Oh, and what about M&A in the second half of the year? Investors will have their eyes and ears peeled for hints on future deal prospects, who else will step up for Onyx? How high will AMGN go to win control? Will there be bids for other new drug hopefuls such as Alexion, Alnylam, BioMarin and Regeneron?
Stay tuned for an interesting earnings season.