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Barbara Ryan, managing director of Deutsche Bank, gives her take on investing in health care stocks.
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We've got some good news for your health and your portfolio perhaps the pipeline for new drugs and therapies in the pharmaceuticals industry.
Hasn't looked this promising in quite a while.
Barbara Ryan is managing director at Deutsche Bank where she's a senior analyst covering the pharmaceuticals.
Industry welcome to -- it's -- -- so.
What is it what is going on any industry that analysts such as yourself are so optimistic about.
Well I think you know the industry spent through very challenging period characterized by pat next brace for their leading on drugs.
And lack of any new product flow to replace them and so it's been a challenging environment characterized by restructurings deliver earnings results.
The stocks have underperformed the market this year.
Very different story on one stocks have outperformed the market to to want in part because investors are a little concerned about the economy wanna be more defensive.
And -- and companies like health care stocks which have been beaten up and have attractive valuations.
But probably more importantly common front on a go forward basis as the fact that we finally see some light at the end of the tunnel and there are a lot of late stage products -- awaiting FDA approval.
Or recently have been launched in the market with substantial commercial opportunities.
And so investors have been able to.
Look beyond the earnings -- that we still are gonna be going through on generic competition towards an improving top and bottom line longer term.
-- but here's the thing -- from referencing this hundred billion dollars in revenues potentially lost right industry why -- These patents expire and the generics can come in in you know take advantage of some of that happening so how much of an offsetting -- -- -- promising new treatment.
Well I think it's important to note is if you look at -- -- CF valuation of that industry.
On the market has done a great job of pricing in the decline of revenues and earnings from the drugs that are gonna lose their patent protection.
-- but the market is basically implied in valuations that these companies would never ever have dollar one of new drug sales.
So despite the challenges that you rightfully point out I think there is significant upside opportunity.
In these stocks I and their valuations as a result of -- -- new drug port.
-- so you've got the first.
Therapy to extend the life of melanoma patients that's the deadly form of skin cancer first new treatment for -- this.
In something like fifty years T drugs for hepatitis C apparently far more effective so what companies are behind these therapies and when can they hit the marketplace.
OK so -- you mentioned lupus that spend less so that's that's GlaxoSmithKline which I don't cover European colleagues cover.
-- a product called air foyer or at -- the map on is Bristol-Myers and that was launched for -- com.
First and second line malignant melanoma and is already on the market.
On the hepatitis C not.
Treatments are added on to the existing standard of care and as you pointed out do double the level of efficacy and those are -- -- inhibitors.
I'm Merck has launched one called both separate the air.
And -- tax the innovator is partnered with.
Product to lack -- And to lack Revere and both separate there are on the market in the US both separate there was just on approved in the EU and we're waiting for the same for -- there.
Here's the thing if you're investing in a pharmaceuticals company on the -- and its pipeline in its potential.
How do you do that what's your thanks for doing that because if you've got a new drug coming to market from a a smaller company.
Vs a larger company like by Brad Johnson and Johnson's can have a totally different impact on the bottom line.
Absolutely so if you look at and that you make a great point -- if you look at -- and buys or we didn't mention advisors partnered on product called the -- the ban.
Which would be -- -- potentially the best in class.
Content for stroke prevention in atrial fibrillation.
They're partnered with Bristol the bank for the -- is in Bristol-Myers because.
Pfizer is more than three and a half times the size of Bristol and they share that opportunity.
But on the point that would make here is that I think all of these companies have been starved for new products the valuations have been so depressed.
On that there is more leverage and greater growth opportunity at Bristol which -- recommending.
By the same token I think that there still will be a benefit all the terms of top and bottom line earnings as well as very modest -- multiple expansion.
For Pfizer and Jane.
Still no -- deal to raise the debt ceiling and yet we are getting dangerously close to that all the second deadline house Republicans voting Lotta cuts happen balanced plants a moral.
What does -- stand a chance of making it to the White House.
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