Pharmaceutical ETF Surges on Healthy Outlook

This article was originally published on ETFTrends.com.

Investors looking to play a rebound in pharmaceuticals stocks have an array of exchange traded funds to consider. The SPDR Pharmaceuticals ETF (NYSEArca: XPH) is an equal-weight approach to pharmaceuticals stocks.

Importantly, XPH indicates the pharmaceuticals space is already on the mend as highlighted by the ETF's better-than-5% surge last week. There are some catalysts for pharmaceuticals stocks and ETFs such as XPH.

“From a fundamental standpoint, most companies in our coverage reported solid core product trends and in-line/better-than-expected earnings per share, augmented by a greater-than-expected tax benefit for 2018 and beyond,” said JPMorgan in a note out last month.

“The SPDR S&P Pharmaceuticals (ETF) holds 41 stocks with a weighted average market value of $46.35 billion. Prominent names in XPH’s fold include Johnson & Johnson(NYSE: JNJ) and Pfizer Inc. (NYSE: PFE), but this healthcare ETF also features some mid-cap names that could be legitimate takeover targets. For the investors that prefer, large-cap pharma names, there is good news as well,” reports InvestorPlace.

The pharmaceutical and biotechnology sub-sectors may benefit under a Republican president and Congress as the industries are less at risk of price controls that Democrats vowed to impose. Additionally, the White House is also looking to help the Food and Drug Administration (FDA) expedite new drug approvals, which could serve as a major catalyst for the biotechnology space.

Plus, tax reform is seen as a major boon for pharmaceuticals companies.

“The act taxes corporations at a flat rate of 21%, down from the previous top rate of 35%, repeals the corporate alternative minimum tax, and allows a full deduction of the foreign portion of dividends received by corporate shareholders from foreign subsidiaries,” according to PharmaceuticalExec.com. “Companies in the pharmaceutical industry will likely have extra cash on hand as they benefit from the corporate tax cut while excluding from income foreign dividends they receive from foreign subsidiaries.”

Industry observers argue that medical technology companies can tap into increased healthcare spending among emerging economies while the U.S. market has matured and could experience slower growth. Looking ahead, in the years through 2024, spending growth is projected to average 5.8% and peak at 6.3% in 2020.

For more information on the healthcare sector, visit our healthcare category.