President Trump spent a lot of time talking about prescription drug prices yesterday. While it’s a topic that hits home for just about everyone, there are big differences between the largess of health care insurers and drug makers. 

Publicly traded giants in Big Pharma peaked long ago in the midst of the blockbuster drug craze, which brought in huge moneymakers, but resulted in thin pipelines and an avalanche of cheap generic alternatives thereafter.

Shares of the biggest names in pharmaceuticals have a long way to go to get back to their all-time highs, having peaked a long time ago.

Big Pharma	Close	High	Date
GSK	$40.86	$69.50	Dec 1998
MRK	$63.34	$93.60	Dec 2000
LLY	$85.95	$103.80	Jul 2000
PFE	$35.98	$48.00	Jun 2000

The industry needs smarter regulations that will allow them longer shelf-life for patents and easier for competition.  As for pricing vis-a-vis other nations, it just means the prices over there have to go higher. Last year, the top five selling prescription drugs saw limited pricing power and revenue increases, or in some cases, saw total sales decline.

#5. Remicade®

Johnson & Johnson and Merck

Indication(s): Crohn's

• 2016 sales: $7.829 billion ($6.561 billion J&J + $1.268 billion Merck)
• 2015 sales: $8.760 billion ($6.966 billion J&J + $1.794 billion Merck)
• % Change: (10.6%)

#4. Rituxan®

Roche (Genentech) and Biogen

Indication(s): non-Hodgkin’s lymphoma; chronic lymphocytic leukemia

• 2016 sales: $8.583 billion ($7.268 billion [CHF 7.300 billion] Roche + $1.315 billion Biogen)
• 2015 sales: $8.354 billion ($7.015 billion [CHF 7.045 billion] Roche + $1.339 billion Biogen)
• % Change: 2.7%

#3. Enbrel®

Amgen and Pfizer

Indication(s): Rheumatoid arthritis; polyarticular juvenile idiopathic

• 2016 sales: $8.874 billion ($5.965 billion Amgen + $2.909 billion Pfizer)
• 2015 sales: $8.697 billion ($5.364 billion Amgen + $3.333 billion Pfizer)
• % Change: 2.0%

#2. Harvoni®

Sponsor(s): Gilead Sciences

Indication(s): indicated with or without ribavirin for the treatment of chronic hepatitis C virus (HCV) genotype 1, 4, 5, or 6 infection

• 2016 sales: $9.081 billion
• 2015 sales: $13.864 billion
• % Change: (34.5%)

#1. Humira® (adalimumab)

Sponsor(s): AbbVie

Indication(s): moderate to severely active rheumatoid arthritis (RA

• 2016 sales: $16.078 billion
• 2015 sales: $14.012 billion
• % Change: 14.7%

Source: https://www.genengnews.com/the-lists/the-top-15-best-selling-drugs-of-2016/77900868

Market Investing Themes

Financials have been laggards this year but yesterday was the best performing sector as JPMorgan Chase & Co. (JPM) shares broke through key resistance. Morgan Stanley (MS) and Goldman Sachs (GS) are on the cusp of similar breakouts.

Crude Oil

Crude oil popped early, but West Texas Intermediate (WTI) settled below $52.00 despite Iraqi forces capturing oil-producing areas of Kirkuk.  If we get a breakout through that huge resistance point, we should see a quick spurt north of $55.00.

Technology

There’s technology as well.  After the bell on Monday, Netflix (NFLX) posted mixed third-quarter financial results but beat on key metrics and offered strong guidance.

• International streaming operating margin 4.7% - best ever
• 5.3 million new members against guidance of 4.4 million
• Fourth-quarter guidance 6.3 million net new subscribers

The shares are slightly higher, and I suspect any weakness would be met quickly with major buying.

 Unsung Tech Names

While everyone talks about the hot tech names, there are a bunch of companies that are crushing it with little media fanfare, including yesterday’s tech winners:

• (MU) Micron Technology +89%
• (AMAT) Applied Materials +70%
• (NVDA) Nvidia Corp. +85%

I think these names will continue to surge, although they could become more volatile. 

The bottom line: your portfolio should be a blend of boring earth-moving stocks and high-flying tech names.

Today’s Session

Stocks will open mixed as the earnings spigot has the street crunching numbers, even as knee-jerk reactions are to sell first.  There isn’t a sense of panic, but big beats are only eliciting big yawns for the moment.

Big Financials

Goldman Sachs (GS)

Crushed Wall Street estimates on the top and bottom lines, but details are not as sanguine, as fixed income declined 23% dragging the institutional component lower.

Business Segments

• Investments +17%
• Institutional -17%
• Investing and Lending +35%
• Investment Management +2%

Morgan Stanley (MS)

Beat on revenue and earnings consensus, but it was also hurt by fixed income business, -20%.  Overall, I like the margin trends with the exception of institutional.

• Institutional 28.2% from 30.4%
• Wealth Management 26.5% from 23.2%
• Investments 19.4% from 17.6%

Both Goldman and Morgan Stanley are on the cusp of major breakouts, but it doesn’t appear likely it will happen today unless the market makes late move. 

Overall, the better part of valor is to cool our heels this morning.

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