It has been a volatile few years for the healthcare industry with several headwinds acting as a drag on performance, including the threat of drug pricing caps and healthcare reform in the US. Is life now getting better?

The NASDAQ Biotech index in early October traded at its highest level since December 2015. On the UK stock market, shares in many drug makers have been in a rising trend since late summer 2017.

Panmure Gordon has even upgraded its stance on the pharmaceuticals, biotechnology and healthcare sector to ‘positive’, believing the next nine months to be a strong period for UK life science company news.

‘Multiple significant trial readouts are expected, companies are generally well funded and many of the headwinds seen in previous quarters are easing,’ says analyst Julie Simmonds.

Trump turns attention to tax

Simmonds believes many headwinds that dragged on the performance of the overall sector such as the attempt to repeal the Affordable Care Act in the US and drug pricing pressures are easing.

‘Healthcare reform in the US is moving to the back burner to be replaced by tax reform, which could have a more positive outcome for the sector,’ says the analyst.

The pressure on pharmaceutical companies to cut drug prices has receded as an immediate threat, but Simmonds flags companies will need to remain conscious on prices at launch and if they choose to hike prices.

This could lead to a more imaginative approach to pricing such as patients not paying if the drug is not effective within a specific time period.

What's happening with UK-listed drug companies?

Simmonds believes ‘rapidly moving technologies’ are behind the positive performance of parts of the UK quoted healthcare sector, pointing to upcoming Phase III results from firms such as ImmuPharma (IMM:AIM).

ImmuPharma is undergoing its Phase III trial for lead treatment Lupuzor with results expected in the first quarter of 2018. Lupuzor is anticipated to have blockbuster potential and is considered safer and more effective than GlaxoSmithKline’s (GSK) Benlysta.

The drug treats lupus by modifying the behaviour of certain key cells involved in the development of the disease, which can be fatal as it causes the body to make antibodies that attack healthy tissue.

Shares in ImmuPharma have nearly doubled in price this year to 97p as investors anticipate positive results from the study.

More stocks with legs

Pharmaceutical products developer Silence Therapeutics (SLN:AIM) has also had a good year thanks to moves in the RNAi sector, according to Simmonds.

RNA is short for ribonucleic acid, which is a linear molecule that can play an important role in cells such as switching genes on and off.

RNA interference (RNAi) is used to study gene function by enabling gene expression and targeting only problematic genes that cause the disease.

Simmonds flags several catalysts behind Silence’s share price surge, including US listed Alnylam’s Phase III results for its patisiran to treat a rare nerve disorder and positive news on Spark Therapeutics’ therapy Luxturna.

Shares in Quantum Pharma (QP.:AIM) have had a good run this year thanks to a takeover offer by Clinigen (CLIN:AIM).

What news will continue to drive a strong performance?

One of the key catalysts for any company working in the biopharma industry are trial readouts, specifically Phase III results. A strong outcome can lead to approval from healthcare authorities. These include the US Food and Drug Administration or European Medicines Agency.

In the run up to results, investors tend to jump on the bandwagon and ride the share price momentum. There are several Phase III results expected in the next nine months, with some expected as early as the first quarter of 2018.

These include ImmuPharma, Faron Pharmaceutical’s (FARN:AIM) Traumakine treatment for acute respiratory distress syndrome and Shield Therapeutics’ (STX:AIM) Feraccru for treating iron deficiency anaemia.

In the first half of 2018, Phase III results are also anticipated from Diurnal (DNL:AIM) for its cortisol replace product Chronocort. (LMJ)

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