NEW YORK: Berkshire Hathaway Inc's new bet on the U.S. pharmaceutical industry signals hope for shares of large drug companies, which have lagged a broad market rally amid concern about efforts to rein in prescription drug prices.
Still, many are reluctant to sound an all-clear on the industry, which is trading close to its biggest-ever valuation gap against the S&P 500 based on forward price-to-earnings ratios, according to Refinitiv Datastream. So far in 2020, the S&P 500 pharmaceutical industry index has gained 0.6per cent, versus an 11.7per cent gain for the overall S&P 500 , and an 8.8per cent gain for the S&P 500 healthcare sector .
“As you get within five years of patent expirations, people start to look and get more nervous about growth prospects,” said Marshall Gordon, senior healthcare analyst at Clearbridge Investments.