The Q4 earnings season for the pharma/biotech sector was scattered with a few small biotech companies yet to report. The releases so far provide us with a clear picture of the sector’s performance.

Overall, the sector performed reasonably well. Among the biotech/pharma bigwigs, Gilead (GILD – Free Report) , Celgene (CELG – Free Report) and Vertex (VRTX – Free Report) beat earnings and revenue estimates. Meanwhile, Biogen (BIIB – Free Report) announced mixed results with earnings beating estimates and sales lagging the same. However, Amgen (AMGN – Free Report) had a rather weak quarter as it missed expectations for earnings and sales and also issued a lower-than-expected sales guidance for 2018.

Drug/biotech stocks remained on a growth trajectory in 2017. Ramp up in new product sales, successful innovation and product line expansion, favorable clinical study results, frequent FDA approvals, strong performance by key products, growing demand for drugs especially for rare-to-treat diseases, an aging population and increased health care spending are some of the factors that should keep driving the sector. A faster drug approval process, the proposed removal of outdated regulations that push up costs and a slowdown in innovation should also prove beneficial.

The year started off on expectations of a pick-up in M&A activity. The new tax law, which cuts corporate tax rate from 35% to 21% and encourages companies to bring back huge cash held overseas at a one-time tax rate of 10%, is expected to spur merger activity this year.

Sanofi (SNY – Free Report) , earlier this year, announced deals to buy Belgian biotech company, Ablynx, and haemophilia-focused biotech firm — Bioverativ.

Banking on the positive trend and impressive Q4 performance, it might be the perfect time to cash in on the bountiful prospects in this growing market. Here we have picked three biotech stocks which saw positive estimate revisions post Q4 earnings release and also flaunt a Zacks Rank #1 (Strong Buy) or 2 (Buy). 

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