The biotech industry has been on the comeback trail in 2017 after facing a number of challenges last year including pricing pressure, rising competition, pipeline setbacks, pricing pressure, slowdown in growth of mature products and generic competition for certain key drugs.

Frequent FDA approvals, new product sales ramp up, R&D success and innovation, strong clinical study results and continued strength in some legacy products have changed the scenario for the better this year.

In fact, the NASDAQ Biotechnology Index has gained 21.1% so far this year in sharp contrast to last year’s decline of 22%.

Notably, the Medical – Biomed/Genetics sub-industry carries a Zacks Industry Rank of #115, which places it at the top 43% of the 250 plus Zacks industries. Our back-testing shows that the top 50% of the Zacks ranked industries outperforms the bottom 50% by a factor of more than two to one. Moreover, the Medical – Biomed/Genetics industry has increased 3% this year so far.

The positive factors are expected to continue contributing to the sector’s growth next year. Also, on Dec 20, 2017, the Senate Republicans passed the tax overhaul Bill, excluding the provisions. The Bill permanently slashes corporate tax rates from 35% to 21% which can boost profits of large drug/biotech companies.

Further, companies will be allowed to pay a 5% tax on reinvested earnings and 10% tax on deferred cash earnings. After the Senate passed the tax Bill, the House of Representatives re-voted 224-201 in favor of the Bill, complying with the Senate rules.

The approval of the bill is an advantage for the biotech companies as the companies will be left with with more cash on hand. This cash can be utilized for mergers/acquisitions, which have been relatively less this year than in 2016.

What has caught our attention in 2017 is that smaller biotech companies have done well and we saw a sharp rise in their share prices. These companies are continuously working on bringing innovative new treatments to market, and there could be significant catalysts in the coming quarters in the form of important new product approvals as well as major data read-outs.