“Our conviction level is high on the industry given what we believe will be another strong year for biotech innovation and a differentiated earnings growth profile versus the broader markets,” Geoffrey Meacham, an analyst with Barclays, said in the Financial Times article.

Moreover, merger and acquisition activity will strengthen valuations. As the market anticipates more deals ahead, consolidations have provided a floor on share prices. Fueling further M&A activity, Marshall Gordon, senior healthcare analyst at ClearBridge Investments, argues that large companies still need to acquire more products, especially as large blockbuster drug patents expire, and financing remains inexpensive. [Best Biotech ETF Gets a Lift From Merck’s Cubist Buy]

Health Care Select Sector SPDR

For more information on the healthcare sector, visit our healthcare category.

Max Chen contributed to this article.