After a strong start in 2018, the drug sector struggled a bit in the next few months probably on U.S. market instability and a few negative updates on the pipeline and regulatory front. In the first four months of the year (January-April), the biotech industry significantly underperformed the S&P 500. The biotech industry declined 9.3% compared with the S&P 500’s decline of 0.8%.

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However, the industry has bounced back in the past month. It rose 6.8%, better than the S&P 500’s increase of 2.9%. A better-than-expected first quarter pulled up the biotech industry. As of May 31, 2018, 94.8% of the medical sector’s total market cap in the S&P 500 index reported results. Total earnings for these companies were up 13.8% on 7.1% higher revenues, with 77.4% beating EPS estimates and 71.7% beating revenue estimates. Several positive pipeline and regulatory updates also contributed to the rise.

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Acquisitions and strategic collaboration deals have also been rising consistently this year with the tax reform in place. 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 spurring merger activity.

In fact, the drug/biotech sector has been one of the best-performing industries in the U.S. stock market. The outlook for biotech/drug sector is quite positive for the rest of the year.

Here we take a look at three stocks whose share price has increased in the past month. These stocks carry a Zacks Rank #1 (Strong Buy) or 2 (Buy). 

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BioMarin Pharmaceutical Inc. (BMRN - Free Report) : The company share price has increased 5.9% in the past month. The stock carries a Zacks Rank #2. In May, Biomarin received FDA approval for pegvaliase to reduce blood phenylalanine (Phe) levels in phenylketonuria (PKU) patients. This was the second product approval for BioMarin in less than two years, the first being Brineura in mid-2017. Its impressive rare disease pipeline is also progressing well. BioMarin’s key orphan disease drugs – Vimizim and Kuvan – continue to do well, backed by strong underlying patient demand trends. BioMarin expects sustained growth in both the drugs.

Ligand Pharmaceuticals Incorporated (LGND - Free Report) ): The company’s share price has increased 25.1% in the past month. The company benefited from its numerous licensing agreements. This year so far, Ligand has entered into a worldwide OmniAb platform license agreement with Glenmark Pharmaceuticals per which the latter will be able to use the its full OmniAb platform to discover fully human mono- and multispecific antibodies. Ligand also entered into a worldwide OmniAb platform license agreement with Ferring Pharmaceuticals and venBio Partners this year. Ligand also carries a Zacks Rank #2.

VIVUS, Inc. (VVUS - Free Report) : The share price of the company has increased 32.9% in the past month. In May 2018, VIVUS entered into an agreement with Janssen, a subsidiary of Johnson & Johnson (JNJ - Free Report) , to acquire all rights to the latter’s exocrine pancreatic insufficiency (“EPI”) drug, Pancreaze, in the United States and Canada. This is the first of what the company expects to be a series of product acquisitions designed to generate revenues and strengthen its financial position. Pancreaze has a positive cash flow, which is expected to boost VIVUS’ revenues. The company carries a Zacks Rank #2.