Shares of Merck & Co. climbed 1.4%, Johnson & Johnson rose 0.4% and Eli Lilly & Co. surged 2.7% in morning trade Tuesday, after the drug makers were all upgraded to overweight from equal weight at Barclays, which cited optimism about the outlook for the companies' drug pipelines and attractive relative valuations. Analyst Geoff Meacham said he believes the political scrutiny over drug pricing is more election season rhetoric than a push toward structural changes, and believes demand for innovative therapies will continue to support premium pricing at the expense of older, less effective drugs. Meacham said he prefers drug makers to deploy capital to enhance drug pipelines, rather than for cost-savings and for purposes of financial engineering, such as large cross-border mergers, and believes J&J, Merck and Lilly could step up the pace of pipeline deals. Meanwhile, Meacham downgraded AbbVie Inc.'s stock dropped 1.3% after it was downgraded to equal weight from overweight at Barclays, with Meacham citing concerns over potential competition to its blockbuster antiinflammatory drug Humira.
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