Biotech investors may have noticed that the first quarter of the year is a bit sluggish for drug sales. They aren’t imagining things, according to Bernstein analyst Aaron Gal.

Bernstein analyzed a group of about 40 drugs and found that Q1 sales declined by about 7 percent compared to Q4 sales in the past three years.

Gal identified four primary drivers of the seasonal slump:

• 1. Less drugs are utilized in Q1 because of managed care rejections due to patients switching plans or new utilization policies, as well as patients opting not to purchase prescription drugs because their out-of-pocket cost is too high.
• 2. High deductibles for commercial plans can place a heavy burden on patients in Q1.
• 3. Due to the Medicare coverage gap, the entire cost of the patients’ half of their high-priced drug bills between $3,700 and $8,000 is incurred in Q1.
• 4. Roughly half of the drugs studied received price increases in Q1 2015 and two-thirds received price hikes in Q1 2016.

“The impact of the 1Q seasonality disproportionally [affects] names with U.S. exposures, especially with primary care and high price prescription drugs,” Gal says.

Bernstein says U.S. primary care companies such as Novo Nordisk A/S (ADR) NVO 2.33% and Allergan plc Ordinary Shares AGN 0.34% are impacted the most by the Q1 weakness. Specialty prescription drug stocks such as Biogen Inc BIIB 1.69%, Jazz Pharmaceuticals plc – Ordinary Shares JAZZ 0.5% and Shire PLC (ADR) SHPG 1.04% also take a hit.

However, companies with heavy medical benefits products, such as Amgen, Inc. AMGN 1.86% and Regeneron Pharmaceuticals Inc REGN 3.09%, are typically not impacted…

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