Drug companies are companies that develop, manufacture, and market pharmaceutical drugs.
The major drug companies are more speculative than most investors realize. They need a continuing flow of successful new products to maintain their earnings. They face increasing litigation and aggressive competition from generics as drugs come off patent. Unlike tech stocks, they have formidable regulatory burdens, and unlike other manufacturing stocks such as, say, auto companies, they do not benefit from customer loyalty.
The general view on these stocks seems to be that they are can’t-miss investments because the baby boomers are reaching an age when they will need drugs for a number of medical conditions, and are willing to pay for them.
Drug companies need to spend heavily to create new drugs, and spend even more to gain regulatory approval. Even then, they only get to profit for a limited time before patents run out and generic products appear. Then too, their research spending may lead to dead ends, rather than new drugs that fill a need and can overcome the regulatory hurdles.
If you want to invest in drug companies, we think you should focus on those that have high cash holdings and a number of drugs in the pipeline. And all the better if they have access to fast-growing markets, like China, India and Latin America.
Drug companies may have a place in your portfolio, and at TSI Network, we recommend using our three-part Successful Investor philosophy to decide how:
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Valeant Pharmaceuticals, $147.02, symbol VRX on Toronto (Shares outstanding: 333.4 million; Market cap: $49.8 billion; www.valeant.com), is a multinational specialty pharmaceutical company that develops, makes and markets a broad range of products, mainly in the areas of neurology, dermatology and generic drugs.
On September 28, 2010,… Read More
Pat McKeough responds to many requests from members of his Inner Circle for specific advice on stocks as well as questions on investment strategy and the economy. Every week, his comments and recommendations on the most intriguing questions of the past week go out to… Read More
Patent production continues to be a crucial issue for major drug companies. The expiration of a patent and the entry of a key drug into the public domain is a challenge for those U.S. stocks in the pharmaceutical industry hat have prospered thanks to the… Read More
Endo Pharmaceuticals, $38.80, symbol ENDP on Nasdaq (Shares outstanding: 117.3 million; Market cap: $4.6 billion; www.endo.com) researches, develops and sells branded and generic drugs that are mainly used to treat pain.
Endo markets to drug wholesalers, large drug chains, doctors and other health-care professionals. Its… Read More
Eli Lilly & Co., $35.04, symbol LLY on New York (Shares outstanding: 1.2 billion; Market cap: $40.4 billion; www.lilly.com), develops, makes and markets drugs and animal-health products.
The company markets its products in about 135 countries. Its brand names include Cymbalta, Prozac (antidepressant); Axid (anti-ulcer);… Read More
Many investors think drug stocks are can’t-miss investments. That’s because the baby boomers are reaching an age when they will need drugs for a number of medical conditions, and are willing to pay for them.
We agree that the aging of the boomers will create… Read More
Inspire Pharmaceuticals Inc., $6.99, symbol ISPH on Nasdaq (Shares outstanding: 82.8 million; Market cap: $578.9 million; www.inspirepharm.com) develops and markets drugs for various eye and respiratory diseases, usually with other drug companies, such as Allergan Inc. (symbol AGN on New York) and InSite Vision Inc… Read More
Warner Chilcott plc, $23.19, symbol WCRX on Nasdaq (Shares outstanding: 252.2 million; Market cap: $5.8 billion), researches and develops drugs. Its main products include Femcom Fe and Loestrin24 Fe (birth control), Enablex (bladder control), Actonel (osteoporosis), Doryx (acne) and Asacol (colitis).
Warner Chilcott is based… Read More
Sanofi-Aventis (ADR), $29.91, symbol SNY on New York (ADRs outstanding: 2.6 billion; Market cap: $77.8 billion), is the world’s fourth-largest drug company. In August 2004, Sanofi-Synthelabo bought Aventis and became Sanofi-Aventis.
Paris-based Sanofi gets 88% of its sales from pharmaceuticals. Vaccines, which it sells through… Read More
On Sunday, the U.S. House of Representatives passed the Obama administration’s massive overhaul of the U.S. health-care system, nicknamed Obamacare. On Tuesday, the president signed the bill into law.
The non-partisan Congressional Budget Office puts the cost of Obamacare at about $940 billion over ten years… Read More
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