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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Warner Chilcott plc, $25.91, symbol WCRX on Nasdaq (Shares outstanding: 251.5 million; Market cap: $6.5 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
Demand for medical devices and supplies will undoubtedly continue to grow as the population ages. Companies in this fast-changing field make a wide range of products, from laboratory instruments to bandages and surgical tools.
Some medical-equipment firms are large and well-established, like C.R. Bard (symbol… Read More
Investors often comment that we sometimes differ with the mainstream view on which stocks make good investments. That’s especially true with drug stocks.
The general view on these stocks seems to be that they are can’t-miss investments because the baby boomers are reaching an age… Read More
We still feel that the major drug companies are more speculative than most investors realize. They need a steady flow of successful new products to maintain their earnings. As well, as their drugs come off patent, they face increasing litigation and aggressive competition from generics… Read More
Sanofi-Aventis, $32.71, symbol SNY on New York (ADRs outstanding: 2.7 billion; Market cap: $86.1 billion), is the world’s fourth-largest drug company, and the largest in continental Europe. In August 2004, Sanofi-Synthelabo bought Aventis and became Sanofi-Aventis.
Paris-based Sanofi gets 90% of its sales from pharmaceuticals… Read More
Pfizer Inc., $14.72, symbol PFE on New York, (Shares outstanding: 6.8 billion; Market cap: $100.1 billion) is one of the world’s largest drug companies. It’s a major maker of pharmaceuticals, hospital and consumer products, and animal-health lines. Pfizer’s products are sold in more than 150… Read More
A few years ago, many investors valued drug stocks the way they value the top software makers, bidding them up to 30 or more times earnings. However, drug stocks are riskier than investors generally realize.
Because of that, while drug stocks can show fantastic profits, it… Read More
Anadys Pharmaceuticals, $6.25, symbol ANDS on Nasdaq (Shares outstanding: 28.9 million; Market cap: $180.5 million), is developing new drugs to treat hepatitis C and cancer. San Diego-based Anadys first sold shares to the public at $7 each, and began trading on the Nasdaq in March… Read More
Paladin Labs, $14, symbol PLB on Toronto (Shares outstanding: 14.9 million; Market cap: $209.0 million), is a Montreal-based specialty pharmaceutical company. Paladin sells its drugs to Canadian doctors who focus on urology, dermatology, pain management and women’s health.
Paladin mainly buys, licences and markets drugs. It… Read More
AGILENT TECHNOLOGIES INC. $16 (New York symbol A; Aggressive Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 345.3 million; Market cap: $5.5 billion; Price-to-sales ratio: 0.2; WSSF Rating: Average) makes testing systems that help electronics manufacturers improve the quality of their products. Agilent also makes… Read More
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