5 Top Weekly NASDAQ Biotech Stocks: Correvio Leads for...

Correvio Pharma, Synergy Pharmaceuticals, Vaccinex, Cerecor and Nymox were last week's top gainers.

January 20th, 2019

5 Top Weekly NASDAQ Biotech Stocks: Index Up During...

Axsome Therapeutics, Checkpoint Therapeutics, Bellerophon Therapeutics, Enochian Bioscience and Equillium were last week's top gainers.

January 13th, 2019

Notes from the Floor: Biotech Showcase, Day 2

The Biotech Showcase takes place in San Francisco from January 7 to 9. Here’s what happened...

January 8th, 2019

We found the top performing pharma stocks to watch this year

Find out more in our report
 

Verrica Releases Positive Phase 3 Results

Both trials achieved statistical significance for the primary objective with Verrica’s VP-102, a candidate for molluscum...

January 3rd, 2019

Big Pharma Collaboration Announced with Cocystal and Merck

Cocrystal Pharma and Merck have announced a new partnership that ignited investor attention in early trading...

January 3rd, 2019

We found the top performing pharma stocks to watch this year

Find out more in our report
 

Adamis Submits NDA for New Product

The application was for Adamis’ naloxone pre-filled single dose syringe (PFS) product candidate, as a treatment...

January 2nd, 2019

An Investor’s Guide to Clinical Trials

Clinical trials can be one of the more challenging US Food and Drug Administration processes to...

January 1st, 2019
<< Older Posts
The development of new pharmaceutical products is an incredibly complex process, requiring years of research and development, and billions of dollars in investment. Ultimately, companies have only a short number of years to recoup their investments. However, for those that are successful, the payoff can be astounding.  According to the World Health Organization, the global pharmaceuticals market is worth $300 billion a year, and is anticipated to increase by another $100 billion in the next three years. The market is dominated by the 10 largest pharmaceutical companies, which control more than one-third of the international market. North and South America, Europe and Japan are the largest consumers of pharmaceuticals, constituting 80 percent of the global market. The lifecycle of a...

The development of new pharmaceutical products is an incredibly complex process, requiring years of research and development, and billions of dollars in investment. Ultimately, companies have only a short number of years to recoup their investments. However, for those that are successful, the payoff can be astounding. 

According to the World Health Organization, the global pharmaceuticals market is worth $300 billion a year, and is anticipated to increase by another $100 billion in the next three years. The market is dominated by the 10 largest pharmaceutical companies, which control more than one-third of the international market. North and South America, Europe and Japan are the largest consumers of pharmaceuticals, constituting 80 percent of the global market.

The lifecycle of a drug

The production of new drugs begins with a patent application. Drugs must also pass through pre-clinical development and clinical trials before moving on to registration and marketing authorization. In the US, that is when a drug will receive FDA approval. The European Federation of Pharmaceutical Industries and Associations (EFPIA) estimates that approximately 12 or 13 years may elapse between the first synthesis of an active substance and its introduction to the market.

In terms of costs, the Biopharmaceutical Research Industry states in its 2015 Profile that discovering and developing a new pharmaceutical product takes an estimated $2.6 billion. Indeed, according to data from the Pharmaceutical and Research Manufacturers of America (PhRMA), the biopharmaceutical sector is the most R&D intensive in the US, with an estimated $51.6 billion spent on it in 2013. That spending adds up quickly: since 2000, American pharmaceutical companies have spent more than half a trillion dollars on R&D.

The EFPIA estimates that only one or two out of every 10,000 substances synthesized in laboratories will ever pass all stages of development to become marketable medicines. Those are slim chances, and it’s important to note that even reaching marketability doesn’t guarantee a drug’s profitability. In fact, research from PhRMA shows that on average, only two in 10 drugs are profitable.

That’s partially because big pharmaceutical companies only have a limited amount of time to profit from the drugs they’ve developed. Patents for new drugs are typically awarded for 20 years, and after patent expiration, generic drugs costing a fraction of the price of the original begin to flood the market. When that happens, drug sales can decrease by as much as 90 percent, as per BBC News. Elaborating, Joshua Owide, director of industry dynamics at GlobalData, told the news outlet, “unlike other sectors, brand loyalty goes out of the window when patents expire.”

Profit payoff

Investing in pharmaceutical companies might sound like quite a gamble, and indeed it is during the very early stages of development for small start-up companies. However, the vast majority of pharmaceutical investors are not directly affected by this lengthy, risky process. That’s because big pharmaceutical stocks are driven in large part by prescription data, new drug pipelines, M&A activity and competition and reimbursement changes, some of which are predictable factors. That can make pharmaceutical investing a fairly conservative venture.

And despite the risks mentioned above, potential profit continues to lure investors to the pharmaceutical sector. For example, while blockbuster drugs are under patent, their profits can be enormous — the drug company Gilead Sciences (NASDAQ:GILD) achieved sales of $3.5 billion between April and June of last year for its new hepatitis C drug Sovaldi, which retails at $84,000 for a 12-week treatment program. Furthermore, the US alone spent over $1 billion distributing the new drug in the first three quarters of 2014.

All in all, the pharmaceutical industry can be an incredibly rewarding investment for investors willing to do their research and take on a little risk.

Get the latest Pharmaceutical Investing stock information

Get the latest information about companies associated with Pharmaceutical Investing Delivered directly to your inbox.

Pharmaceutical Investing

Select All
Select None

By selecting company or companies above, you are giving consent to receive communication from those companies using the contact information you provide. And remember you can unsubscribe at any time.