The pharmaceutical sector consists of businesses that study, create, and distribute medicines and vaccines to prevent, treat, and eradicate illness. Companies like Pfizer, Inc., Merck & Co., Inc., and AbbVie, Inc., which are among the largest and most well-known in the world, are included.
The licensure of vaccinations against the COVID-19 virus by governments in the United States and other countries has led to a sales boom for a number of pharmaceutical businesses.
Bottom line, pharma stocks are increasing in demand and its a good time to invest in them, read on to know more.
The Current Scenario
By 2025, the worldwide pharmaceutical market is projected to be valued US$1.7 trillion, as reported by McKinsey. According to Medical Marketing and Media, several potential medications in oncology, neurology, immunology, and gene therapy are reportedly in the pipelines of major pharmaceutical companies.
Drug sales in oncology are significantly higher than in any other therapeutic area. Drugs used to treat diabetes, and autoimmune diseases are also doing very well commercially. Many of the most promising new cancer medications are designed to treat either multiple myeloma or solid malignancies.
The CAR-T treatment developed by Legend Biotech (NASDAQ:LEGN) and Johnson & Johnson (NYSE:JNJ) Iovance Biotherapeutics (NASDAQ:IOVA) is planning to seek clearance for Lifileucel, a cell therapy that targets solid tumors; Bristol-Myers Squibb’s (NYSE:BMY) Deucravacitinib has demonstrated impressive efficacy in treating psoriasis; and Cilta-cel is focusing on multiple myeloma.
CRISPR technology and other forms of gene editing are also gaining traction in the pharmaceutical industry. According to a survey by Business Research Company, the worldwide market for CRISPR technology will increase from $1.65 billion in 2021 to $3.11 billion by 2026.
Investment prospects in niche medications from leading pharmaceutical companies like Wheeler who provide cell line development services notwithstanding, drug price policy continues to be a contentious issue. Former FDA Commissioner Scott Gottlieb embarked on a campaign to reduce prescription prices by encouraging competition among pharma companies a few years ago.
The hunt for vaccination against COVID-19, combined with worries about skyrocketing medicine prices, increased the pressure on lawmakers to implement price controls.
Despite Trump’s administration’s best efforts, the United States is still paying exorbitant rates for prescription drugs. Fortunately, current US President Joe Biden is taking up the cause. A request for Medicare to have the authority to negotiate cheaper prescription prices was a central theme of his second State of the Union Address, delivered in early 2022.
Investors looking to diversify their holdings might wish to investigate the pharmaceutical sector.
Pharma firms have a bad stigma, yet they might be attractive to long-term investors. Opportunity awaits pharmaceutical sector individuals willing to put in the legwork necessary to secure patents in emerging therapeutic areas.
Investors in publicly traded pharmaceutical businesses should maintain a careful eye on the progress of clinical trials. For many businesses and their products, the outcomes of clinical trials are crucial. While positive results might generate significant revenue growth, negative ones can have the opposite effect.
Is It Currently Redeemable?
You should wait it out if the investment is less than 10% of your portfolio. Reduce your stance if it has grown to this extent. Also, cash out if it was all a lucky guess that paid off.
While a pharma fund is a welcome addition to any portfolio, allocating more than 10–15 percent to the sector may not be the best use of your money. Evaluate your other financial holdings and make a choice based on that. You should only invest a modest portion of your portfolio in pharmaceuticals if you already have a diverse portfolio. However, a sectoral fund isn’t necessary for the vast majority of portfolios.