The global pharmaceutical industry is worth at least 1.2 trillion dollars in sales each year. This shows how huge the pharma industry is and a great opportunity for investors trying to get their money in the right place. Investing in pharma companies is not only is profitable for the investors but it also contributes to quality-of-life advancements for the patients all over the world. The COVID-19 pandemic has drawn even more attention to the pharma companies since many of them are involved in developing coronavirus drug and vaccine candidates.
Investors should look to pharmaceutical stocks for their ability to reap good long-term returns that outperform the general market. Such returns are possible because pharmaceutical companies are creating medicines that people need — medications to cure or prevent diseases and immunization vaccinations against bacterial and viral infections — and are actively investing in research and development to introduce new drugs. However, every sensible investor knows that focus should be given on drug patents when evaluating pharma companies.There are some other factors that can have significant effects on the drug industry and work alongside or independently of drug patents. Certain non-patent factors that should be taken into consideration when investing in pharma companies by investors are :
Orphan Drugs
“Orphan drugs” are pharmaceutical products intended for the diagnosis, prevention or treatment of rare , life-threatening or extremely serious diseases or disorders. Government regulatory agencies can use non-patent exclusivities, such as those available for Orphan Drugs, to encourage new medicines to develop. According to a 2015 study released by EvaluatePharma, orphan drug markets mimic the pharmaceutical industry system as a whole but with some very significant variations. The 2014 Orphan Drug study reported that as part of all prescription drug sales, the proportion of orphan drug sales has risen at a rapid rate. The US FDA describes an Orphan Drug as one that prevents a disorder that affects less than 200,000 Americans. Seven years of market exclusivity are granted to orphan products, regardless of the patent status. Drugs with an orphan status in the European Union benefit from price reductions and the exclusivity for 10 years of marketing.
505(b)(2) Drugs
505(b)(2) Medications which are often referred to as supergenerics are a mixture of a generic and a new drug use. Unlike generics, 505(b)(2) medications can have different characteristics from the medications on which they are based and, unlike new drugs, 505(b)(2) drugs can invoke the safety and effectiveness of drugs already on the market.Regulatory issues aside, the essential factor for investors is that 505(b)(2) drugs can operate around such patents and can even be used to strengthen the characteristics of drugs already approved.
For example, a company may use a 505(b)(2) application to obtain approval for manufacturing modifications that allow them to work on branded drug synthesis patents. Similarly, as opposed to the original drug, a 505(b)(2) drug may have enhanced features such as a preferred delivery type ( e.g. oral vs. injectable), less adverse effects, or longer duration of action.Both of these factors will allow a 505(b)(2) drug to take market share from other drugs either before all of their patents expire or because of their improved properties they will take market share from generics.
Biosimilars
Biosimilars have the same therapeutic effect as a generic but are just as similar to the original branded drug as can be verified by validation technologies.A advantage of the biosimilar production process is that while generic entrants are often not detectable until they are released, the creation of these new drugs can be monitored for biosimilars early in development. This helps investors to watch the emergence of biotechnology drug price pressures and to foresee growing companies can take market share from the originators.
Litigation
Patent litigation may provide valuable information about the potential prospects of both branded and generic companies. The results can be expected even without reading the particulars of the litigation. For example, it will be anticipated that a branded drug business that has succeeded in numerous patent challenges would continue to succeed in potential challenges too. Lastly, litigation involving contract disputes could expose the terms of the previously confidential deal and shed light on the company’s proprietary internal processes.
Tentative Approvals
Although the FDA does not reveal the names of patent claimants, nor does it name companies that have submitted generic applications for drugs, preliminary approvals may help.
According to the FDA: if a generic drug product is eligible for approval before the expiry of any patents or exclusivities given to the drug product specified in reference, the FDA may issue the applicant a letter of conditional approval. Tentative approvals will also help determine which generic firms are expected to market first before they officially launch.
Tracking new drugs
It is possible to predict potential new entrants by monitoring investigational drugs which may erode the market share of existing industry leaders.
Tracking the companies involved in clinical trials and monitoring the success of clinical trials will also provide further insight into the future timing of market penetration and which companies will benefit.
There are several considerations in helping you make investment choices that support the drug patents. Investors can boost their odds of excellent returns by better knowing the business environment and which parties stand to gain and who could be harmed.
