Investing in generic drugmakers based on biogenerics
A report in the Motley Fool yesterday advises investors to look into companies equipped to offer biogeneric equivalents — that is, biologic drugs that have lost their patent protection. Right now, the FDA has not established a metric for approving biogenerics, but it is likely that they will under pressure from generic drugmakers and pharmacy benefit managers alike. Consumers, of course, will appreciate the generics when they become available.
Mr. Gorman advises investing in companies equipped to make biogenerics — Novartis (probably through their Sandoz division), and a couple of others. Personally, I would stay away from investing in Novartis solely on the basis of their biogeneric capabilities, if for no other reason than their market capitalization is six times greater than the entire yearly generic drug market. Beyond this, Novartis's recent acquisition of Sandoz has caused some problems for the generics portion of their business:
Large pharmaceutical companies are used to being able to take their time because they have 20 years before their patents expire on New Chemical Entities — things that may or may not go on to become drug available to the public, depending on the outcome of clinical trials — but to survive as a generic drugmaker you've got to be the fastest to market, or the most capable negotiator to land a big contract manufacturing an "approved" generic. Recent reports in the WSJ indicate that the Sandoz division is being slowed down by the established bureaucracy — another reason to be skeptical of investing in Novartis on the issue of biogenerics. (Sorry, I don't have a link available; I read the article in the print edition of the paper.)
Mr. Gorman goes on to suggest some other companies like the Israeli-owned Teva, and Barr. Naturally investing money in those companies now based on the possibility of an approval pathway is risky, because nothing is ever certain, or fast, with the FDA. However, the potential payoff for investing on the biogeneric ground-floor, so to speak, could make it worth your while.
[tags]Medicine, pharmacy, biogenerics, biologic drugs, Teva, Barr, Novartis, Sandoz, investing, Big Pharma[/tags]
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