With just six months left on my 2014 bioscience "profit calendar," things are really starting to look promising for the second half of 2014. There are huge opportunities in several subsectors of the bioscience market in particular.
That said, some bioscience analysts are saying there's a bubble. And it's scaring a lot of bioscience investors out of great positions in the market.
That's why last week I shared my complete bioscience market outlook for the rest of 2014 with my paid members – to help them see the real market story.
Today I want to share with you some of my thinking, expectations, and predictions, as well as my strategy to get us tapped into a segment of the bioscience market we haven't even touched yet.
This segment has been tremendously profitable for some of the world's biggest drug companies, and I think there are going to be some killer profits for us there, too…
Outlook for Q3/Q4 2014
For the rest of this year, we have a number of great opportunities coming our way, but of course, a lot will depend on the overall health of the biosciences industry during that time. Over the past few months, some analysts have been rubbing their worry beads over the pullback in FDA approvals for 2013, the possibility that we might be experiencing a bioscience sector "bubble," and the market correction that took place a few months back.
My take? There's nothing but great sailing ahead. Here's why.
What We Mean When We Say "Bioscience Sector"
The "bioscience sector" is actually a group of subsectors that includes pharmaceuticals, biologics and biosimilars, generics, and medical devices. In brief:
- Pharmaceuticals are bioactive "small molecule" drugs, designed and synthesized in laboratories. Often, they're based on brand new molecules engineered by researchers, although sometimes they're known substances combined in novel ways. The FDA requires that new pharmaceuticals undergo a rigorous series of preclinical (animal) and clinical (human) studies for safety and effectiveness, as well as ongoing and final assessments by the agency.
Much of our investment strategy in BioScience Millionaire is based around events in this "regulatory gauntlet," such as data releases and FDA reviews, which can cause dramatic changes in stock price.
Despite dire predictions from some analysts, R&D in new pharmaceuticals is robust. This type of drug currently represents about 80% of all medications, with biologics representing the other portion. Today, there are roughly thousands of new drugs under study in the U.S. alone.
- Biologics are "large molecule" compounds created naturally by living organisms and are used in the same way as pharmaceuticals. Biosimilars are more or less the generic versions of biologics. Because biologics tend to be very complex, a biosimilar may not be an exact molecular copy of an originator drug, but it treats the same condition in a similar way. Also, biosimilars are not always the natural product of a living organism, but rather the result of recombinant DNA technology. These drugs undergo the same regulatory development process as pharmaceuticals.
The market for biologics is expanding vigorously. By 2016, they are predicted to account for 24% of sales in the world market, double that of 2004. These drugs are innovative medicine and are sign of great health in the industry.
- Generics are knockoffs of brand-name drugs. According to the FDA, they must be "…the same as brand-name drugs in dosage form, safety, strength, route of administration, quality, performance characteristics, and intended use." Before a generics manufacturer can produce a copycat, all patent and other exclusivity protections for the original drug must expire. Generics do not have to undergo safety and effectiveness trials, and so are much, much cheaper to produce. The timing of their regulatory gauntlet is much less disciplined than that of pharmaceuticals and biologics, so it's impractical to base an investment strategy around catalysts in this subsector.
Over the past two years, many brand-name drugs have fallen off the so-called "patent cliff," making them available to generics manufacturers. This year, 2014, a number will lose protection. In 2015, however, that number will drop sharply, curbing the addition of new generics on the market.
Still, they represent an ever-growing portion of the market. Generics account for about 80% of all prescriptions written in the U.S., and they're extremely important in keeping medical costs under control.
They can also make a significant contribution to a bioscience portfolio, and we'll be taking a closer look at them in the second half of this year.
- Medical devices, like everything else used to treat human illness, need to undergo a regulatory approval process before being allowed on the market in the U.S. and in most other parts of the world. The FDA approved just over 30 new devices in 2013, which included everything from surgical sealants to ceramic hips.
Thus far, in 2014, the agency is approving devices at approximately the same pace as 2013.
Medical devices represent a significant, if somewhat smaller part of the larger bioscience sector, and continue to attract the interest of both business and investors.
An Evolving Sector
So the industry is thriving. But it's also changing.
About the Author
Ernie Tremblay has more than 25 years of experience in following and analyzing the latest developments in health, medicine, and related technologies. He understands the FDA approval process, as well as the "hard science" behind new, experimental drugs and the market demand for them - and has a comprehensive grasp of the complex dynamics that determine whether a new drug will be a breakthrough winner, or just another casualty of the FDA approval process.