The pharmaceutical industry is sizable, with the US commanding the largest slice of the market. But competition within the sector is cutthroat and regulatory approval is an ongoing hurdle. Read on to find out what you need to know before investing in pharmaceutical stocks from Australia.
What are pharmaceutical stocks?
Pharmaceutical stocks are stocks from companies that research and produce pharmaceutical drugs and medical equipment.
The industry is dominated by big names like Pfizer, Johnson & Johnson and GlaxoSmithKline — famous for blockbuster drugs netting over $US 1 billion in annual sales, like Advair, Lipitor and Zoloft.
But there are numerous up-and-comers in the industry offering a spectrum of entry points for Australian investors, like livestock medicine manufacturer Zoetis or Neoleukin Therapeutics, a biopharmaceutical company that targets immunological disorders.
Why invest in pharmaceutical stocks?
The global pharmaceutical industry is massive — and the US holds the largest slice of the market. In 2018, worldwide pharmaceutical revenue sat at $US 1.2 trillion, with the US commanding a 40.4% share of the market with pharmaceutical sales of $US 484.5 billion.
According to Statista, the US also happens to have some of the highest prescription drug prices in the world — bad news for the general public but profitable for well-established drug companies like Pfizer and its shareholders.
Pharma stocks also have the potential to outperform the broader market. For example, the SPDR S&P Pharmaceuticals ETF has outperformed the S&P 500 since its 2006 inception.
And if the potential for profit isn’t incentive enough, investors also have the opportunity to back potentially groundbreaking, life-saving medicine — medicine that they or a loved one may one day rely on.
Risks of investing in pharmaceuticals
Pharmaceutical stocks present a potentially lucrative investment opportunity but carry significant risks, including competition from generic drugmakers, product patent expirations and the substantial cost of research and development (R&D).
It’s estimated that pharmaceutical companies spend approximately 20% of their revenue on research and development. In fact, in 2018, US companies spent a collective $US 80 billion on R&D, according to Statista. What makes this expense especially unpalatable is the risk drug companies face in having their products rejected by regulatory authorities like the US Food and Drug Association (FDA). A company could spend millions researching and developing a product, only to have it rejected by the FDA.
Pharma companies also face steep competition from generic drugmakers attempting to undercut brand-name products with cheaper alternatives — especially for drugs with patent expirations on the horizon.
The industry is far from foolproof, and while pharma stocks could be a potentially profitable addition to your portfolio, make sure you understand the risks involved before you invest.
How has COVID-19 affected pharmaceutical stocks?
In the wake of the coronavirus pandemic, pharmaceutical companies have been thrust into the global spotlight as over 155 vaccine candidates scramble for regulatory clearance. Many of the big-name drug manufacturers with COVID-19 vaccines in trials have seen their stock prices rise alongside press releases of potential efficacy rates, including Pfizer, Moderna and AstraZeneca. These so-called COVID stocks may continue to see market growth, but the gains related to the pandemic may be short-lived.
There’s money to be made from selling a COVID-19 vaccine, but analysts warn that as more drug companies enter late-stage trials, the number of viable vaccine candidates will grow and no single manufacturer will be able to monopolize vaccine sales.
Investing in the pharmaceuticals industry
These pharmaceutical stocks hail from companies headquartered in Australia and around the globe.
Company summary
Starpharma Holdings Limited, a biopharmaceutical company, engages in the research, development, and commercialization of dendrimer products for pharmaceutical, life-science, and other applications worldwide. The company offers VivaGel BV, a non-antibiotic vaginal gel for the treatment of bacterial vaginosis and prevention of recurrent BV; VIRALEZE, an antiviral nasal spray; and VivaGel condom, an antiviral condom. It is also involved in the development of DEP cabazitaxel that is in Phase 2 clinical trial for the treatment of prostate and other cancers, DEP docetaxel that is in Phase 2 clinical trials for the treatment of colorectal and other cancers, DEP irinotecan that is in Phase 2 clinical trials f for the treatment of pancreatic and other cancers; and EP gemcitabine, DEP HER-2 ADC, and DEP HER-2 radiotherapy completed preclinical trials for the treatment of solid cancers. In addition, the company's DEP radiotheranostics development pipeline includes DEP HER2-zirconium, a HER2-targeted radio diagnostic for HER2-positive cancers, such as breast and gastric cancer; and HER2-targeted DEP SN38 ADC, a targeted ADC therapeutic for the treatment of human ovarian cancer. Starpharma Holdings Limited was incorporated in 1997 and is headquartered in Abbotsford, Australia.
Historical performance
Stock information
Market capitalization: $53565328
PEG ratio: 0
Company summary
Mayne Pharma Group Limited, a specialty pharmaceutical company, manufactures and sells branded and generic pharmaceutical products in Australia, New Zealand, the United States, Canada, Europe, Asia, and internationally. The company operates through four segments: International Branded Products, and Portfolio Product Division. It provides oral drug delivery systems; and contract development and manufacturing services to third-party customers, as well as distributes specialty pharmaceutical products in the dermatology, women's health, and infectious disease therapeutic areas. The company was formerly known as Halcygen Pharmaceuticals Limited and changed its name to Mayne Pharma Group Limited in November 2010. Mayne Pharma Group Limited was incorporated in 2005 and is based in Salisbury South, Australia.
Historical performance
Stock information
Market capitalization: $614236480
PEG ratio: 0
Company summary
AFT Pharmaceuticals Limited, together with its subsidiaries, engages in the development and sale of pharmaceutical products in New Zealand, Australia, Asia, and internationally. It offers products for use in the areas of allergy, cold and flu, digestive health, eye care, first aid, nail care, oral care, pain management, skin care, and supplements, as well as other products. AFT Pharmaceuticals Limited was incorporated in 1997 and is headquartered in Auckland, New Zealand.
Historical performance
Company summary
Medical Developments International Limited manufactures and distributes emergency medical solutions in Australia, Europe, the United States, and internationally. The company operates through Pain Management and Respiratory segments. It offers respiratory devices for sufferers of asthma and chronic obstructive pulmonary disease (COPD); and Penthrox, a trauma and emergency pain relief product; and medical devices. The company also provides asthma and COPD products, such as space chambers and silicone face masks. The company was founded in 1971 and is headquartered in Scoresby, Australia.
Historical performance
Stock information
Market capitalization: $50057016
PEG ratio: 0
Company summary
Ecofibre Limited, together with its subsidiaries, engages in the researching, producing, and selling of polymer-based industrial products and hemp derived nutraceuticals and food in the United States and Australia. The company operates through three segments: Ananda Health, Ananda Food, and Hemp Black. It offers cannabinoid based health products for human and pet consumption; hemp related food products; and textile and hemp products. Ecofibre Limited was incorporated in 2009 and is based in Sydney, Australia.
Historical performance
Company summary
Cann Group Limited engages in the breeding, cultivation, production, manufacturing, supplying, and selling medicinal cannabis. It licenses to undertake research and to cultivate cannabis for human medicinal and research purposes. The company was founded in 2014 and is based in Port Melbourne, Australia.
Incannex Healthcare Limited, a clinical stage pharmaceutical development company, engages in the research, development, and sale of medicinal cannabinoid and psychedelic pharmaceutical products and therapies in Australia. The company offers APIRx-1801, an ultrapure tetrahydrocannabinol; APIRx-1802, an ultrapure CBD; and APIRx-1803, an ultrapure cannabigerol. It also develops IHL-42X, which has completed Phase IIb clinical trial for obstructive sleep apnea; Psi-GAD that is in Phase IIa clinical trial for generalized anxiety disorder; MedChew Dronabinol, which has completed Phase Ia clinical trial for nausea and vomiting in chemotherapy; CanChew Plus that has completed Phase IIa clinical trial for irritable bowel syndrome; APIRx-1601, which has completed Phase IIa clinical trial for vitiligo; APIRx-1602 skin that has completed Phase IIa clinical trial for psoriasis; and APIRx-1603, which has completed Phase IIa clinical trial for atopic dermatitis. In addition, its product portfolio includes IHL-675A for inflammatory lung disease, IHL-675A for rheumatoid arthritis, IHL-675A for inflammatory bowel disease, and IHL-216A for traumatic brain injury and concussion, which have completed pre-clinical trials; and MedChew 1401 for pain and spasticity in multiple sclerosis, MedChew GB for post-herpatic neuralgia, MedChew-1502 for Parkinson's disease, MedChew-1503 for dementia, MedChew RL for restless legs syndrome, APIRx 1505 Flotex for chrohn's disease, CanChew RX and SuppoCan (Suppository) for inflammatory bowel disease, CheWell for addiction of cannabis, CanQuit for tobacco smoking cessation, CanQuit O for opioid addiction, APIRx-1701 for glaucoma, suppoCan gastro for IBD, and APIRx-1702 for dry eye syndrome that are in pre-clinical trials. The company was formerly known as Impression Healthcare Limited and changed its name to Incannex Healthcare Limited in June 2020. Incannex Healthcare Limited was incorporated in 2001 and is based in Docklands, Australia.
Creso Pharma Limited develops, registers, and commercializes pharmaceutical-grade cannabis, and hemp-based nutraceutical products and treatments for human and other health in Europe, Canada, Asia Pacific, the United States, and internationally. The company develops and commercializes therapeutic products; develops and sells beauty and personal care products under the Green Goo, Southern Butter, and Goodgoo brands; and cultivates, processes, and sells cannabis products. Its products include cannaQIX, a nutraceutical product containing hemp oil extract, and vitamins and minerals in a lozenge delivery system; the ImpACTIVE Pro Releaf Stick to provide relief to muscle aches, particularly in professional sport, and acts as an alternative to pharmacological solutions sold through online channels; Ritual Green, a dried flower; Ritual Sticks for pre-rolled joints; and Ritual Gold, a handheld vapouriser. In addition, the company develops Halucenex, which is in phase II clinical trials, which will test the efficacy of psilocybin on treatment of resistant Post Traumatic Stress Disorder. Further, it engages in marketing of its hemp based food, feed supplements, and topical products; manufacture and sale of packaged consumer products; conducts clinical trial and development of synthetic psilocybin micro and macro dose formulations to treat treatment resistant depression and anxiety; and development of psychedelic medicines. The company was incorporated in 2015 and is headquartered in Nedlands, Australia.
Probiotec Limited engages in the development, manufacture, packing, distribution, and sale of prescription and over the counter pharmaceuticals, complementary medicines and consumer health products, and fast-moving consumer products in Australia and internationally. The company provides contract manufacturing services for solid dose tablets, capsules, and caplets; tablets coatings; blister packs, bottles, sachets, tubs, and tubes; liquids, creams, gels, lotions, ointments, and powders and powder blends. It is also involved in analytical and stability testing services; new product formulation and production trials, and ongoing research and development services; and packaging options for human and animal nutrition products, as well as manufactures and exports a range of nutraceuticals and functional ingredient raw materials. The company was incorporated in 1996 and is headquartered in Laverton North, Australia.
Historical performance
Stock information
Market capitalization: $232584912
P/E ratio: 28.6
PEG ratio: 0
Dividend yield: 0.0245%
Company summary
Recce Pharmaceuticals Ltd, a biotechnology company, discovers, develops, and commercializes synthetic anti"infectives in Australia, the United States, and the United Kingdom. The company's lead candidate is RECCE 327 to treat blood infections and sepsis derived from E. coli and S. aureus bacteria, including their superbug forms. It also develops RECCE 529, a synthetic anti-infective for viral infections; and RECCE 435, a synthetic polymer antibiotic formulated for oral use. In addition, the company engages in R327 Intravenous which provides serious/life-threatening bacterial infections, including sepsis which is in the phase 1 trial; urinary tract infections, including urosepsis; rapid infusions sepsis in the phase 2 trial; and R327 Topical offers wound infections, including infected burns; and diabetic foot ulcer infections in Phase 2 trails. Further, the company operates various pre-clinical programs, such as Mycobacterium abscessus which is in phase 1 clinical trial; bacterial sinusitis; and additional TBA. The company was formerly known as Recce Limited and changed its name to Recce Pharmaceuticals Ltd in November 2017. Recce Pharmaceuticals Ltd was incorporated in 2007 and is headquartered in Sydney, Australia.
Historical performance
Company summary
Neuren Pharmaceuticals Limited, a biopharmaceutical company, develops drugs for the treatment of neurological disorders. Its lead product is trofinetide, which is in Phase III clinical trial for the treatment of Rett syndrome, as well as has completed Phase II clinical trial to treat Fragile X syndrome. The company develops NNZ-2591, which has completed Phase I clinical trial for the treatment of Phelan-McDermid, Angelman, Pitt Hopkins, and Prader-Will syndromes. In addition, it provides development services; and holds loan funded shares. The company was incorporated in 2001 and is based in Camberwell, Australia.
Althea Group Holdings Limited manufactures, distributes, and sells cannabis-based medicines and recreational cannabis products in Australia, the United Kingdom, Canada, Germany, and Ireland. It also offers a range of education, access, and management services to support eligible patients and healthcare professionals in navigating medicinal cannabis treatment pathways. In addition, the company provides formulation and manufacturing of recreational cannabis products, such as beverages, edibles, concentrates, and topicals; and owns and operates a private medical cannabis clinic network under the MyAccess Clinics name. Althea Group Holdings Limited was founded in 2016 and is based in Melbourne, Australia.
Historical performance
Another way to invest in the pharmaceuticals industry is through ETFs. Pharmaceutical ETFs contain baskets of stocks from a range of businesses within the industry, including pharmaceutical companies, medical device manufacturers and more.
BetaShares Global Healthcare ETF (DRUG)
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Bottom line
Pharma stocks offer Australian investors the opportunity to back groundbreaking drug research, but competition in this industry has the potential to threaten profits.
To invest in pharmaceutical companies, you’ll need a brokerage account. Compare your platform options to find the brokerage that fits your budget and investment goals needs.
Frequently asked questions
Yes. Some that do include AstraZeneca, Johnson & Johnson and Sanofi.
Shannon Terrell is a writer for Finder who studied communications and English literature at the University of Toronto. On any given day, you can find her researching everything from equine financing and business loans to student debt refinancing and how to start a trust. She loves hot coffee, the smell of fresh books and discovering new ways to save her pennies.
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