It is a known fact that pharmaceutical companies offer an investor many advantages that you cannot find with other companies. Many value and growth investors find investing in these companies lucrative.
The important thing is to know what kind of investor you are. Value investors would normally look for good companies that earn much more relative to actual price paid. Medical companies that sometimes can experience a dip in their share price because of a lull in their cycles of production or some bad news that is temporary would offer good value.
Medical companies should also have a healthy balance sheet which is very necessary for growth. Pharmaceutical companies that have cash equivalents to pay for research and development and other investments have a good chance to sustain their growth. Companies that give importance to innovation know that it is vitally important for future growth and in turn would benefit the investor.
A huge segment of the pharmaceutical industry sells items that are consumable and are used on a daily basis by medical professionals, hospitals and clinics and the public themselves. The use of these items is non-discretionary and the revenue earned is steady even if the economic cycles are not. Moreover, countries all over the world have a large aging population that needs medication and drugs all through the year.
While the advantages of investing in pharmaceutical companies are obvious, there are also certain risks one has to consider. These are: a product may prove to be less valuable, a product may not be approved by the concerned authorities and a product can also become a liability if it is harmful to patients.
One has to admit that the pharmaceutical industry has a very good position to take great advantage of the growing demand for drugs and medication for the sick and elderly. Innovations always offer new ways that will improve the welfare and lives of people. Growth investors should take advantage of new and rapid innovation while value investors would do well to take advantage on the dips in company stock price that is temporary.
"Biotechs" have grown in the past few years and is still growing. The trick is to catch a company while it is still small as long as it has the right type of drug in its pipeline. Huge pharmaceutical companies have drugs that are losing patent protection and thus causing their pipelines to run dry. Therefore they are buying up biotech companies to restore and fill up their pipelines!
It is common knowledge that many pharmaceutical companies are undergoing transformations to change their business strategies and techniques. Many are focusing on developing new systems, sales tools, technologies etc to fight the increasing competition from smaller generic drug companies. They are focusing on the demand of "smaller patients" rather than developing expensive blockbuster drugs. Participation by these companies in co-promotes, JVs etc; outsourcing of activities like clinical research, sales and R&D to other third parties and sub-contractors; and even entering new markets in Asia where opportunities for growth exist, are helping the pharmaceutical companies to still come out on top in the evolving market.