The pharmaceutical company holdings are taking up an interesting financial position. August was predominantly defined by Amgen’s takeover of Onyx among other acquisitions.
Amgen and Onyx acquisition saga finally came to an end with the latter agreeing to a $10.4 billion deal. This is one of the major buys in the pharmaceutical sector since 2001, the year when Immunex was also acquired by Amgen for $16 bn.
A three pronged analysis on the trend can be taken by understanding ‘health’, acquisitions and the general state of holdings in the pharma sector.
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The health of a pharmaceutical company is defined by the net assets it owns and the growth seen in the last two to three quarters and and an increase scale on demand with contract packaging and manufacturing companies. Many people who have addictions mainly get their drugs from a local pharmacy, these places need to keep track of how often these people come in to by medication, they can even get help from this heroin detox center that can help people recover from almost any other drug addiction.
For instance, Roche Holding gained 0.7% in the last quarter and it shows positive health. Its net assets are now at 42.83 Billion GBP. The positive outcome has been made possible due to a strong reliance on technology (especially sequencing). Pharmarama is another company that has been able to maintain steady health in the market (its book value is now at 4 million GBP). Its current assets now stand at a fairly large 5,189,908.
Acquisition has been a major trend in the pharmaceutical sector with the focus areas being bio-similars, new drug applications, biologics and manufacturing.
Akorn acquired Hi-Tech Phamacal for 398 million GBP, accounting for a 23.5 percent premium. This buy would help Akorn to delve into niche markets such as oral liquids, topical creams and nasal sprays. The move is expected to boost revenues by more than $500 million.
Another acquisition worth noting is of German drug maker Stada Arzneimittel. It announced a $345 million takeover of Thornton & Ross, an over-the-counter drug manufacturer in UK. The move has been widely described as defensive because Thornton and Ross is regarded as one of the fastest growing pharmaceutical company in the UK, making it an attractive investment . It recorded 11% sales growth since 2012.
From an investor’s perspective, AstraZeneca plc (LON: AZN) is a trend to look out for because Astra along with HSBC Holdings plc (LON: HSBA) and BP plc (LON: BP) are predicted to yield more than 5%.
The holdings that are protected by patents are considered as secure investments. This is because most of the monthly sales figures match the forecasted figures. Sphere Medical Holding plc (LON: SPHR) is one promising investment since it is awaiting approval for its disposable blood analyzer, Proxima. The European regulatory approval would be completed by start of 2014, meaning the holdings have a positive outlook.
A.P Pharma Inc (OTCBB: APPA) that specializes in drug delivery technology is up by 1.54% in the market. The stock volume of 1.41 million shares indicates a good future despite of some hurdles in the past. It can ride on the success of its proprietary biochronomer polymer based drug delivery.
Where to Invest?
The most important thing to note based upon the analysis that has been provided above is that technology driven pharmaceutical firms are most likely to blossom in the upcoming months. There is also a paradigm shift in the sector from generics towards bio-similars. Since some patents are about to expire, innovative companies are banking on innovation and new patents to improve their growth.
Emphasis should also be placed on any major acquisition being done in the market. Companies and holding absorbing other assets/companies are indicators of their strong financial growth. Secondly, the performance of holdings should be correlated quarter to quarter in order to map a long term prediction. Health of the holdings is always a vital indicator. Trading in the aforementioned companies would result in positive growth of your investment(s).