Investing For The Global Diabetes Epidemic

By Aaron Levitt | Updated July 10, 2013 AAA

This week, fast-food king-pin McDonald’s (NYSE:MCD) unveiled in Japan its newest creation- Mega Fries. The three-quarters of a pound, 1142 calorie serving of french fries- while potentially delicious- underscores that our new diet of convenience and excess is having some sobering effects on our heaths. As the world moves towards less physical activity and increased consumption of nutritionally deficient foods with higher levels of sugar and saturated fats, obesity rates and its complications will continue to rise, globally.

Incidences of one of those complications- diabetes- is rising at an exponential pace.

For investors, we can find opportunities in this sobering statistic in the companies that are working towards a cure or treat diabetes.

A Growing Global Problem
The National Institute of Health estimates that obesity and related complications such as diabetes are our nation's chief health concern. However, while most people tend to think of diabetes and obesity as a developed market problem, the two issues are spreading quite rapidly across the globe. Roughly, four out of five people suffering from diabetes are now located in developing markets. China alone, has 92.3 million diabetic citizens, while India’s diabetic population is over 50 million. Overall, there are nearly 371 million people across the globe that suffer from diabetes and plenty more that are in pre-diabetic stages.

However, there ranks are growing quite rapidly.

According to a new report from The International Diabetes Federation (IDF), at least one in 10 adults will have diabetes by 2030. Based on factors like aging, demographic changes, diet changes and increasing sedentary lifestyles, the group predicts that an estimated 552 million people could have diabetes in less than two decades' time. Overall, the IDF expects the number of cases to jump by 90% with the biggest contributor of new cases coming from the emerging world. This new report echoes similar statements made by the World Health Organization and Centers For Disease Control.

All in all, the growing number of people who suffer from the disease will push the global spending for diabetes to reach $48 to $53 billion by 2016. That’s some serious spending amounts and could be lucrative opportunity for investors.

A Diabetes Portfolio
Given just how big of an epidemic that diabetes has become, investors may want to contribute some capital to the sector. Many major pharmaceutical firms like Eli Lilly (NYSE:LLY) or Sanofi (NYSE: SNY) have divisions devoted to diabetes care and treatment. However, some of the best opportunities could be in the firms that specialize in the diseases care.

While there are several new therapy's in the works for diabetes care- such as MannKind’s (NASDAQ: MNKD) inhaled insulin drug Afrezza- injectable insulin still remains at the bread and butter of the industry. Novo Nordisk (NYSE:NVO) became one of the first manufacturers of insulin in 1923 and currently supplies more than half of the world’s dosage. The position is being strengthened in the emerging world as Novo has undergone a pricing strategy-in places like Africa and India- that helps get its insulin products into the hands of the poor for dirt cheap. Given the population sizes of these markets, Novo believes that over time volume of insulin sold will lead to serious profits. As such, investors may want to go with the leader in the space.

The diabetes sub-sector is the largest market for medical devices. Analysts estimate that in the U.S. alone will reach $20 billion by next year. Investors can play the device angle through several avenues from syringe manufacturers like Retractable Technologies (NYSE:RVP) and West Pharmaceutical (NYSE:WST), glucose monitors through Becton, Dickinson and Company (NYSE:BDX) or cutting edge insulin pumps through Insulet Corporation (NASDAQ: PODD).

Finally, one of the sad potential side-effects of diabetes is kidney failure and millions of people around the world suffer from this condition. DaVita (NYSE:DVA) owns and operate kidney dialysis centers with primarily focus on the United States. The company’s future potential hasn’t gone unnoticed as America’s favorite value investors- Warren Buffett- has taken a sizable stake in the firm. Incidentally, Buffett also holds a stake in Becton; Dickinson. Retail investors may want to follow suit as the epidemic continues to grow.

The Bottom Line
Sadly, diabetes is quickly becoming a global epidemic. As inactivity and high fat diets continue to seep into our lifestyles, the problems will compound themselves. Within these grim statistics, investors can find opportunities with the companies that are fighting this epidemic. The previous stocks represent a good starting point for further research.

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