Over the past year, many different pharmaceuticals have been an ideal place for investors to hide. With increasing demand for several key drugs among baby boomers, retirees and overseas patients, countless investors are wondering if now is the time to go aggressively into this sector.
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Pharmaceutical Demand Expected To Increase
Part of the reason for the surge in demand is that many developed Western nations have aging populations. In addition, China and other developing nations are increasing their demand for popular drugs on the market. According to The Freedonia Group, growth for many of these best-selling Western drugs is expected to increase by 13.6% this year in China alone. This, along with increasing demand worldwide, is causing many of the large drug manufacturers to report better than expected numbers during one of the worst recessions the world has seen in 25 years. (For more, see Stocks On Drugs: What It Takes To Get High.)
Ways To Make Money Off This Increasing Demand
You can make money off this promising sector in many ways. The following stocks offer potential long-term growth in addition to improving earnings:
Eli Lilly and Co. (NYSE:LLY) reported better than expected earnings of $1.20 per share compared to 97 cents at this time last year. Chairman and CEO John C. Lechleiter said, "Despite the downturn in the economy, in the first quarter of 2009 Lilly delivered strong financial results with good underlying operational performance, aided in part by movements in exchange rates. Our revenue growth included solid volume-based gains, while our gross margin percentage benefited from a stronger U.S. dollar. These results, in combination with prudent expense management, helped us to achieve operating leverage and robust earnings per share growth." In spite of the global economic recession, the company continues to report higher drug sales and profits as a result of strong demand. (For further reading, see Measuring The Medicine Makers.)
Gilead Sciences (Nasdaq:GILD) announced better than expected earnings of 63 cents, compared to 53 cents one year ago. Gilead also reported strong sales of its popular AIDS drugs, Atripla and Truvada, saying that both had increases of 28% and 23% compared to one year ago due to continually increasing worldwide sales. This will more than likely continue to help improve the company's overall earnings in the coming quarters.
Biogen Idec (Nasdaq:BIIB) reported earnings of $1.05 compared to 83 cents in the same quarter last year. As President and CEO James C. Mullen said, "Revenue growth from all three of our marketed products and continued advancement of our robust pipeline during the quarter were in line with our expectations. The expansion of our global footprint in recent years is serving us well, particularly in the current environment. One-third of our sales currently come from outside the United States, a clear illustration of our success in capturing the greatest amount of value for our products worldwide."
Demand for the company's three main drugs remains strong both inside and outside the U.S. This strong demand and improving year-over-year earnings results indicate the company's financial strength.
Sepracor (Nasdaq:SEPR) announced better than expected earnings of 31 cents per share compared to 6 cents last year. The company reiterated its guidance for all of 2009, saying that earnings will come in the $2.10 to $2.70 per share range. As President and CEO Adrian Adams said, "We delivered strong first-quarter results with robust EPS growth and are determined to continue to deliver strong financial performance." Sepracor continues to deliver strong year-over-year results and expects to keep up this pace for the foreseeable future. (For related reading, see Investing In The Healthcare Sector.)
Even with the current recession hurting many different industries and companies, the pharmaceutical sector continues to show strong year-over-year earnings results and demand worldwide. While you never can be certain of what the future will bring, clearly Eli Lilly, Gilead Sciences, Biogen Idec and Sepracor all have improving earnings and strong momentum that should provide continued earnings growth - something that is difficult to find during this challenging economic environment.