There is a good reason that healthcare stocks have remained immune to the wild swings of the volatility of the stock market. Everyone agrees that the industry of healthcare has clocked much quicker growth, compared to the market. It is attested by industry analysts, that the reputation of healthcare stocks as a safe harbor during volatility, gives them a special investment appeal.
Rise of the elderly
This was agreed to by Stephen Leeb, an investment manager, and the editor of The Complete Investor, an industry newsletter. He has noted that along with the United States, the huge Chinese population is also swinging towards the elderly. He has calculated that by 2020, the average Chinese age will cross the American median age. According to Leeb, about 10 million Chinese citizens will reach 65 years of age within the next three years. He argued that this fact, along with the rising income of the Chinese, will ensure a steady growth in healthcare for an indefinitely longer period.
Leeb is of the opinion that by 2020, the healthcare market in China, will in all probability, be approximately $1 trillion, much higher than the $357 billion market of 2011. This market will continue to expand, thus adding to the industry's profits. Revenues will also be generated from developed nations like the US as healthcare spending will continue to move up. It is apparent that the winners will be the drug companies who have done their homework and positioned themselves in a better business spot.
Leeb recommends two companies as his favorites: Bristol-Myers-Squibb (NYSE: BMY) and Alexion Pharmaceuticals (NASDAQ: ALXN). The former leads the world in anti-cancer therapeutics and cardiovascular anti-infective medicines. The latter has focused its research on what is colloquially known as “orphan diseases”.
The pivot of the rare disease drugs of Alexion, is Soliris. This drug is at present, approved for aHUS and PNH-two rare disorders of the blood. Soliris made its first appearance in the market in 2007 for the treatment of PNH, a very rare kind of anemia. Another drug, the aHUS, was approved in 2011 to treat rare kidney diseases. Other uses are also presently being explored for this drug, including the expulsion of pathogens from the immune system.
Soliris has given impressive revenues to the tune of $2.23 billion. Leeb says that this handsome growth reflects not only the newer applications, but also the increasing awareness of the availability of the drug by the burgeoning potential patients population.