Pharmaceutical ETFs: Drug Companies Roar Back

November 16th at 11:00am by Tom Lydon

Back in the day, Big Pharma’s block buster drugs were their bread and butter, but those patents are running out. However, the industry’s fortunes could be turning as new breakthroughs bring pharma companies and related exchange traded funds (ETFs) back from the brink.

Some cases in point:

  • Bayer and Johnson & Johnson (NYSE: JNJ) have come up with a new blood thinner, dubbed Xarelto, that has shown some promising results in preventing strokes in patients with atrial fibrillation, writes Matthew Herper for Forbes.
  • Other firms are also developing the next generation of blood thinners, including the apixiban from Pfizer (NYSE: PFE) and Bristol-Myers Squibb (NYSE: BMY), edoxaban from Daiichi Sankyo and betrixiban from Merck (NYSE: MRK). Additionally, Merck will be announcing a drug that will raise good cholesterol levels. [ETFs for a Changing Pharma Landscape.]

Expiring patents weighed heavily on the pharmaceutical sector, but innovation in other areas appears to be poised to help them trump any of the negative effects, and it has given pharma ETFs a boost:

  • iShares Dow Jones U.S. Pharmaceuticals (NYSEArca: IHE): up 8.4% in the last six months
  • PowerShares Dynamic Pharmaceuticals (NYSEArca: PJP): up 16.5% in the last six months
  • SPDR S&P Pharmaceuticals (NYSEArca: XPH): up 8.1% in the last six months

After acquiring Alcon, Novartis (NYSE: NVS) may soon be debt free in four years and in a position to takeover and expand again, reports Haig Simonian for The Financial Times. Critics have labeled Novartis as turning away from further medicinal discovers in favor of expanding generics, consumer health and other more conservative activities. [Why Health Care ETFs May Be In the Clear.]

But is all well with pharma for the long haul? The sector still has to stay on its toes. Novartis’ CEO argues that pharma companies need to review their strategies as stressful financial times weigh down health care providers and drug discovery rates. [Pharma ETFs Find New Avenues of Growth.]

If you want to get in on this sector and believe that it will continue to rise to the challenge, consider one of the ETFs above, or search for others in the ETF Analyzer.

For more information on the pharmaceutical industry, visit our pharmaceutical category.

Max Chen contributed to this article.

The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.