Coming off a vaccine rally that started in the middle of 2020, the pharmaceutical industry will continue to evolve as technological advances make their way into the sector, which should help ETFs like the VanEck Vectors Pharmaceutical ETF (PPH).
PPH seeks to replicate as closely as possible the price and yield performance of the MVIS® US Listed Pharmaceutical 25 Index. The index includes common stocks and depositary receipts of U.S. exchange-listed companies in the pharmaceutical industry, which includes medium-capitalization companies and foreign companies that are listed on a U.S. exchange.
“A couple aspects of PPH are noteworthy,” an ETF Database analysis said. “First, though PPH is now structured as a true ETF, it used to be one of the HOLDRS products offered by Merrill Lynch. Some of the concentration that was characteristic of those products remains in PPH; the portfolio is relatively shallow and concentration in the top allocations is significant. Further, PPH includes only U.S. stocks, meaning that some of the biggest players in the pharmaceutical industry are excluded from the underlying portfolio.”
“PPH is a decent option for pharma exposure, but there are probably some better ETFs out there for tapping into this segment of the market,” the analysis added. “IHE offers better depth of holdings, while DRGS may be appealing to those looking to achieve truly global exposure.”
PPH is up 11.48% the last 12 months while the MSCI ACWI Pharmaceuticals has risen by 7%.
The Future of Pharma 4.0
A confluence of factors is feeding into a more complicated pharmaceuticals industry. The process of developing drugs is getting more advanced, and with the introduction of Pharma 4.0, more defined processes may help promote medical simplification.
“Over the past 20 years, many factors, including globalization, supplier specialization and reimbursement pressures to reduce cost, have increased the complexity of the drug-making process,” a Technology Networks article said. “Pharma 4.0TM is a framework for adapting digital strategies to the unique contexts of pharmaceutical manufacturing, especially using more analytical information to improve productivity and product quality.”
“The term Pharma 4.0 was coined by the International Society for Pharmaceutical Engineers to represent an industrial transition in which ‘digitalization and automation meet very complex product portfolios and life-cycles,‘” the article explained. “As regulatory agencies mandate improved traceability of data and enhanced quality oversight of the complex processes and supplier networks within the pharmaceutical industry, this creates pressures that manufacturers must address in addition to continuing to accelerate their therapeutic pipelines.”
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