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Health Care Stocks

Big Pharma: Good for What Ails Your Portfolio

By Yiannis G. Mostrous, on Mar. 18, 2014

Investors have long regarded big pharmaceutical companies as defensive plays, assuming that consumers will continue to spend on medications and other health-related products when the economy weakens.

Although shares of big pharmaceutical companies have earned a reputation for resilience, recent developments suggest that some names offer investors an overlooked growth element.

It’s Biology

Biological medical products, or biologics, differ from traditional pharmaceuticals in that they are produced biologically and can comprise a combination sugars, proteins and nucleic acids. In some instances, biologics may consist of cells, tissues and other living entities.

Cutting-edge biotechnologies enable pharmaceutical companies to isolate these biological treatments from a variety of natural sources, from humans and animals to microorganisms.

Whereas chemically synthesized drugs exhibit an identifiable structure, the complexity of many biological products defy easy definition.

These innovative treatments represent the cutting-edge of biomedical research and eventually may emerge as the most effective means to remedy a variety of medical illnesses and conditions for which no cures exist.

Equally important, biological treatments are more difficult to replicate than chemically synthesized drugs, proving a degree of insulation against competition from generic versions when the patents expire.

With their bulletproof balance sheets, the biggest pharmaceutical names remain best-positioned to commercialize biological products.

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