5 Factors to Consider When Investing in a Drug Company

August 27, 2020 09:49:16

As your drug patent rights lapse, you can lose billions of money as your new competitors enter the market. This is the main reason why several investors always put their concentration on drug patent rights during the evaluation of drug companies. To help you make better investment decisions, here are some of the main factors to put into consideration if you want to invest in drug companies:

Seek Orphan Drug and Non-Patent Administrative Exclusives

In several states, governments are always using the regulatory agencies’ non-patent individuality, such as those in orphan drugs. They use those exclusivities to incentivize the production of new medicines. This is because the percentage of sales of orphan drugs is always increasing at a faster rate. The orphan drugs are also offered seven years of market exclusivity whether they have the patent rights or not. In some countries, exclusivity can last for more than ten years.

Benefits of Biosimilars

You can opt for these tiny molecule drugs that are developed by traditional drug companies as the only competition you may face may be from the generic drugs. Biologics, drugs produced by biotechnology companies, are always complex and may only face competition from biosimilars. As an investor in the drug market, you need to know that the process of generic drug approval is well crafted. It is also based on overall predicted patent expiry dates. You also need to understand that the steps for biosimilar market entry and competition are quite complex.

The benefit of biosimilar drugs is that you can track their development in competing for other drugs at early stages. It will allow you as an investor to also follow the pricing pressures from the biotechnology medicines and predict which companies may take important market shares.

Consider Indefinite Approvals

A question that you should ask yourself is that when generics are launched, who will be the first generic competitor? The question is always essential with patent problems. It is because an unbeaten patent challenger may only have half a year generic market patent exclusivity. It is the reason why you should go for tentative patent rights. Indefinite patents can help you identify which generic companies are gearing to be the first in the market before their official launch.

Research Litigation

Looking into patent litigation may help you get vital information on the future expectations of both generic and branded companies. Patent litigation can lead to invalidation of a patent, which may lead to an early generic drug launch than expected. Furthermore, if a lawsuit is concluded in favor of a brand, a generic company may still obtain a license for its sales. If you do your research about litigation, you will know which generic companies have filed drug applications and which generic firm will be the first to launch its drugs.

Supergenerics are an Option

These are drugs that are a hybrid between a new drug application and a generic one. These drugs, unlike new medicines, can cite efficiency and safety from the already existing drugs. The essential consideration of these drugs that you should capitalize on is that they can work with some patents and can be used to modify the specifications of some drugs on the market.

There is a lot to learn if you are a budding investor in drug companies, and it would be of great help if you studied established companies like LexaGene Holdings Inc. (TSX.V: LXG) (OTCQB: LXXGF) so that you learn how their investors made their decisions.

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