Why invest in pharma in times of a recession?

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Léone Atayi, CEO of Hybrigenics and Stemcis, discusses the importance of investing in the pharmaceutical industry amid a recession.

Key insights:

  • Advancements in technologies capable of matching the drug testing process in human tissue are crucial for a secure therapy. However, these methods will need to be secured through continuous research.
  • Personalised medicine also needs to be prioritised as it allows for patients to be assessed individually, allowing for a decrease in healthcare costs.
  • The significance of educating patients and promoting transparency in communication lies in both improving public understanding of the pharma industry and increasing trust.

The emergence of innovative ideas and projects is one of the positive aspects of the COVID-19 pandemic. More precisely, it became apparent just how important it is to focus on the development of pharmaceuticals, not only to continue to fight existing diseases but also to prevent future outbreaks as the likelihood of pandemics could increase threefold in the upcoming years.

However, while focusing on its importance, we must also acknowledge the ambivalent narrative that characterises the industry. We need to address the continuous distrust that has built up in pharma throughout the years and acknowledge its impact on investors’ trust and participation. By addressing those setbacks, the chances of building a strong pathway for the acceleration of drug technologies increase.

With the global pharmaceutical industry continuing to grow, the industry offers a wide range of opportunities for employment in the research, development, production, and distribution of drugs which, consequently, results in more growth. Therefore, not only is the pharmaceutical industry beneficial for society as a whole, but its growth also means an increase in jobs as this industry is, directly and indirectly, sustaining approximately 4.7 million jobs in the United States.

Profitable and innovative industry

The importance of the pharma industry for humankind makes it an attractive asset for long-term investors. After all, the whole purpose of this industry is to help humankind live longer, better, and healthier lives. In fact, not only was the gross margin of the global pharmaceutical industry measured at 88.13% in Q4 of 2022 but it is also expected to reach over US$ 353 billion in market size by 2030 thereby showing that the industry is generating and will continue to generate cash flow for investors.

So, even amid a period of slow growth, a recession will not necessarily result in making a loss - unless investments are sold at a loss. That being said, it is noteworthy that the US faced 12 recessions in the 20th century. A prolonged drop in investment prices will generally not last as long as the bull market, meaning that even though the industry is marked by the ongoing economic struggle, it will most likely recover and so will your investments. 

Investing in pharma will grant the innovations that humankind needs, such as the enhancement of the patient-centric approach, personalised medicine, and analytical techniques. Simultaneously, it will continue to spur economic growth and stimulate economic competition, all, consequently, generating reciprocal growth.

Advancement in drug development

When talking about investing in innovations, it is important to dive deeper into the possibilities that can be offered as well as into the gaps that need to be addressed to develop the medicine of tomorrow.

The new US legislation that states that the testing of drugs on animals is no longer required illustrates the transformation that the industry is undergoing, as well as the increasing need for alternative testing methods. Advancements in technologies capable of matching the drug testing process in human tissue are crucial for a secure therapy. However, only through continuous research will alternative methods be able to allow for a safe treatment.

Personalised medicine also needs to be prioritised as it allows for patients to be assessed individually and to be offered interventions and products that are tailored for them specifically. Making access to PM possible for the majority will not only result in a decrease in general healthcare costs but will simultaneously minimise adverse drug reactions, reactive treatments, and long-lasting trial-and-error phases. Having a more individualised touch, rather than mass production, enables increased safety as the right therapeutic strategy is tailored for the right person, at the right time.

It is also crucial to invest in education regarding pharma and its research so that investors, patients, and authorities gain a deeper understanding of the industry and have more confidence in it. If the industry is associated with miscommunication, then important information such as new research work or the benefits of therapies and treatments ends up being disregarded. Tackling the lack of knowledge in the industry will help to get rid of misconceptions and misinformation, and, ultimately, lead to a better-informed public. Consequently, this can lead to a more supportive environment for medical research and innovation.

Big distrust in the industry

While diving into the potential of the future of medicine, we also have to address the distrust that many associate with this industry. When talking about responsibility, the industry needs to be more transparent about its mishappening. High costs, failure to disclose required clinical trial results, and corruption are some of the reasons that have made investors wary of the pharma industry. Additionally, despite failed drug trials being an inevitable part of the process, their recurrence did not help the trust-building process either.

The significance of educating patients and promoting transparency in communication lies in both improving public understanding of the pharmaceutical industry and increasing trust in pharmaceutical companies. By informing patients about research and regulatory and manufacturing processes, the industry can build credibility and confidence.

Overall, while the profitability of the pharma industry is indisputable, this does not mean that it does not have any responsibilities to the public. With chronic diseases on the rise, it is crucial to have the best technology and innovations available in the process of finding a cure and helping humankind overcome health struggles.