As Big Pharma consolidates and their portfolio of drugs rationalise we expect better margins and more investment into novel therapies. This will lead to increased and higher dividends and a potential re-rating of the sector.
Insync Funds Management expects big Pharma to reduce from the current eight large players over the next 12-24 months as natural consolidation occurs amongst drug companies seeking economies of scale and more focus on therapies.
“We are already seeing takeover action occurring between Pfizer and AstraZeneca after the successful drug sharing arrangement between Glaxo, (which we hold) and Novartis is likely to show greater returns. This should result in stronger dividend flows to the sector.
“Insync has been a long term investor in prescription drug companies and we like the dividends and strong year-on-year growth as these companies service the needs of an ageing middle class around the world. The pharmaceutical sector continues to be undervalued, based on Insync’s analysis, as the pipeline of new drugs starts to generate stronger revenue and earnings growth.
“Insync is forecasting the drug company earnings growth to accelerate in the coming years as the giants merge and reduce competition and the pipeline of critical and novel new drugs come to the market,” said Nitesh Patel at Insync Funds Management.
Nitesh Patel
Insync Fund Management
02 9216 2930
0431 425 808
npatel@insyncfm.com.au