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The 3 Promising Pharmaceutical Industry Niches

By Andrey SergeenkovMarket OverviewFeb 09, 2019 03:34AM ET
www.investing.com/analysis/the-3-promising-pharmaceutical-industry-niches-200385996
The 3 Promising Pharmaceutical Industry Niches
By Andrey Sergeenkov   |  Feb 09, 2019 03:34AM ET
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The pharmaceutical market is growing. It's not very rapid growth, but it is quite stable. According to a study by the IQVIA Institute for Human Data Science, the global pharmaceutical market is now valued at $1.2 trillion, with an expected growth rate of 3-6% per year. By 2023, the value of the global market will exceed $1.5 trillion, $600 billion of which will come from the United States alone. High levels of funding for anti-cancer drugs and drugs to fight Alzheimer's disease, as well as technological innovations, are indicative of what are the most pressing issues in pharmaceuticals today.

1. Treating Alzheimer's

In 2017, Bill Gates invested $100 million in the Dementia Discovery Fund and other start-ups that are doing work related to treatments for Alzheimer's disease. The billionaire explained that taking care of patients suffering from the disease is a great financial burden on the medical system. In the future, it is something that could lead to a crisis, especially in developed countries. Among other issues, the problem has a social aspect, as millions suffer from the disease. According to forecasts, the number of people with Alzheimer's throughout the world will reach 131.5 million by 2050, and medical costs in the US alone will be close to $1 trillion annually.

The ARK Investment Company estimates that Alzheimer's disease in the United States is near the top in terms of disease-related expenditures. In light of this, shareholders of the largest pharmaceutical companies are actively tracking the market and paying attention to the latest research in this area. Today, most research focuses on preventing onset, and slowing the course of the disease, as well as treating its symptoms.

2. Treating Cancer

Expenditures on cancer drugs in the US doubled from 2012 to 2017, and are expected to double again by 2022 to $100 billion. The development of medicines for various types of cancers has attracted venture capital investors. Financing comes via funds belonging to the major pharmaceutical companies, such as Celgene (NASDAQ:CELG), Novartis Venture Funds, and SR One. There are also other funding sources, such as Google) Ventures.

Investors are now highly focused on immuno-oncology. The investment bank Goldman Sachs (NYSE:GS) noted that immunotherapy is one of today’s most revolutionary technologies and that it has a chance to change the future for people. Attention to developments in this area confirms the confidence of investors in the development of new medicines to fight cancer and makes it possible to predict further growth in the industry.

Investment in cancer research and treatment not only prolongs and saves lives. It is also profitable for investors and the economy as a whole. According to the latest National Institutes of Health report, these investments support 400,000 jobs and $69 billion in economic activity across the United States.

3. Using Information Technology in Medicine

Another niche gaining momentum is the financing of innovative technologies that can help in the development of medicines. The introduction of Machine Learning, alongside Artificial Intelligence and Big Data into new medicine development can significantly reduce both funding requirements and development time.

Giants such as Merk, Johnson & Johnson (NYSE:JNJ) and Sanofi (PA:SASY) are not always capable of producing new medicines without outside assistance. They create venture capital funds, and invest in, and absorb, startups. The fact that small companies produced 63% of all new drugs approved by US regulators in 2017 shows how important startups are for the pharmaceutical market. Some of them are engaged in the classical development of new drugs, while others specialize in innovation.

AI algorithms in pharmaceutical projects are used to aggregate information. They also facilitate the understanding of the mechanisms of disease; AI helps to build models, improve the composition of existing medicines, and optimize clinical trials. Both Big Pharma companies and technology funds invest in startups of this type.

Here are a few of this niche's recent deals:

● Atomwise, which uses AI to search for new chemical compounds, has raised $45 million
● The startup Bigfinite, which has developed an AI-based SaaS platform for optimizing medicinal production, raised $8.5 million
● Recursion, which employs machine learning to develop new drugs, raised $60 million

In the near future, investment in the pharmaceutical industry will definitely not be limited only to those niches discussed here. Expect growth in more specialized drug segments as well, such as developments in diabetes treatments, not to mention the pharmaceutical markets of entire countries.

The 3 Promising Pharmaceutical Industry Niches
 

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The 3 Promising Pharmaceutical Industry Niches

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