- Biologics are a class of drugs derived from the cells of genetically modified living organisms. They’re orders of magnitude more complex than conventional, chemically synthesized drugs, and hence more costly to produce and to purchase.
- Biologics are also generally more effective at treating serious medical conditions such as cancers and autoimmune disorders. Seven of the top ten best-selling drugs in the world in 2017 were biologics, including AbbVie’s Humira, the world’s top-selling drug by far.
- As patents for biologics begin to expire, some drug companies are investing heavily in new production facilities in a bid to profit from the anticipated rise in demand for biosimilars—the cheaper copies of biologics. Yet entering this market represents a considerable bet because a biologics facility can cost five times as much as a conventional pharmaceutical plant. Success at developing a biosimilar is also less likely than a conventional drug.
- Because the biosimilar industry is still nascent, it is difficult to discern whose investments will be profitable. On the other hand, makers of bioreactors, filtration devices, and other sophisticated equipment needed to produce biologics are the early beneficiaries of the investment boom.
The “Fundamental Thinking” series presents the perspectives of Harding Loevner’s analysts on a range of investment topics, highlighting our fundamental research and providing insight into how we approach quality growth investing. For more detailed information regarding particular investment strategies, please visit our website, www.hardingloevner.com. Any statements made by employees of Harding Loevner are solely their own and do not necessarily express or relate to the views or opinions of Harding Loevner.
Any discussion of specific securities is not a recommendation to purchase or sell a particular security. Non-performance based criteria have been used to select the securities identified. It should not be assumed that investment in the securities identified has been or will be profitable. To request a complete list of holdings for the past year, please contact Harding Loevner.
There is no guarantee that any investment strategy will meet its objective. Past performance does not guarantee future results.
© 2022 Harding Loevner