Ryan Stancil,
Editor
April 9, 2021
Editor's Note: This week we've sent you the first three chapters of my latest report, "Healthcare in a Post-COVID World: Four Profitable Trends to Watch".
Today we finish up with the last section, Part IV.
"Healthcare in a Post-COVID World:
Four Profitable Trends to Watch"
Domestic Drug Manufacturing
Since the first COVID vaccines were authorized for emergency use in the U.S., the companies behind them have done a good job of manufacturing them and getting them where they need to go.
It’s a massive logistical challenge getting the vaccine to every American, but this pandemic has shown just how important it is to be able to do it quickly and efficiently.
Traditionally, a lot of drug manufacturing is done overseas, mostly in countries like China and India where labor costs are lower. The cost savings come at the expense of time as well as increased vulnerability in the supply chain.
During the early days of the pandemic, you didn’t have to go far to see store shelves empty of certain items, highlighting just how fragile supply chains could sometimes be. When something happens to the supply chain of critical products like medications, things can very easily reach crisis levels if they aren’t addressed quickly.
It’s with that idea that there’s been a bipartisan push for big pharma companies to bring their manufacturing to the U.S. or at least diversify away from countries like China, with whom the U.S. has a strained relationship.
President Biden signed an executive order to help secure supply chains and one part of that includes a 100-day review of API production that has moved offshore. An API (active pharmaceutical ingredient) contains the active drug and, in recent decades, 70% of their production for U.S. supply has been moved overseas. The president’s review will likely bring to light the steps that need to be taken to lower the risk associated with all of that offshoring.
If the U.S. sees a shift in more drugs being produced domestically, it would of course lead to more American jobs, but it’s much more likely that automation will play a huge role in making this a reality. With labor costs being one of the big reasons that companies offshored their drug production to begin with, it makes sense that big pharma companies would rely on robotics to save costs while shifting operations to a more secure supply chain. Pharmaceutical manufacturing hasn’t been as fast to adopt automation as many other industries, largely due to regulations, but that might change thanks to the pandemic exposing just how important it is that the U.S. be able to get as many domestically produced medications as possible.
In fact, the FDA has signed a Memorandum of Understanding (MOU) with the National Institute of Standards and Technology (NIST) that defines an agreement between the two entities to collaborate in order to “strengthen supply chain resilience and advance domestic manufacturing of pharmaceuticals, biopharmaceuticals, and medical devices through adoption of 21st-century manufacturing technologies including smart technologies, emerging manufacturing processes, and artificial intelligence and machine learning.”
This is something likely to bear fruit as this issue gains more attention.
In this segment, one company worth looking at is AbbVie (NYSE: ABBV). The company was founded in 2013 after a split from Abbott Laboratories and operates as a research-based pharmaceutical manufacturing company.
Part of its business is as a Pharmaceutical Contract Manufacturer, which means it handles manufacturing for other companies. It has manufacturing facilities all over the world with four here in the United States, perfectly positioning it to take advantage of the trend of more pharmaceutical companies investing in domestic production.
The company’s share price has enjoyed steady growth over the past year, with the price ranging from $70-$103. Its share price really took off in October 2020, when its third-quarter earnings beat expectations, allowing the company to raise its outlook and increase its dividend payment. In that time, adjusted earnings per share grew to $2.83 from $2.33, beating estimates. Revenue also beat expectations when it grew to $12.90 billion from a consensus of $12.72 billion.
The company’s strong foundation and wide reach put it ahead of many of its competitors and make it a strong choice for investing.
Healthcare of the Future
The healthcare of the 21st century is rapidly changing, especially following the pandemic. These are just some of the areas that will see the biggest growth potential, but there are sure to be many others.
Here at Daily Profit Cycle, we want to help you notice and profit from market trends before everyone else. Reports like this one will do just that and help you get in on the big investment stories before they become the big stories.
Keep your eyes open,
Ryan Stancil
Editor, Daily Profit Cycle
Ryan Stancil is an editor and regular contributor to Daily Profit Cycle. He’s been active in the financial publishing industry for more than half a decade, offering insights and commentary on technology and geopolitics to help readers make sense of the constantly changing landscape and how it affects their investments. His readers appreciate his "tell it as it is" writing style, where he always offers a fresh new perspective on what's happening in the market and leaves nothing unsaid.