The global pharmaceutical industry is in a tight spot because of the Coronarivus outbreak in China that is making its presence felt across drug manufacturing units and supply chains. After all, pharma giants heavily reliant on this Asian country for active pharmaceutical ingredients (APIs) and manufacturing are witnessing a slowdown that might get worse in the near future.
But there are drugmakers that are less dependent on China for production, which makes them compelling investment choices.
Let’s delve deeper.
The Pandemic Affects U.S. Drugmakers: Here’s How
Given the complex nature of pharmaceutical supply chains and manufacturing, it’s difficult to access the full impact of this new disease. However, it is clear that the ripples caused by COVID-19 are strongly felt by any drugmaker with major manufacturing and pharmaceutical ingredient-dependency on China.
For example, pharmaceutical giants focusing on new meds are “unlikely to encounter material global supply disruptions,” since these companies do not have a major manufacturing footprint in China, according to Moody’s.
Pharmaceutical biggies, such as Johnson & Johnson JNJ and Bayer Aktiengesellschaft BAYRY boast a solid base in the Asian country but they also have stock policies to reduce the impact of the disease on their businesses.
Generic drugmakers are affected as well, mostly because of their dependency on China for APIs. The majority of these API producers are based in China’s provinces of Shandong, Zhejiang and Jiangsu and along the east coast of the country, which is far from the province of Hubei, the epicenter of the epidemic. But the possibility of these regions bearing the brunt of the contagion in the near future cannot be ruled out.
India, which is the world's biggest exporter of generic drugs, imports two-thirds of its raw materials used for drug manufacturing, from China. The country’s drug manufacturers usually maintain a two-month window for supplies, which means it would take India about two months before it runs out of its stocked APIs.
This is why it’s imperative to keep tabs on a couple of drugmakers that rely least on China for either ingredients or production. These companies anticipate brighter days ahead not just because they are independent of China’s input but also owing to other factors that could bolster their share prices going forward.
3 Drug Manufacturers Set to Gain
Pfizer Inc. PFE is a developer, manufacturer and marketer of healthcare products globally. Per CNN Business, the company hasn’t witnessed any disruption in its supply chain. In addition, the majority of Pfizer’s finished products and ingredients are dependent on countries other than China.
The company made significant efforts in areas, such as the evaluation of vaccine effectiveness, biosimilars and treatment of hereditary transthyretin amyloidosis since the beginning of this year.
TheZacks Consensus Estimate for Pfizer’s current-year earnings has moved 4.9% north in the past 60 days. The company sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Mylan N.V. MYL is a developer and manufacturer of generic, branded-generic, brand-name and over-the-counter pharmaceutical products worldwide. The company is a major generic player in the U.S. market that is dependent on self-manufactured active pharmaceutical ingredients, which it produces in the United States and Europe.
Mylan is all set for a merger with Upjohn, a division of Pfizer, sometime this year. The new company descending from the merger will be called Viatris. Mylan operates out of its corporate center in Canonsburg, PA, and has businesses around the globe including China. The company reported that the anti-Coronavirus efforts haven't upset its business so far.
The Zacks Consensus Estimate for Mylan’s current-year earnings has been revised 0.7% upward in the past 60 days. The company carries a Zacks Rank #2 (Buy).
Teva Pharmaceutical Industries Limited TEVA is a pharmaceutical company that manufactures both generic and specialty medicines. The company has a strong foothold in the U.S. market and like Mylan, it is largely dependent on active pharmaceutical ingredients that it manufactures across the United States and Europe.
Teva Pharmaceuticals USA, an affiliate of Teva Pharmaceutical Industries, witnessed a considerable progress in areas of autoinjectors this year. Shares of this Zacks #2 Ranked company have rallied 27.4%, outperforming the broader S&P 500 Index’s gain of 2% over the past month.
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