The Summer Season of Pharmaceuticals!
Four weeks ago we talked to you about gold as an asset class that is fairly resistant to the traditional summer low on the markets. However, by using our application and checking different industries, we are able to find potential investment opportunities all year long. This time, we are going to talk to you about an industry that shows and has shown strong seasonal patterns in July – the pharma and biotech industry. It might be straight-forward to think of seasonal patterns in this industry in winter due to higher demands. But what does the pattern look like in summer and what are its reasons? Let’s take a closer look.
Known drivers of seasonal patterns in pharma and biotech
It might occur to you, that seasonality is a straight-forward principle when it comes to biotech or pharma, since there are times of the year when there is higher demand for certain drugs. For instance, the demand for medication against the common flue typically rises when the temperatures begin to fall in the western hemisphere. Furthermore, the demand for medication against hay fever typically rises in April or May. These trends are more relevant in the U.S. than in Europe, since advertising in pharma is a lot more restricted in the EU. Still, they are relevant in both markets and of high significance for strategic marketing decisions. Recognizing these trends is essential for marketers and there are several studies analyzing the success of pharmaceutical products regarding their time of market entry with regard to seasonal peak sales (Cortjens et al., Bauer & Fischer).
For now, we are going to focus on the month of July and what drives the prices to soar during this time of the year. According to Fischer, Leeflang & Verhoef (2010), high-quality brands achieve peak sales earlier, and are able to sustain these periods of high volume sales longer. The study suggests, that one deciding factor is the publication of clinical studies. These are traditionally published in July and August and besides introducing new products to the market, they generate large amounts of highly effective PR for the biotech and pharma industry. These are the kind of news that get investors excited and cause the stock prices to soar. Let’s look at some hands-on examples!
American corporations exhibit strong seasonal patterns
As mentioned above, American pharma and biotech companies show stronger seasonal patterns since advertising and PR have stronger effects in these markets. With the help of our newly launched web-application we have analyzed several players from the industry. Some of the results were overwhelming with incredibly strong seasonal patterns.
The first stock we identified is Celgene Corporation. Founded in 1980, the company is specialized in the production of drugs against cancer and diseases of the immune system. It has 7,500 employees and yearly earnings of 13 billion USD.
As you can see, there seems to be a general trend in Biotech and Pharma during the month of July, which is usually a month that causes a lot of headaches around the global stock markets. The analysis also shows, that this year has been no exception and the stocks we have picked by using our application would have been profitable in 2018 as well.
The article proofs that seasonal analysis and pattern recognition can help you overcome the traditional patterns of stock markets and to be able to obtain cumulative profits the whole year round!
If you are interested in conducting your own seasonal analysis, go to app.seasonax.com and start by analyzing some of our free featured patterns.
As always, there are no guarantees in the market but you can certainly let the probabilities work in your favor!
Global clinical research organizations in a
recovering economy
CROs: Rekindling relationships with small to midsize biotechs
Since the summer of 2021, life sciences stocks have been struggling. As inflation appeared more stubborn than originally anticipated and the Federal Reserve’s target lending rate increased, shares continued to tumble.
Negative share performance persisted until the last few months of 2023 when life sciences shares rebounded by posting gains of 20% to 35%; however, these gains only served to offset losses up until that point with shares ending mostly even for the full year. Additionally, even though life sciences valuations are up now compared to pre-pandemic, they have fallen behind the broader S&P 500 amid investor perception that they are higher-risk assets in an uncertain economic environment.
Investors wondered when the Fed’s target rate would peak, hopefully leading to a turnaround in investor sentiment and a rebound in life sciences equity valuations. This equity rebound may be on the horizon. Six months into the Federal Open Market Committee’s regime to maintain a target rate of 5.375%, Fed Chairman Jerome Powell has publicly indicated that no more increases are on the horizon and that rate cuts are set to begin later this year.
If the market follows historical patterns, the forecast of receding interest rates means we are on the precipice of a rebound for life sciences valuations and, consequently, funding; however, the reality isn’t quite this simple. We expect that there will be a mix of winners and losers over the next year resulting in a net 15% to 20% increase in valuations through 2024. Those winning will have strong clinical pipelines, proven clinical success, or strong cash runways. Unfortunately, companies not meeting these criteria will continue to see a year of tough valuations ahead.
Additionally, throughout the pandemic, the uncertainty in small to midsize biotech funding has led many large service providers to diversify their portfolios away from small to midsize biotechs and into larger pharmaceutical companies. With the expected beginning of a rebound in funding and valuations, service providers, such as clinical research organizations (CROs), should plan to renew their attention on the small to midsize biotech market, which makes up a significant portion of preclinical, phase 1, and phase 2 research and development.
The global reach of clinical research
Clinical trials are increasingly global, and the countries leading the research efforts are often surprising. While industry-funded, phase 3 clinical trials registered on ClinicalTrials.gov note an average and median number of clinical trial sites of 51 and 21, respectively, the majority of these sites are not in the United States. In fact, according to the data on ClinicalTrials.gov, only 33% of the sites included in the average clinical trial’s site network are in the U.S. The remaining sites are primarily spread across Europe and Asia.
Asia has seen the greatest increase in recent years, having boosted its share of clinical trial sites to 25% in 2023 from 20% in 2016. This growth has been led by China, which now accounts for 10% of the clinical trial sites, up from just 2% in 2016. Japan accounts for 5% but is losing share as countries with larger potential patient populations come into play.
Europe has seen a recent decline in its share of clinical trial sites, decreasing to 30% in 2023 from 35% in 2016. European clinical research is spread among its many constituents, with Germany making up the largest share at 4% in 2023.
TAX TREND: Clinical trials outside the U.S.
There’s a litany of tax considerations for domestic biotechs that conduct clinical trials in foreign jurisdictions. Understanding the tax costs associated with supply chains and research and development may help biotechs assess their return on investing in that research globally.
For example, outsourcing research to a CRO abroad may introduce income tax obligations, value-added taxes, customs and duties fees, tariffs and other related costs. Strategic tariff planning may help a company seize cost-savings opportunities.
Also, the tax relief bill Congress is considering does not propose changing the relatively unfavorable tax treatment of expenses for R&D conducted abroad. Companies are required to capitalize and amortize those expenses over 15 years, as opposed to the proposal to allow immediate deductibility for domestic R&D expenses.
For the growing middle market CRO, navigating the global landscape brings significant challenges. While many relate to the political, economic and social environments of diverse countries, here are a few practical challenges that we’ve seen related to accounting and financial reporting:
Global compliance and reporting risks: Finding success here means internationally active companies take time to understand the compliance risks and benefits of operating in multiple jurisdictions. Inaccurate reporting and inconsistent oversight can expose businesses to potential risks and unexpected financial penalties. Missed global filings can translate into substantial fines or even halt operations in important global growth markets.
Regulatory and cyber threats: Establishing a data security and privacy strategy while simultaneously considering the evolving regulatory environment, including compliance with FDA IT requirements for on-premises and cloud-based computerized systems, readiness for FDA’s Computer Software Assurance (CSA) guidance, and compliance with Foreign Corrupt Practices Act (FCPA) and General Data Privacy Regulation (GDPR).
Timely reporting by sites and pass-through vendors: Monitoring timely reporting of sites and pass-through vendors is critical for accurate financial reporting of CROs and their customers. These challenges are exacerbated in a global environment.
Technology to support global financial reporting efforts: Assessing the technology solutions most appropriate to meet your needs is critical to ongoing financial reporting success. Not all technology solutions are created equal, and while many solutions can be customized to meet CRO financial reporting needs, most do not address these concerns off the shelf.
Ref: Global clinical research organizations in a recovering economy (rsmus.com)
Commentaires