Pharmaceutical Or Biotech- How Do They Fare Against Each Other In Investment
In the wake of the coronavirus, biotech and pharmaceutical companies might be the most lucrative sector to investors – as these companies are trying to find a vaccine for COVID-19.
Not only investors but also people worldwide are also waiting in suspense to see who wins the race to vaccine intention.
Companies are even sweating over it; because inventing a vaccine means- they have a product that no one has, and that product will be the most in-demand product in the world.
No doubt bringing a vaccine to the market will allow a company to monopolize the market and forever change its fortunes.
But how do you know who will win this race? Pharmaceuticals or Biotech? Only time could answer this question.
But as an investor, you should get yourself familiar with these two stock trends if you are interested in tapping into that success.
Here we have explained what it means to invest in pharmaceutical and biotech and how they fare against each other.
Biotech Vs. Pharmaceutical: What Is The Difference?
The fundamental difference between biotech companies and pharmaceuticals is that biotech processes medicine from living organisms (bacteria or enzymes), whereas pharmaceuticals focus on chemically produced medicine.
Biotech is a research and development based sector with minimal, streamlined production.
Pharmaceuticals conduct mass production as well as research. The composite of these two is biopharma, which produces both biomedicine and chemical-based medicine.
Even though pharmaceutical and biotech both manufacture medicines, there is a huge difference in investment.
If you want to get more insight into biotech and pharmaceutical investment, you can check out the article Tech Melt predicted by Jeff Brown.
How Do Pharmaceutical And Biotechnology Operate As A Business?
Before we dig into the investment part, we need to learn the basics of pharmaceutical and biotechnology.
It is essential to know the risks associated with each of them before you decide to invest.
Even though both pharmaceuticals and biotech manufacture drugs, their business operation is vastly different.
- Biotech focuses on research and development; inventing novel medicines through research might take years to find a breakthrough.
- You might have to wait for 12 years before you see the product travel from a lab test tube to pharmacy shelves.
- Their focus on research requires a large amount of operation cost, while they have practically zero revenue, as they are still researching their product.
- Despite all of that, the biotech industry is fascinating in the sense that very few sectors work with something that saves people’s lives, and when they succeed, they take the market by the storm.
- Pharmaceutical companies have a diverse product line up. They make sure they have a steady flow of income regardless of their research state.
- Unlike biotech companies, they don’t go all out while inventing drugs; they spend only a fraction of their resources to find groundbreaking drugs while reserving the rest of their regular drug production effort.
- Investing in pharmaceuticals is much safer this way, as they operate like other production industries, and the stakes are not as high.
What Does It Mean To Invest In a Pharmaceutical or Biotech Company?
Investing in biotech might seem daunting; if you win, you win big, but you lose everything when you lose.
Stakes are not as high for pharmaceuticals; as they ensure continuous manufacturing of products.
Investing in biotech or pharmaceuticals depends on some personal and business factors.
How Much Risk Is Associated
- Although investing is all about taking risks, there is a risk threshold that you need to set up for yourself.
- Where investing in biotech depends mainly on its success in research, the risk can pay off the massive profit.
- Having said that, it doesn’t mean you can’t gain huge profits by investing in pharmaceutical companies.
- If a pharmaceutical company finds the vaccine, it will not translate into a massive profit for you as an investor.
- Still, over time, as the vaccine’s mass manufacturing begins, you can continue to earn a steady profit.
How Much Security You Want
- If you are not risk-tolerant and value security over risk, you should stick to investing in the pharmaceutical industry.
- One distinctive feature of the pharmaceutical industry is that it has greater competition compared to biotech.
- Although clinical-stage biotech companies and pharmaceuticals both provide game-changing investment opportunities in the coronavirus context, you need to monitor their stock performance before investing in any of them.
Regulatory Bodies Hold the Reins
- When a biotech company discovers a new drug, it needs to undergo a rigorous testing process for approval. In the USA, the FDA( Food and drug administration) holds the reigns of drug marketing.
- Many clinical-stage companies promote their product even before it passes the final approval stage, where only 3% of drugs get full approval.
- Before you invest in these companies, make sure you know their approval stage and potential for success.
Best Pharmaceuticals to Invest In
- Large pharmaceuticals are nowhere close to stock price compared to biotech.
- Pfizer’s stock price has gone down 7.7% since the beginning of the year, where AstraZeneca has been up 11%.
- However, the situation might turn 180, as Pfizer now has the spotlight on them for their recent progress in the vaccine race.
Best Biotech Companies to Invest In
- In the coronavirus vaccine race biotech, Moderna and Novavax are taking the lead. Since the onset of the pandemic, their share prices have gone up 261% and 2612%, respectively.
- While you compare their stock prices with those of pharmaceutical stocks, it might seem that investing in biotech will be more profitable.
As a final thought, whether you should invest in biotech or pharmaceuticals depend s on your investment style. If you thrive on market volatility, willing to bet in the face of sheer uncertainty, you might like investing in biotech. If you rely on a steady investment approach, investing in pharmaceutical companies is more suitable for you. Even though it seems that biotech companies have a greater chance of finding a vaccine for coronavirus. Still, pharmaceutical companies can also provide you with a good profit over time. For now, it is entirely up to you; how much risk you are willing to take by investing in them.
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