What Makes and Breaks Healthcare

Healthcare is by far the best performing sector and has been for quite a while now. It is important to understand the growth spots in the sector and the risks involved. The best industries to invest in for growth are the pharmaceuticals and biotech industries. These contain the companies that produce new drugs for different ailments. With the elderly as the single largest age group in America right now, healthcare will be strong for years to come. The companies that can come out with the best drugs to help these retirees, will be the companies with huge growth potential.

With these drugs and growth prospects come risks. Coming out with a new drug is a long and tedious process. It all begins with research. Once the company researches current drugs, diseases, and the effects, it will begin testing on animals. If all goes well, the company will submit an application to the FDA to begin human testing. If accepted, the company enters Phase I testing. Phase I involves testing on a handful of healthy individuals. It observes side effects and the overall life of the drug in the body. If Phase I subjects don't suffer any adverse reactions, Phase II research will be approved. Phase II involves only a couple hundred subjects who have a certain ailment or condition. This further researches the side effects and any changes. If these individuals do not suffer any adverse reactions, Phase III will be approved for testing. Phase III involves a few thousand subjects. This is where testing for proper dosage and testing with other drugs takes place. If the drug is effective and safe, the FDA will then put up the drug for marketing approval. If accepted, the drug will then be put on the market.

So where are the risks at? With any highly anticipated drug, there is a risk of approval. If the drug does not pass one of the clinical trials and is rejected by the FDA, the stock price will drop considerably. Another risk is competition. One has to look at any competing drugs or drugs that may arise to compete against said drug. A third risk would be patent expiration. Once a patent expires and that drug is sold OTC, growth and revenue will slow for that drug. So when looking at a pharmaceutical or biotech firm, you have to look at patent expirations, where a drug is at in the clinical trials, and any competition already on the market. If it passes the risk checks, you should probably invest in that company. It just might make you some cash money.