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Where Pharma Firms Still Have Pricing Power

Damien Conover, CFA

Damien Conover: When we think about the healthcare landscape, there is a lot of concern right now about pricing power of drugs within the United States. And when we look at the pricing power for these drugs, it's areas of unmet medical need where you can really retain a strong pricing environment. And generally speaking, when we think about areas of unmet medical need, we think about cancer, we think about immunology, but there's also an area of pain development drugs which really addresses an area of unmet medical need. There hasn't been a lot of development there in the last decade. We're really left with old drugs, opioids, NSAIDs that cause a lot of side effects.

What's really interesting in the environment right now is a new class of drugs called nerve growth factor drugs, and the leading drugs in this space are coming out of the laboratories of Eli Lilly, Pfizer, and Regeneron, all three of which companies we think are undervalued and underappreciated by the investment community. And as these drugs come to the FDA and the EMA for approval, we think the efficacy will be very, very strong, and we believe the side effects will not be as bad as some of the older drugs currently on the market. So that gives us confidence in this next class of drugs which really could develop into $5 billion annually. So, huge potential here. Really those three companies, we think, have these drugs well-positioned for unmet medical areas of need and really are emblematic of their pipelines.