Over the last decade Pharma investors needed patience. Stocks of big pharma companies have broadly disappointed again and again. However, we might have reached a turning point. Pharma companies have started to focus and first results have become apparent after a long-lasting revaluation process. Pharma companies’ valuations are reasonable and offer distinct opportunities for positive surprises.

This report aims to assess the current status and prospects of the pharma market by having first a look at the history of pharma investments. Understanding the past helps to better grasp the present and to anticipate future directions. This report starts in the year 2000, a year which was marked by a sharp and material change in pharma investor’s mood. A change which determined the development of pharma stocks over a whole decade.

The year 2000 marked the peak of an outstanding bull-market which started in the early 90’s. After the burst of the tech bubble mid of 2000 investors started to shift away from a pharma blue sky scenario and begun to focus on the fundamental challenges of the industry such as patent expiries, R&D inefficiencies, industry scandals and increasing regulatory requirements. Pharma companies were not ready for the new reality. Double digit market growth rates around 2000 blinded them from their own future. The result was 10 year long revaluation process, which seems to have bottomed-out only recently.

Lately, the pharma market and share prices seem to have stabilised. Many of the big drugs will soon have gone through the patent cliff. With a clear focus pharma companies have started to find answers to the many challenges of the industry.

Focus and true innovation will further help pharma companies to stabilize and increase R&D productivity. Macro and demographic drivers speak for pharma companies, despite continuous pressure from healthcare authorities. The aging of the population and unhealthy lifestyles lead to a rise of chronic diseases. Medical treatments are far from perfect and there is plenty of room for innovation. Oncologics, antidiabetics and autoimmune drugs remain the areas with highest market growth rates.

Signs are apparent that the pharma sector has made significant advances and is moving in the right direction. Challenges remain high and should not be underestimated. However we are confident that companies have learned from their shortcomings in the past, that true innovation will produce attractive drugs and that in the end investors and most important, patients will profit from a healthy and stable growing pharma market.

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