Financial analysts are always looking for the newest investment trend, and it seems like they’ve already chosen one for 2014—generic drugs. Generic drug producers such as Actavis, Mylan, and Teva Pharmaceuticals have strong reputations and have consistently delivered high quality drugs. Teva’s stock performance in the past few months has not stood up to the other two companies, but there is reason to believe the entire generic drug sector is due for a big year that could have ramifications throughout the entire pharmaceutical industry, potentially driving new investment. A contributing factor is a large number of brand drugs that are expected to lose exclusivity and become competitors with generics in 2014. As a result, generic production will expand along with the market, as a flood of new patients will look for cheaper versions of expensive brand drugs.
For that reason, financial analysts and industry experts are excited about 2014. While the past few years have been mired with an investment and economic downturn, it looks as though the turnaround is in the coming months, at least for generic drugs. Nine drugs with yearly sales of almost $60 billion are losing their patent protection and will come under competition with generic drugs, creating what is called a “patent cliff” in the pharmaceutical industry.
Investors must keep in mind that not all generic drug producers are going to be successful. There are going to be winners and losers of the patent cliff, and certain companies are going to lose their competitive advantage as the year goes on. Actavis has already been noted as expecting growth in generics as high as 22%, but Mylan’s generics sales fell last year.