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Pharmacy: Investing in remedies

August 18, 2020

reading time: 8 minutes

by Baiyun Chen and Dr. Tilman Dumrese, LGT

climate change pharmacy invest

Climate change is making people ill; pharmaceutical companies offer solutions. How investors recognize promising firms.

Climate change is a systemic threat to humankind. This is nothing new. But while most people think of heat waves, droughts and floods, there are other climate-induced challenges that are less obvious, less direct and arguably more overlooked: the ways in which climate change affects human health. 

Besides the mental stress brought by extreme weather events and their destructive consequences, climate change significantly increases the risks of human diseases. For example, extreme heat events can trigger a variety of heat stress conditions, such as heat stroke, which is positively correlated with increases in cardiovascular illnesses. For instance, the unexpected heat wave in summer 2003 in Europe resulted in an estimated 22'000 to 45'000 deaths over a single two-week period. As global warming trends continue, heat waves will occur more frequently. 

Another consequence of increased temperatures are respiratory illnesses. Climate change increases concentrations of ground-level ozone and particulate air pollution. Warmer seasons lead to an increase in allergens and harmful air pollutants. For example, pollen seasons are prolonged – which increases allergic reactions and asthma episodes.

climate change health pharmacy invest
Climate change challenges our health systems. © Unsplash, Zhen Hu

Because warmer average temperature means longer warm seasons in broader geographic areas, conditions might become more hospitable for many carriers of vector-borne diseases, such as mosquitoes that kill about one million people a year. They will roam beyond their current habitats, shifting the burden of diseases like malaria, dengue fever, chikungunya and West Nile virus to a wider population. In other words, infectious diseases are on the rise.

The negative impact of climate change on human health is intensified when it's combined with other societal megatrends. For example, according to the United Nations, one in six people (16%) in the world will be over age 65 by 2050, up from one in eleven (9%) in 2019. The number of people aged 80 years or above is projected to triple from 143 million in 2019 to 426 million in 2050. In addition, the COVID-19 crisis underlines the urgent need for medical solutions and more investment in public health.

A reinforced trend

Innovative pharmaceutical companies with high-margin products will be well-prepared in addressing the challenges ahead. They therefore indicate long-term investment potential. Especially interesting for investors are firms that have a clear strategic focus on the treatment of the three main areas which pose a threat to human health: the discussed cardiovascular and respiratory as well as infectious diseases.

climate change health pharmacy invest
The pharmaceutical sector offers solutions.

Due to the current developments, according to estimates by Global Data's Pharma Intelligence Center, total sales of drugs for cardiovascular diseases will grow steadily from nearly 47 billion US dollars in 2018 to over 70 billion US dollars in 2024. Progressive climate change will probably reinforce this trend beyond that period. 

The respiratory as well as the global vaccine markets are relatively small in comparison to the global pharmaceutical market. Respiratory and asthma medicines are expected to grow by an average of +6.0% over the next few years, reaching an estimated 52 billion US dollars by 2022. The global vaccine market is highly regulated and largely dependent on public purchasers. Nevertheless, it is estimated to reach 58 billion US dollars in 2019 at an average annual growth rate of +7.0% until 2024. 

Conclusion

In the face of a looming crisis, remedies that help those directly affected by climate change remain central. As shown above, the pharmaceutical sector is not only interesting from a humanitarian and medical, but also from an economic perspective. Compared to other industries, many large pharmaceutical companies are characterized by stable cash flows, high profit margins and an attractive dividend policy. Such firms therefore offer one among many ways to contribute to a more resilient economy and a healthier future. 

Finance expertise and research

Through our financial expertise and research publications, we help you to make well-founded investment decisions that fit your personal and financial goals and values. In our current investment proposition which is available to our clients, we have considered those companies from our equity universe that either have a clear strategic focus on the treatment of cardiovascular or respiratory diseases or on the development of modern vaccines. 

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