Healthcare & Dividends | Where the Money Is - 11/26/2014 | The Motley Fool | Summary and Q&A

TL;DR

Stellar, a drug used to treat psoriasis, has been successful in gaining market share, but now faces competition from other drugs. Biotech companies typically don't pay dividends due to the need to reinvest profits into research and development.

Key Insights

• 🌓 Stellar has been successful in gaining market share in the psoriasis drug market, with sales reaching $540 million in the third quarter.
• 💪 Competitors, such as Novartis and Amgen, are developing drugs that could challenge Stellar's market share, with strong efficacy and FDA approvals.
• 👨‍🔬 Biotech companies prioritize reinvesting profits into research and development or acquisitions rather than paying dividends to shareholders.
• 🎨 Comparing drug efficacy can be challenging due to differences in trial design, populations, and efficacy measures.
• ❓ Biotech companies offer significant growth opportunities but are generally considered more speculative investments.
• 🔬 Investing in dividend-paying pharmaceutical companies, like Johnson & Johnson, may be more suitable for dividend investors.

Transcript

a conversation about autoimmune diseases and why biotechs don't pay a dividend because this is where the money is hey fools Healthcare analyst Michael Douglas here with our Healthcare contributor Todd Campbell all the way from New Hampshire Todd how's it going it's going well I'm I'm getting really excited about the apple pie tomorrow how about you... Read More

Questions & Answers

Q: How has Stellar performed in terms of sales and market share?

Stellar has been a big success for Johnson & Johnson, with sales reaching $540 million in the third quarter and a 47% year-over-year increase. It has successfully gained market share from competitors in the psoriasis drug market.

Q: Which competitors should investors be most concerned about in terms of Stellar's market share?

Novartis and Amgen are two competitors that could challenge Stellar's market share. Novartis' drug, Centex, has shown strong efficacy and safety during trials and has received a unanimous nod for approval from the FDA. Amgen's drug, Brodalumab, also showed better results in head-to-head trials against Stellar.

Q: Why do biotech companies, including Stellar's manufacturer Johnson & Johnson, typically not pay dividends?

Biotech companies tend to reinvest their profits into research and development or acquisitions. They prioritize the growth of their pipeline and the development of new therapies over paying dividends to shareholders. Only a few biotech companies, like Amgen, pay small dividends.

Q: What are the challenges with comparing different drugs and their efficacy?

It can be difficult to compare drugs' efficacy due to differences in clinical trial design, populations, and efficacy measures. However, head-to-head trials, like the one between Amgen's Brodalumab and Stellar, provide more direct comparisons and conclusive results.

Summary & Key Takeaways

• Stellar, a drug used to treat psoriasis, has been successful in winning market share from competitors like Enbrel and Humira, with sales reaching $540 million in the third quarter.

• Competitors in the psoriasis drug market, such as Novartis and Amgen, are developing drugs that could challenge Stellar's market share.

• Biotech companies, including Stellar's manufacturer Johnson & Johnson, typically reinvest profits into research and development rather than paying dividends.