Clients of Marietta Miemietz, CFA, Co-Founder and Director of Pharmaceutical Advisory at Primavenue Advisory Services are asking her three things about investments in the pharmaceutical and healthcare sector.
“The first relates to opportunities arising as a direct result of Covid-19,” says Miemietz. “The second is the operational resilience of the leading players during the shutdown and the third is the pricing power of those players in a post corona world.”
She feels there is not enough focus currently on pricing power by investors. Miemietz biggest concerns is a hyper inflationary scenario, where suddenly you wake up one morning and you realise a cup of coffee costs $50.
“Can you actually charge millions of dollars for a single cancer treatment because of that?” she says. “That is something that should really be on investors radars.”
In the past, pricing pressure has always been manageable, she explains, because there has really been no mechanism for most players in the industry to cut prices dramatically. But the problem is she warns is on the flipside of that, there is also no mechanism for massive price hikes.
Overall for the market, she is expecting the current turmoil to last. She says: “The IPO window is not probably going to open for a lot of companies unless they say they have a Covid-19 cure.
“You need to rethink the whole world and need to rethink how pharmaceuticals are going to fit into that world. I would really encourage everybody to look very much at the subject of pricing power and at look at various scenarios were margin structures of various industries have shifted when inflationary events happen.”
This article was recorded on Friday 3rd April over Zoom.