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Several pharmaceutical companies are working on or have developed key drugs to treat diabetes. Given the way people are living, especially baby boomers, their drugs will see increasing demand.

As baby boomers age, they are contributing to the growth in the number of people who have diabetes. Many of them tend to be less active, and/or they just don't eat right. So while baby boomers have been building their portfolios with investments to settle into retirement comfortably, they have also been contributing to the healthcare system in terms of the billions of dollars in expenses they are racking up because their unhealthy lifestyles are causing all sorts of ailments, including diabetes.

Among the top pharmaceutical companies making commendable strides in developing drugs to treat diabetes are Johnson & Johnson (NYSE: JNJ), Merck (NYSE: MRK) and Pfizer (NYSE: PFE). They are tackling what is referred to as Type 2 diabetes, which accounts for at least 90% of all cases of diabetes. Approximately 60% of patients with type 2 diabetes in the United States are obese.

To get a better perspective of the size of the market companies developing diabetic drugs can penetrate, consider this. As people born between 1946 and 1964 approach their 70s, they are contributing to the whopping $177 billion spent on diabetes each year in this country. The U.S. Food and Drug Administration says Type 2 affects about 24 million people in the U.S. The domino effect of having high blood sugar levels can increase the risk for serious complications, including heart disease, blindness, and nerve and kidney damage.

As I said, Merck and Pfizer are among the companies tapping this market. Their latest ventures are not being undertaken individually, however. They are partnering in developing what could be a major step forward in treating diabetes. Announced last month, the strategic deal involves the two working together to develop and sell Pfizer's ertugliflozin. The two are also discussing combining the drug with Merck's Januvia, which was approved in 2006. It is a top seller in oral medicines used to treat diabetes.

Januvia has been one of the fastest-growing drugs in Merck's pipeline, but revenues from it fell during the last quarter. Specifically, they fell 4% to $884 million.

Johnson & Johnson beat Merck and Pfizer to the market with a new diabetic drug to treat Type 2 diabetes with its Invokana. In fact, this drug is a first of its kind. The FDA notes that it is the first diabetes treatment approved in a new class of drugs known as sodium-glucose co-transporter 2 (SGLT2) inhibitors. While Johnson & Johnson is selling the drug, it is manufactured by Janssen Pharmaceuticals. It was approved by the FDA in March and is estimated to generate roughly $468 million for Johnson & Johnson by 2016.

Interesting about Invokana is the new way it treats diabetics. Being obese can cause the body to not produce enough insulin, which leads to diabetes. Invokana works by causing blood sugar to be excreted in the person's urine. It blocks the re-absorption of glucose by the kidney, increasing glucose excretion, and lowering blood glucose levels in diabetics who have elevated blood glucose levels.

Like most new drugs, it may not initially receive strong sales as doctors wait to see how it is received. Also noteworthy is the trial phase of the drug not being without problems. Issues dealt with its safety, such as increased risks of heart attacks and strokes. Despite this, the drug was shown to be very effective in reducing blood sugar in diabetics.

For those who develop diabetes, the balance of their lives may be spent on some kind of drug (or drugs). For the companies that make the drugs, this segment of the population represents one of the largest that they can profit from in developing new treatments and medications. For investors, the lifestyle choices that may be contributing to the number of people developing diabetes represents an opportunity to own stock in a space of healthcare that is bound to continue to reap strong returns.

All of the companies I've mentioned are strong and worthy investments. Returns to investors from both price appreciation and dividends are up for all of them over the last year compared to that of the S&P 500. Pfizer is up 32.04%, Johnson & Johnson up 37.88%, and Merck up 25.36%.

Source: Baby Boomers Are Money-Making Machines For Big Pharma