Pharma ETFs: Next Up, Emerging Markets

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 |  Includes: IHE, IXJ, PJP, VHT
by: Tom Lydon

Citizens of developing countries are getting richer. That newfound wealth is a major opportunity for health care ETFs, and that fact hasn’t been lost on big pharma.

As the emerging market middle class grows, so will health care resources and companies. Kevin Grewal for Seeking Alpha reports that a report released by UBS indicates that developing nations are expected to account for $550 billion of annual drug sales per year by 2020. This may account for more than 70% of all drug sales growth and pushing China and Brazil ahead of France, England and Germany when it comes to market size.

Other facts about the growing presence of health care on the global stage that might interest you:

  • Peter Foster in Beijing and Rachel Cooper for Telegraph UK report that over the next five years, China is projected to be fastest-growing pharma market in the world. For health care companies to succeed in the dirty and dog-eat-dog world of Chinese drug sales, however, foreign companies need to find innovative ways of getting doctors to choose their drugs over the competition.
  • Jonathon D. Rockoff for The Wall Street Journal reports that a market leader in India is taking over in Michigan. Abbott Laboratories (NYSE:ABT) will hold the biggest share of India’s pharmaceuticals market, about 7%, when the company closes as early as next month on a $3.7 billion takeover of the drug business of Piramal Healthcare Ltd.

For more stories about health care or emerging markets, click on the links. As with many other sectors, health care has a range of ETFs, from the broad, total-industry offerings, to more specific sub-sectors. Which you choose depends on how much direct exposure you want.

  • iShares S&P Global Healthcare Sector Index Fund (NYSEARCA:IXJ): Pharmaceuticals are 76.2% of the ETF
  • Vanguard Health Care ETF (NYSEARCA:VHT): Pharmaceuticals are 43.3% of the ETF
  • iShares Dow Jones US Pharmaceuticals Index Fund (NYSEARCA:IHE)
  • PowerShares Dynamic Pharmaceuticals (NYSEARCA:PJP)

Tisha Guerrero contributed to this article.

Disclosure: None