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AstraZeneca plc, GlaxoSmithKline plc And Shire PLC Are Set For A Decade Of Rapid Growth

The biotech industry has really entered a new phase of growth over the past few years. The value of research and development spending has surged, mergers have accelerated the development of experimental drugs, and the industry’s move away from ‘blockbuster’ treatments has increased the drive to find as many new treatments as possible. 

Over in the US, the Food and Drug Administration approved 41 new drugs for sale to the public last year, the highest number since 1996 and double the 10-year average. Meanwhile, the return on investment for R&D spending rose in 2014 for the first time since 2010, to 5.5%, up from 5.1% the previous year. 

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It’s not just the wider industry that’s progressing. The UK three main pharmaceutical companies, AstraZeneca (LSE: AZN)GlaxoSmithKline (LSE: GSK) and Shire (LSE: SHP) are all at key stages in the development of their treatment pipelines. What’s more, all three are well placed to grow rapidly over the next decade. 

Pipelines are key 

Shire is planning to double its annual sales to $10bn by 2020 and the company plans to do this by concentrating on the development of rare disease treatments. A small but lucrative market.

Shire is now in a better position to chase this growth than it has ever been before, after receiving $1.6bn merger break fee from AbbVie. Still, even without this break fee, Shire is already making steady progress towards its long-term growth target. Third-quarter revenues rose almost a third to $1.6bn, beating estimates and hitting a record for the company. Excluding exceptional items, earnings per share rose to $2.10, or 129p for the nine months to 30 September, up 93% year on year.

Meanwhile, Astra has developed an industry-leading immuno-oncology portfolio with 13 clinical trials already under way. A further 16 trials are planned and a total of 14 potential new drugs are already in the process of Phase III testing or registration before sale. As many as 10 drug approvals are set for 2016. Astra has laid out an ambitious growth plan to deliver annual revenues of $45bn by 2023, up from reported revenues of just under $26bn during 2013.

Glaxo hasn’t set out a revenue target but the company is quickly adapting and changing its operations to put the group on a solid footing for growth. These deals include the asset swap with Novartis and a deal with Aspen Pharmacare Holdings, Africa’s biggest generic drug maker.

Deals have also been conducted in Asia to boost Glaxo’s presence within the region. What’s more, the company has around 40 new treatments under development at present. These new treatments should only add to the company’s growth.

Growing market 

Couple these new treatments with the projected growth in pharmaceutical spending over the next four to five years, and you can see how these companies are set to profit throughout the rest of the decade. 

For example, Chinese spending on healthcare, per capita, is expected to increase by over 75% during the next five years. Global spending on medicines alone is expected to increase 30% to $1.3trn over the same period. 

So overall, all the factors Shire, Glaxo and Astra need to achieve rapid growth are in place. It seems as if the sky is really the limit for these pharma companies. 

Long-term growth

Shire, Glaxo and Astra are long-term investments but investing with a long-term outlook usually requires plenty of research. However, if you've not got the time to do this research, then The Motley Fool is here to help. 

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Rupert Hargreaves owns shares of GlaxoSmithKline. The Motley Fool UK has recommended GlaxoSmithKline. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.