On the other hand, if you hear of a company in the process of producing a biosimilar for a popular biologic drug, it could be a buying opportunity. Fortunes have been made in generic drugs. In the same way, if you pick a company that successfully wins enough market share in the biosimilar space, it could be a very good company with a long future.
Like with any sector, competition is an important element in business. If your pharma company doesn't have a next thing in the works, it may already be a problematic stock to own, even before the risk of a biosimilar being introduced by another company comes up. On the other hand, if you're looking for outside-the-box ideas for pharma companies, biosimilar producers could be a solid investment if they are able to win the hearts and minds of patients with difficult to treat diseases.