Good Prognosis For Drug Makers
Pharmaceutical companies couldn't look any sicker.
But sometimes, the best time to buy stocks is when prospects look the bleakest. And that is why at least some drug stocks, particularly Wyeth, Eli Lilly and Forest Laboratories, may be tempting.
Drug stocks have been disappointing investors for more than a year, and Wednesday's news suggested things are getting worse. Shares of Merck tumbled 6.5% to $45.72 after it said it will fall short of 2003 earnings guidance and lay off 4,400 workers amid lower-than-expected sales. Subdued earnings from Pfizer, GlaxoSmithKline, Schering-Plough and Wyeth also helped pull down shares of the entire sector, as well as the overall market. The Dow Jones Pharmaceuticals Index Wednesday fell 3.3%.
The industry's litany of aches and pains is well known. The big drug makers continue to have difficulty coming up with new, profitable drugs and are struggling to fend off generic competitors. Pressure on the companies to rein in prices also is hurting the bottom line. And so many have merged in recent years that they no longer can target certain diseases, but are forced to focus on home-run drugs that can bring in big bucks -- but have proved tough to deliver.
With investors convinced that a broad economic rebound is at hand, they are dumping drug stocks, which generally don't benefit much from an economic rebound, and shifting to tech and industrial stocks. The result: Stocks in the pharmaceuticals index trade at a price-to-earnings ratio of 9.3, about half the value of the overall market.
But even as gloom descends, there is reason for optimism for a few of the most appealing drug companies. The few pharmaceutical companies with genuinely promising pipelines of new drugs have been unfairly punished by investors, and will pay off when the drugs become blockbusters.
"From a value perspective, the drugs are attractive," says David Sowerby, a portfolio manager at Loomis Sayles in Detroit, which has been adding pharmaceutical shares in recent months. "There are low expectations for the group and attractive valuations, and long-term we're all popping more pills and looking to stay healthier" as baby boomers age.
Mr. Sowerby is a big fan of Pfizer, largely because it is less pricey than its competitors, trading at just 15 times next year's expected earnings, making it "as inexpensive as it has been since the mid-1990s."
While the huge rally in the stock market this year suggests that much of the good earnings news already is baked into share prices, the opposite is true for the big drug makers. Shares are down this year, bucking the overall market, as investors focus on the uninspiring immediate prospects.
Kris Jenner, manager of the T. Rowe Price Health Sciences Fund, points to Wyeth as an example of a stock where the fundamentals are solid but side issues have turned investors against it.
Investors were rattled by the $2 billion charge the company took to boost its reserves for lawsuits stemming from its fen-phen diet drugs, and by its failure to boost earnings guidance for the fourth quarter. The charge sent Wyeth shares down about 5.5% Wednesday, even though some investors anticipated a charge. Otherwise, the company's health is improving.
In contrast to some of its rivals, Wyeth's main drugs are doing quite well, including its antidepressant, Effexor, which could generate more than $3 billion in sales next year, its heartburn medication Protonix, and the vaccine Prevnar, which protects children against meningitis and blood infections. "This is a company that operationally is doing far better than what the 5.5% decline in their stock price would suggest," says Mr. Jenner, referring to Wyeth's tumble Wednesday.
Eli Lilly, which reported earnings after the close of trading Wednesday that met analyst expectations, trades at a higher multiple than its drug competitors. But analysts say the company has among the best pipelines of new drugs in the business, and if the sector comes back into favor, Lilly shares could do the best.
Leading the way is Lilly's antidepressant drug, Cymbalta, a drug with huge promise that has sparked some hedge funds to move into the company's shares in recent weeks. Cymbalta should help Lilly recapture some of the market that its antidepressant Prozac lost to generics and other competition. Some investors argue the company's expertise in marketing Prozac could boost Cymbalta, though it could take well into next year before significant earnings from the drug kick in. Eventually, the drug could post sales topping $2.5 billion annually, helping the stock. (The Food and Drug Administration has found manufacturing flaws at Lilly's Indianapolis production plants. The company said the launch of Cymbalta must await the FDA's signing off on a plant where the drug would be made, and has said it expects approval of the plant and the drug before the end of the year.)
Forest, meantime, soon will begin selling an Alzheimer's disease drug called Namenda that some industry specialists predict will be big. The drug, which won federal approval earlier this month, targets those with moderate or severe signs of Alzheimer's, and figures to be an improvement over the four existing drugs on the market aimed at earlier stages of the devastating disease. Some investors predict annual sales eventually could reach $1 billion, as earnings jump by a third by 2005.
But Forest's shares have barely moved in the past year, caught in the drug stock malaise. While they trade at a multiple of 23.5 times expected 2004 earnings -- higher than the price-earnings multiple of almost 17 for the Standard & Poor's 500-stock Index -- few companies will be able to match Forest's earning growth in the new few years, which is higher than overall growth expectations of the S&P 500.
Mr. Jenner and other health-care analysts say some of the industry's better companies, including Pfizer and Wyeth, paid the price for bad news from some of its weaker members, including Merck and Bristol-Myers Squibb.
"These stocks still have a tendency to trade in a group fashion," Mr. Jenner says. "Though, in my opinion, there should be an increasing separation in value between a company like Pfizer that reports a good quarter and Merck that doesn't."
Not surprisingly, Henry McKinnell, Pfizer's chairman and chief executive, agrees. "All pharmaceutical companies aren't the same, Every company is its own story," he says. "We had a terrific quarter, and we're down -- but down on a really good story."
医药类股的诊断书
医药类股已经虚弱到了极点。
但有些时候，买进的良机恰恰是在前景最为堪忧之际。据此看来有些医药公司股票，如惠氏(Wyeth)、礼来(Eli Lilly)及Forest Laboratories还是颇有诱人之处的。
医药类股已经令投资者失望一年有余了，周三的消息表明情况可能会更糟。默克(Merck)周三下跌6.5%，至45.72美元，此前该公司表示，由于销售低于预期，公司将达不到2003财政年度收益目标，并将裁员4,400人。来自辉瑞(Pfizer)、葛兰素史克(GlaxoSmithKline)、先灵葆雅(Schering-Plough)及惠氏的不佳业绩也帮助推低了整个类股，同时也拖累大盘走低。道琼斯工业股票平均价格指数周三收盘下跌3.3%。
医药类股久治不愈的病症早已广为人知。大型医药公司在推出利润丰厚的新药方面依旧不堪重负，而且同时还要抵御来自仿制药的竞争；价格压力也损害了医药公司的利润；而且近年来业内进行多次合并，各个公司都不再专门针对一种疾病生产药物，而是被迫关注那些能带来大量利润的广谱药物，但往往徒劳无功。
由于相信经济全面复苏即将来临，投资者开始抛售通常不会从经济复苏中受益良多的医药类股，转而买进科技及工业类股。结果是：医药分类指数成份股的本益比仅仅为9.3倍，约为整个股市平均本益比的一半。
但即便阴云密布，仍由理由对某些最具吸引力的医药公司保持乐观态度。有些医药公司被投资者不分青红皂白予以惩罚是极不公平的，这些公司拥有前途光明的新药，这些药物上市后应该能获得良好回报。
Loomis Sayles驻底特律的投资组合经理大卫?索沃拜(David Sowerby)称，从股票价值角度来看，医药类股也极具吸引力。索沃拜最近数月增加了医药类股头寸。医药类股收益预期较低，而股价极具吸引力，随著婴儿潮时期出生的国民渐渐步入老年，长期来看人们服用药物会越来越多，也会越来越希望保持健康。
索沃拜是辉瑞的忠实拥趸，主要是由于辉瑞股价与其竞争对手相比较为廉价，仅为明年每股收益预期的15倍，使该股处于二十世纪九十年代中期以来最廉价水平。
股市今年的大幅上扬表明好的收益消息早已体现在股价之中，但医药类股刚好相反，由于投资者对该行业短期前景不甚满意，该类股逆市下挫。
T. Rowe Price Health Sciences Fund的基金经理克利斯?贾纳(Kris Jenner)指出，惠氏是一个典型，该股基本面强劲，但某些枝节问题使投资者一直不愿理睬该股。
对公司计入20亿美元支出以提高与fen-phen减肥药相关诉讼的准备金水平，及并未上调第四财政季度收益预期，投资者耿耿于怀。惠氏股价周三下跌5.5%，尽管一些投资者早就预料到公司将计入这笔支出。除此之外，该公司财务状况都在改善。
与某些竞争对手不同，惠氏主打药物的表现都比较优异，其中包括抗抑郁症药物Effexor，预计该药物明年销售额将超过30亿美元；还有治疗心痛的药物Protonix及帮助儿童预防脑膜炎及血液感染的疫苗Prevnar。该公司的表现要远远好于其股价下跌5.5%所反映的水平。
礼来周三盘后公布了季度收益报告，其收益达到分析师预期。该公司本益比高于其他竞争对手，但分析师称，该公司的在途研发新药前景最好，而且如果医药类股重新获得青睐，礼来应该受益最多。
一马当先的是礼来的抗抑郁症药物Cymbalta，该药物前途无量，已经引发一些对冲基金最近几周入主该股。
Forest很快将开始上市销售其治疗阿兹海默氏老年疑呆症的新药Namenda，一些业内专家预计该药物将大获成功。一些投资者预计2005年该公司年销售额将最终达到10亿美元，利润将增长三分之一。
但Forest股价却无力移动，像是染上了医药类股综合症。该股基于2004财政年度每股收益预期的本益比为23.5倍，高于标准普尔500指数成份股的平均本益比17倍。但未来数年基本不会有公司能在收益增长方面与Forest一较高下。
贾纳及其他医疗保健分析师称，一些表现不错的医药公司，如辉瑞及惠氏是被诸如默克及百时美施贵宝(Bristol-Myers Squibb, 又名：必治妥施贵宝)等表现不佳的同行所拖累才走低的。
贾纳称，医药公司股票总爱追随类股走势。尽管他认为业绩良好的辉瑞与表现糟糕的默克应该有不同表现。
辉瑞的董事长兼首席执行长亨利?麦克金耐尔(Henry McKinnell)当然举双手赞成，他称所有医药公司都不一样，每家公司都有自己的情况。辉瑞上季度表现辉煌，但公司股票却下挫，是受好消息拖累才下挫？
