The Calm Before the Storm – Big Pharma Is Gonna Have Big Problems and Pfizer is the BIGGEST
by ilene - March 24th, 2010 2:01 pm
Second coming of the calm before the storm; fear not, there's time to find shelter. - Ilene
The Calm Before the Storm – Big Pharma Is Gonna Have Big Problems and Pfizer is the BIGGEST
Courtesy of Pharmboy, member of Phil's Stock World
This is a brief article of where the pharmaceutical industry has been, and where it could be headed in the near future. In contrast to past articles where I focused on the pipelines of GSK, LLY, MRK, BMY and ‘biotechs’ GENZ, GILD, and others, this is a summary of the industry. The overall market continues its grind up and I am gun-shy of its continued direction, but with the passage of the health care bill, biotechs that serve niche markets will be well positioned to see a rise both in stock price and potential M&A activity. In addition, as noted on Friday, March 19th on the laggers/leaders of the past month or so, Telecom and Healthcare were at the bottom of the pile. For the review of Big Pharma and some biotech picks at the end, generic companies are excluded from most data (Merck KGaA, Mylan, Teva and Watson).
From 2002 to 2009, the top pharmaceutical companies by sales had growth rates greater than 12% (compounded annually). Unfortunately, this growth is not sustainable and should move towards flat to nominal growth by 2014. The growth decline will challenge these companies to seek more profitable routes, including licensing and acquisitions. Picking the right companies based upon the science is at the forefront of good investing. Not they will all succeed because the science is sound, but understanding the molecule, target, and the disease helps guide smart decisions. Good management helps as well!
Let's start with a summary of potential acquirers. Table 1 is a list of the 15 largest pharmaceutical and biotech companies ranked by healthcare revenue. Some companies (e.g., Bayer and Johnson) have additional revenue which is not included the sales data.
Table 1. Top 13 Pharma Companies in Sales (2009)
Rank |
Company |
Sales ($M) |
Based/Headquartered in |
1 |
Pfizer |
50,001 |
US |
2 |
Hoffmann–La Roche |
46,300* |
Switzerland |
3 |
Merck & Co. |
45,930** |
US |
4 |
Novartis |
Pharmboy’s Review
by phil - September 30th, 2009 4:20 pm
Courtesy of Pharmboy
Good day to all! The corn is ready for harvest, and the fall season is upon our Pharm. It is time for a quick review to see how we have done, and add a few more goodies to our Plots.
From our 15-Aug-09 list:
Novartis – Buying the $40 Jan10 C @ 6.40 ($1 premium), selling $45 Sept09 for 1.35 (also $1 premium). The $40s Jan10 are now 9.10, and rolled 2X to the $50 Oct, now at $0.45 (small loss on the roll). Net ~$2.1 up for the trade.
Bristol-Myers – Buy outright for the dividend, or buying the $20 Jan10 C @ 2.80 ($0.5 premium), selling $22.5 Sept09 C @ $0.55 and $22.5 P@ $0.7. I think this company has room to run. Bought outright and the stock closed on OPEX at 22.47…..can’t get better than that……Only stock on this position, but looking to sell the Nov09 24/22 P/C for 0.44/0.75.
SNY – Not as confident on the SNY story as of yet. I would sell the $32.5 Sept09 P, being prepared to roll down to the $30 Dec09s. These expired worthless….nice gain.
JNJ Buying the $55 Jan10 C @ 6.50 ($0.5 premium), selling $60s Sept09 C/P for 2.20. $55 Jan10s currently $6.10, and the Sept P expired worthless. Sept09 C rolled to the $60 Oct09 C for a 0.50 credit. Puts not sold as of yet.
Genzyme – Buying the $50 Oct09C @ 4.2 ($1.5 premium), letting it run for the next few days, and then selling $55 Sept09 for 1.25 or better (all premium). $50 Oct09 are currently $6.80 and the $55 Sept09s were rolled up to the $57.5s almost even. These will need cashed out for a $2.5 gain, or to be adjusted to the 50 Apr10 C for 9.8. To help offset the costs, I would sell the $55 Oct09 P for $1 or better. For a net $1 out of pocket…
Pharma’s Green Shoots
by phil - September 15th, 2009 6:43 am
Courtesy of Pharmboy
Hello all! Not a bad month since our first plays in the Pharma and Biotech space. Phil summed up last week the positions and the nice profits on our picks, and I think it is time for a few more companies to focus on for our virtual portfolios (e.g., 100K), after all, it’s about tilling the soil and making some money on our Pharm….
First, the healthcare debate is going to rage on after the holiday weekend, and I am expecting this sector to take some lumps with our good ride up. I would expect the economies of scale to weigh in, as even though price may be lower, picking up more coverage (patients) is what it is all about. Those dependent upon high priced biologics may be the ones that take the biggest hit, as the costs are quite different than popping a pill every day for a few $$$. Just things to ponder and we will react as developments take shape on the horizon.
Mid-summer and early fall are the times for the biotech and pharma segments to provide the greatest returns. I cannot decide if it is the cyclical nature or if more clinical data are being released during this time. Looking at XBI and XPH over a five year period, the biotech fund (XBI) has done a bit better on overall return, but the two charts follow the same overall pattern. Thus, we are entering the final stretch for this sector, and should be prepared for a slight pullback during the holidays.
5 yr XBI and XPH Chart Here >>
Now, on to the good stuff….
Shire PLC (SPHGY), founded in 1986, aims to be a market leader in meeting the needs of specialist physicians in targeted segments. Its core therapeutic focus areas are attention deficit hyperactivity disorder (ADHD; within central nervous system, CNS) and increasingly biopharmaceuticals that address specific genetic disorders. Consistent with this strategy, Shire has been made a number of important acquisitions, including the 2007 purchase of New River, the developer of Vyvanse (the successor for Adderall XR ADHD treatment; and a series of biopharmaceutical acquisitions, following the Transkaryotic Therapies entry acquisition in 2005. In 2008, Shire acquired German biotech company Jerini, which brought along Firazyr, a treatment for hereditary angioedema.
Recently, Shire has sent its treatment for Gaucher disease, an alternative…