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Strategies & Market Trends : Value Investing

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To: Jurgis Bekepuris who wrote (30007)	2/7/2008 11:58:47 PM
From: Spekulatius	Read Replies (1) of 78670

SNY, GSK AZN - I think ROE is useless in this case. SNY has tons of goodwill from the merger of Aventis/Sanofi on the balance sheet, which depresses ROE. on top of that the goodwill is depreciated at the rate of almost 2B Euro/year. It' best to just use adjusted earnings, which is given out in the earnings presentations. based on PE or EBITDA/EV GSK, AZN and SNY are valued about the same. Besides valuation, i look at the pipeline and near term product issues (patent exirations). GSK has obvious problems with the latter, SNY had those last year (Plavix) but that's over now and AZN has the Nexium problem. Then there is the pipeline. AZN looks like they have nothing (only 6 entities in Phase III), SNY has 25 and GSK has a similar amount. Even after adjusting for the different size it seems that AZN is going to have problems in the future. they also have a fair amount of debt due to the Medimmune acquisition. After a customary look GSK early/mid stage pipeline looks better than SNY and I think the stock is interesting after the near term challenges are evident. GSK also has the largest consumer/ vaccine sector (measure by % of revenue) from all three, so i think LT they are going to be OK.

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