Large Pharmaceutical Companies' Strong Growth To Continue, Neil Sweig at Southeast Research Partners Says
Superior Sales and Earnings Growth Bodes Well for Pharmaceutical Industry's
Future
BOCA RATON, Fla., Sept. 24 /PRNewswire/ -- The following is being issued by Southeast Research Partners, a member of the National Association of Securities Dealers, CRD number 28629:
An extensive new analysis from Southeast Research Partners has just been released and is entitled, "Pharmaceutical Industry: Outlook and Overview" by senior drug analysts, Neil B. Sweig and Le Anne Zhao. The report details the analysts' views on the global pharmaceutical industry and many of these equities in an increasingly volatile stock market.
Highlights of the report include the following:
* The negative U.S. market conditions caused by the political and economic crises in Russia, Southeast Asia and elsewhere may eventually slow the U.S. economic growth which should favor drug stocks because large U.S. drug companies derive low sales from these regions. The driving forces for drug companies are global new product launches, productive R&D programs and competitive management teams mainly operating in North America, Europe and Japan.
* Despite relatively high P/E valuations, we believe that our drug stocks, as a major component of the S&P 500 index, will outperform the index for 1998-99 because these companies are capable of reporting consistent and above average EPS growth, on the order of 15% for the next 2-3 years, compared to a 4%-6% increase or lower for the S&P 500 index. The Buy ratings remain in place for the following stocks: Glaxo Wellcome (GLX), Merck (MRK), Pharmacia & Upjohn (PNU), Schering-Plough (SGP) and Warner-Lambert (WLA). Furthermore, we are now upgrading all the remaining drug stocks in our universe to Buy from Neutral. These stocks are: Abbott Labs (ABT), American Home Products (AHP), Bristol-Myers Squibb (BMY), Johnson & Johnson (JNJ), Lilly (LLY), Pfizer (PFE) and SmithKline Beecham (SBH).
* We still view Merck as the most undervalued drug stock in our universe based on our 1999 EPS estimate of $5.05 and being capable of 15%-18% growth for the next five years despite several important drugs that will lose patent protection in 2000-02. Glaxo Wellcome is going to have strong sales and earnings growth as the generically exposed drugs become relatively less important and the new products of the 1990s significantly grow the company in 1999-2000. With new management and new product launches, Pharmacia & Upjohn is on the recovery track to have EPS growth of 15%-19% in 1999-2000. Claritin's very strong position in the antihistamine market is giving Schering-Plough more than enough time to develop new products from internal and external programs. Lipitor and Rezulin are the backbone products for Warner-Lambert for well beyond 2000 as this company is capable of delivering outstanding EPS growth over the next five years.
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