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Strategies & Market Trends : Value Investing -- Ignore unavailable to you. Want to Upgrade?

To: E_K_S who wrote (32555)	10/21/2008 10:38:43 AM
From: Oblomov	Respond to of 78774

In addition to shrinking pipelines, there is a lot of political risk in major pharma. I do not think the risk is fully priced in. You may think that the US government would never invalidate a patent or use the threat of FDA audits of manufacturing facilities to push business decisions a particular way. But a year ago, I would have thought the nationalization of the mortgage finance and insurance industries and a trillion-dollar bailout of the banks was impossible. Drugs used widely in a primary setting (e.g. statins, asthma medication) are most at risk, while specialty drugs (e.g. oncolytics, MS treatments) might be able to preserve pricing. So PFE and MRK have much greater risk than BMY. Biotech is safer from this standpoint, but valuations in that sector are seldom as attractive as major pharma looks on paper right now.