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Biotech / Medical : PFE (Pfizer) How high will it go? -- Ignore unavailable to you. Want to Upgrade?

To: Anthony Wong who wrote (5333)	9/1/1998 6:44:00 PM
From: Anthony Wong	Read Replies (1) \| Respond to of 9523

09/01 12:09 European drug shares win fans but U.S. still rules By Michael Shields ZURICH, Sept 1 (Reuters) - Shares in European pharmaceutical companies remain overshadowed by their fast-growing U.S. competitors even though they can offer investors a defensive play amid current global share market turmoil, equity analysts said on Tuesday. Blue chip drugs companies in Europe have benefited from investors' rush to quality by offering relative shelter from market turmoil and because they have little exposure to fresh competition from Asia, the analysts said. But U.S. companies surfing a powerful wave of growth in their domestic market still appear better positioned. Birgit Kulhoff at Bank Sarasin in Zurich said European drug companies have been able to outperform markets of late because they have no big exposure to Asia and are not cyclical. "If you just look at Europe, European companies are definitely benefiting from this bad stock environment," she said. U.S. companies by contrast have higher top-line growth because of their domestic market. "That is why European companies will probably continue to have slower top-line growth," she said, although she diffentiated between continental European firms and their British rivals which tend to have more U.S.-type business. "I still think that the U.S companies are likely to show better top-line performance than the Europeans and probably that will also have an impact on the bottom line," Kulhoff said. Merrill Lynch drugs analyst Janet Dyson in London said she remained been downbeat on prospects for continental European drugs companies as she has been since the beginning of year given the structural problems they face. "We haven't changed our view since then just because of the concerns in Asia and Latin America and Russia," she said. "Even though people are clearly starting to step back into these stocks a bit, we still think there is a lot of scope in the sector in the short term for volume and earnings growth disappointment," she said. Over the longer term there remain questions over their ability to maintain the research and development (R&D) and marketing required to be competitive with U.S. companies, she said. "Just because (pharmaceutical) share prices have dropped we haven't really changed our opinion. I think they would have to fall quite a bit further than they have done so far because they have been holding up relatively well." Continental European markets are simply not growing as fast as the U.S. drugs market, and many companies in Europe are geared more towards selling into the declining Japanese market. "With pressure on their volume growth, they are not really able to make the investments to stay competitive with the sort of investments that U.S. companies are making," she said. Pfizer <PFE.N>, for instance, is growing so strongly that it can plough earnings into R&D and marketing, she said. "The more sales people they bring on and the more R&D they spend, the more the Europeans get left behind," Dyson said. She cited Hoechst <HOEG.F> as a company under pressure, while Synthelabo <SYNT.PA> was relatively better placed. Novartis <NOVZn.S> and Roche <ROCZg.S> were reasonably well positioned due to their U.S. exposure, but they also may have to boost their investment. Eric Bernhardt at Clariden Bank in Zurich said U.S. firms boasting double-digit growth offered obvious strength, but he added that European competitors' restructuring moves and the sector's potential for consolidation should not be overlooked. He said Bayer <BAYG.F> may choose either to merge or spin-off some divisions. "I think they have the weight and the substance to do something," he said, noting its shares were not expensive.