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Biotech / Medical : Pharma News Only (pfe,mrk,wla, sgp, ahp, bmy, lly) -- Ignore unavailable to you. Want to Upgrade?

To: Anthony Wong who wrote (765)	9/10/1998 3:16:00 PM
From: Anthony Wong	Read Replies (2) \| Respond to of 1722

09/10 14:00 U.S. drug stocks seen as haven amid market turmoil By Kevin Drawbaugh CHICAGO, Sept 10 (Reuters) - World equity market turmoil has focused attention on U.S. drug stocks as a safe haven, bolstered by domestic market strength and other advantages. But some Wall Street analysts were wary of the long term. For now, they said, U.S. drug companies are solidly outperforming those of Europe and Asia and offer some noncyclical shelter for anxious investors. "Our feeling is that U.S. drug stocks are probably the place to be strategically for the next year or possibly two. After that, I don't know," said Richard Vietor, pharmaceutical industry analyst at Merrill Lynch in New York. The American Stock Exchange Pharmaceutical Index of 15 large-cap U.S. drug stocks was down 1.7 percent to 646.93 early Thursday as U.S. stocks again moved broadly lower. At that level, the pharma index was 6.3 percent above a four-month low set August 31 when the Dow industrials suffered an historic drop. The broader average of 30 industrial stocks was up only 1.3 percent over the same period by comparison. "If you're looking for safety in this market, U.S. drug stocks are probably as safe as any sector out there. The only issue is what you should pay for them," Vietor said. U.S. drug stocks are not cheap, but given strong fundamentals, they still look undervalued and near the middle of an historic price-earnings range relative to the S&P500, said Christina Heuer, Salomon Smith Barney drug industry analyst in New York. "U.S. drug stocks are poised to gain global market share due to their larger exposure to the faster growing U.S. pharma market that is benefiting from aging baby boomers, managed care and (direct-to-consumer) ads," Heuer said. In addition, she said, U.S. drug makers are doing a better job guarding their Achilles Heel -- generic cannibalization -- by extending the effective life of blockbuster drugs. One example she cited was the continued sales growth of Eli Lilly and Co.'s <LLY.N> 10-year-old anti-depressant Prozac. Moreover, the U.S. Food and Drug Administration is approving new drugs more rapidly than in years past, Heuer noted, accelerating new U.S. drug launches and sales ramps. As a result, analysts said, U.S. drug sales and profits are growing faster than those of non-U.S. peers. "U.S. companies are running away from the rest of the world," Vietor said. Faster top-line growth means U.S. firms can boost research and development, as well as marketing, without pinching profits. "Foreign companies with slower sales growth cannot...Therefore, we expect U.S. pharma companies to gain global market share," Heuer said. She said her models show the best U.S. drug stock values to be Bristol-Myers Squibb Co. <BMY.N>, Pfizer Inc. <PFE.N>, Schering-Plough Corp. <SGP.N> and Warner-Lambert Co. <WLA.N>. Further ahead, analysts said, European drug companies may be in for a round of consolidation that could make them more competitive. Moreover, U.S. companies are looking at a possible falloff in new-drug launches after 1999. "Every good point exhibited by the drug industry worldwide is exemplified here in the United States," said Stephen Scala, drug industry analyst at SG Cowen in Boston. "But that's been true for so long that I would imagine at some point we're going to start getting a deceleration in the continued very good trends that we see," he said.