Mr. Treppel: As is usually the case, it's a mixed bag. There have been some spectacular successes, like Celgene (CELG), King Pharmaceuticals (KING), Enzon (ENZN), and SuperGen (SUPG). There have also been some disappointments like Elan (ELN) and Mylan (MYL), so the generics have been generally a mixed bag. I think the one other thing you can say is that specialty pharma has been among the best performing groups in health care. My own experience is that there has been a lot more interest in the group in the last month than in the last 10 months combined. Some of this, I believe, is sort of a market make-up because there had been such a large cap bias to the market. But I think you've also had some good fundamental news in a number of these names. Comments to me from portfolio managers indicate that it's one of the few areas in health care where they have made money.
TWST: Ian, how does the performance of this group of small to medium cap
companies compare with that of the major pharmas as you look back over
the year?
Mr. Sanderson: We monitor an index of our small and mid-cap
pharmaceuticals universe, and compare it to the large cap drug universe.
The two groups performed remarkably close to one another through early
October. Both of our pharmaceutical stock indices were down 10-15%
through the first three quarters, despite a strong rally by the smaller
stocks in August. Over the past month, the large cap pharmaceutical
stocks have regained momentum due to recent merger speculation. Next
year, we project that the mid-cap drug stocks may outperform the large
cap stocks, due to the psychological impact of the election year debate
over Medicare drug coverage. That impact is likely to be felt
disproportionately by the large cap pharmas.
Tickers included in this excerpt: ABT, ALKS, ALO, ARDM, AZA, BRL, BXM, CELG, COB, DNA, DURA, ELN, EMIS, ENZN, FRX, HOE, INHL, IVX, JMED, KING, KVA, LLY, MRX, MYL, PFE, RPC, SBH, SEPR, SGP, SHPGY, SUPG, TEVA, WLA, WPI
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