Dr. Butler: That's an excellent question. I think there are three particular reasons for investment in pharmaceutical stocks for 2001. Point one is the stability of earnings. We're projecting, for our universe of companies, a 19% earnings growth rate for 2001. This is in contrast to an S&P growth rate at approximately 7%. Point two is that the S&P on a quarterly basis is still decelerating in contrast to pharmaceutical earnings, which are more or less stable or exhibiting flat growth. S&P earnings, according to First Call estimates, are declining from the fourth quarter through the first two quarters of 2001. While they may rise in the second half of 2001, some of the earnings estimates for the second half of 2001 may be tenuous at best. Point three is product pipeline. Our analysis supports a new product cycle in the US pharmaceutical industry over the next two years. In particular, we see the potential for every US pharmaceutical company to introduce one, two, or several new products into the market over the next two years.
TWST: I'd like to get into the details of the pipelines later on, if you
don't mind.
Dr. Butler: Based on those three components, we think that investment in
pharmaceuticals for 2001 is not only a safe investment, but will show
superior returns versus the S&P.
Tickers included in this excerpt: AHP, BMY, LLY, MRK, PFE, SGP
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