Optimistic about a pharma-stock rebound? Some industry experts are as well. As The Wall Street Journal reports, analysts from Deutsche Bank and JPMorgan are talking about a turnaround, at least for the European pharma sector. Just hang on until mid-2012, they say, and drugmakers' efforts to combat their patent-cliff woes will begin to really pay off.
We all know what those efforts have been: diversifying into and expanding businesses such as eye care (Novartis ($NVS)) and consumer healthcare (Sanofi ($SNY), GlaxoSmithKline ($GSK)), pumping up generics divisions (Pfizer ($PFE), for one); rejigging R&D (virtually everyone in Big Pharma); and expanding into emerging markets (also virtually everyone). Then there's "strengthening their balance sheets," as the WSJ points out, and boosting productivity and efficiencies (read layoffs and plant closures).
Deutsche Bank figures investors will start to put more faith in pharma as the cost savings, diversification, and new drug sales pay off. And it will be faith, not fact: The bank's analysts believe that investors will believe in pharma's ability to start growing again, beginning next year. JPMorgan essentially says the same thing: "By mid-2012 we expect investors to turn their attention to 2013-2015, when we expect the growth outlook to return to high single digits," these analysts wrote to clients yesterday. That's a lot of expectation and faith, with little stock-price evidence to show, but belief is better than nothing.
- read the WSJ piece