Billionaire short-seller Jim Chanos has Big Pharma in his sights. The founder of hedge fund Kynikos told a U.K. radio audience that he's put a pencil to the U.S. healthcare system, and as a result plans to bet against drugmakers.
"Healthcare is growing now at about 10 percent per annum in the U.S. top line, versus 3 percent for the economy," Chanos told Peston and the Money Men (as quoted by The Times). "As someone with a sharp pencil and an eye for this kind of thing, this can't last."
Well, we all know that pharma faces plenty of challenges, from fast-growing generic competition to government cost-control efforts to a dearth of groundbreaking new meds. But not all sophisticated investors are ready to start shorting drugmakers. "I don't see any need to start shorting just yet," Jeremy Batsone-Carr of Charles Stanley told The Times. "While big pharmas' top line might be suffering, they can sustain their bottom lines by cost-cutting and working capital reductions for now."
Plus, some analysts point out that pharma's problems have already been factored into stock prices to some extent. Not to mention the fact that many drugmakers pay good dividends as well.