Biotech Values

[DewDiligence]

Which are the most attractive Big Pharma?

As the Barron’s article in #msg-51734762 points out, all of the Big Pharma are cheap, so you probably can’t go far wrong with any of them. Still, I would avoid SNY and GSK because I think investors are underweighting the potential loss of exclusivity of Lovenox and Advair, respectively.

Roche doesn’t trade on a US exchange, so you have to buy shares in Zurich or on the pink sheets. For some investors, this in itself is a reason to look elsewhere.

I think NVS (#msg-49185209, #msg-45888821) and ABT (#msg-51233833) have the best mix of businesses and are well managed, making them no-brainers at the current valuations.

PFE has an even more compelling valuation (#msg-51691899); if you believe PFE will meet its 2012 (post-Lipitor) EPS guidance, PFE ought to be a no-brainer too.

JNJ has some problems in its pharma segment (#msg-49412397, #msg-49465981), but it does have considerable upside from such new drugs as Telaprevir, Xarelto, TMC278 (#msg-50277627), and even Bapineuzumab. If these drugs fizzle, JNJ probably won’t be a great investment, but steady performance by the medical-device (#msg-50898302) and OTC segments ought to preclude anything awful from happening.

That leaves the five “pure play” pharma companies: MRK, AZN, LLY, AMGN, and BMY. Among these, I like BMY best; although it has the highest P/E ratio of the group, it does have some exciting drugs in its pipeline (#msg-47414305, #msg-50952010) and it could yet be a buyout candidate for one of the bigger Big Pharma (#msg-47469186).

All told, I consider ABT, NVS, and PFE the most attractive names in this group and I give honorable mention to JNJ and BMY.

JMHO, FWIW