Novartis (NVS)

[flatlander_60048]

I have touted NVS growth in emerging markets for the past 5 or more years on the Yahoo board. In that time I've watched the earnings double and the PE get halved. A frustrating period indeed! NVS has diversified considerably with a much stronger presence in growth areas including vision care, vaccines and most recently FOB/Biogenerics. Yet it gets viewed by Wall Street as a pharma with the bulk of its products going off patent. I though NVS hiring Symonds as CFO would be able to change the perceptions since he came from Goldman with lots of Wall Street contacts. However, it has not mattered and the PE multiple has continued to contract.

At the present time the emerging market tailwind is is largely being offset by the pricing pressures coming from developed countries with older populations which require many drugs. This trend is likely to continue for a time since austerity programs are spreading.

What I can't understand is how so much of the pricing pressure is focused on the solutions providers such as big pharma whereas the health care insurance companies are largely immune from these pressures. I saw an interesting graphic which broke down health care costs as a percentage of GDP and then looked at which components of the health care industry have fared better over the past 5 years. The insurers come out ahead of pharma and the device makers.

Unfortunately, my investing psych would rather reward the solutions providers rather than the middleman. I'll maintain my core position in NVS but I continue to look elsewhere for growth and excitement.

Regards

FL