A few years ago, it was common for people to leave my company in the financial industry for greener pastures in the pharmaceutical industry. Salaries were higher, bonuses were up, and people were making money off their stocks. Lately, this has cooled. US News & Word Report, in the annual investing guide, agrees:
Drug patents have been expiring, allowing generic competitors to snatch away profits… Between 2005 and 2007, Pfizer has either lost or will lose patent protection on seven drugs that make up more than a quarter of its sales… After unexpected deaths, Pfizer pulled the plug last year on trials of a potential blockbuster drug to raise levels of so-called good cholesterol, while reducing the bad. Merck took arthritis drug Vioxx off the shelves late in 2004 after it was linked to increased risk of heart attacks. Safety concerns have prompted the Food and Drug Administration to limit already slow drug approvals in 2006, hampering companies’ plans to boost sales.
Now, here’s why Renuka Rayasam is recommending pharmaceutical stocks for 2007:
* It’s unlikely there will be changes in Medicare this year.
* The recent turmoil in the sector has left companies with bargain prices.
* “2007 will see the industry split, with companies that have been cutting costs and boosting pipelines perking up and those with continued problems sagging.”