Damien Conover, CFA
Karen Andersen, CFA
Pharmaceuticals: While the majority of pharmaceutical companies are losing patents on major blockbuster drugs over the next five years, strong pipelines should provide stability and growth opportunities over the long run. Investors with long-term horizons could benefit from seeking the firms best-positioned to balance patent expirations with inline product growth and strong pipelines.
Biotech: As the market leader in both biotech and diagnostics, [Buy-rated] Roche is in a unique position to guide global health care into a safer, more personalized, and more cost-effective endeavor. Key acquisitions, such as Ventana Medical and Genentech, complement this firm’s innovative offerings, and we’re confident in the sustainability of Roche’s competitive advantages.
Genentech’s portfolio of blockbuster cancer biologics–which includes Avastin, Rituxan, and Herceptin–continues to grow quickly, as drugs gain market share in approved indications and garner widened approval in new indications.
We think Roche’s decision to fully absorb Genentech is well-timed; Genentech’s commercial structure in the U.S. is mature enough to complement Roche’s international operations without significant additional investment.
Buckingham Research Group
Specialty Pharmaceuticals: Following a strong 2009 performance, there is some temptation to be more cautious; however, given that the health care sector overall has lagged in the 2009 recovery, we still find opportunities. We believe that (1) low-cost health care (generics/store brands) and (2) drug companies with differentiable strategies will be winners.