Pharmaceutical Industry's Best Years Lie Ahead

By Kuo, David | The Independent on Sunday (London, England), July 29, 2012 | Go to article overview
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Pharmaceutical Industry's Best Years Lie Ahead


Kuo, David, The Independent on Sunday (London, England)


I have heard many experts say that the best days of the pharmaceutical sector are behind it.

Drug developers are finding it harder to come up with new medicines - it is not easy to find a new statin or cholesterol- buster to compete with existing medications. Consequently, companies are forced to go to greater lengths to find new treatments as patents expire and me-too drugs appear.

That said, big pharmas such as GlaxoSmithKline boast a bulging pipeline of drugs in late-stage development. Many of these show promise and GSK expects a slew of drugs to gain regulatory approval in the next two years.

But for now, it has been a case of managing costs and generating cash from existing products. It is also keeping shareholders sweet by hiking its dividends. A prospective dividend yield of 5 per cent is welcome when stock markets are volatile. At 1,435p the shares are valued at around 11 times earnings, which is not too demanding.

AstraZeneca is going through similar patent-expiry pains. In the first quarter, revenues fell 11 per cent after it lost exclusivity on key brands.

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