The AP reported on New Year’s Eve that the rough consensus of analysts is that 2004 will be a reasonable but not great year for the pharma stocks. Those stocks have of course underperformed the S&P over the last year but actually haven’t done too badly over the last 2 years compared to the S&P after their plunge 18 months ago. One potential major problem has been dodged, with a Medicare bill that’s as friendly to the pharmas as possible. The longer term problem is the paucity of the pipelines, so I’d look for more deals in the biotech sector like the one Pfizer did with Esperion Therapeutics. But of course some time after 2006 when the Medicare coverage comes in, the likelihood of more governenment interference is a risk in the much longer term.
In the shorter term the most interesting stock remains Astra-Zeneca. Since its beautiful technical double bottom in February and March last year A-Z has rallied over 65%. THCB has reported at length about the potential problems with both Crestor and its struggles with Lipitor. This past weekend the influential finance magazine Barrons essentially came out warning that A-Z’s rally was overdone, but if you’d shorted A-Z a few months ago when this discussion started, you would be under water. Is it any different now?