Pharmaceutical Executive Europe - November 2008 - (Page 13)

Is Pharma Recession-Proof? Jacky Law outlines why pharma is in a position to fend off the current financial crisis. Jacky Law I confess I am no financial expert. My knowledge about the current credit crisis can be summed up in six words: “debt is bad; cash is good,” which was pretty much the limit of my understanding about money before it all began. But you don’t have to be a financial expert to recognise the panic sweeping through the financial system, petrifying investors, CEOs and employees alike, nor to know that the paralytic effect it is currently exerting on global commerce must eventually pass. The banks will lend money again. Normality will return. Meanwhile, however, a major recession seems inevitable. The good news is that it couldn’t have come at a better time for pharma — at least, that is, for those companies that aren’t dangerously reliant on borrowing. As one pharmaceutical analyst from a leading investment bank told EvaluatePharma’s news service, EP Vantage: “It’s a sector not without problems, but still a safe haven, as pharma is clearly less exposed to the macro environment. Go back three recessions and downward revisions in earnings for pharma are half of what you see for the rest of the market.” A major recession seems inevitable. The good news is that it couldn’t have come at a better time for pharma… In the so-called crash of 2008, pharma is performing well or, more accurately, less badly than anyone else. By the beginning of June, the Dow Jones STOXX Healthcare Index had lost 4.5% by mid-October. The Dow Jones STOXX 50 Index, meanwhile, went down 26% during the same period. The largest companies have done particularly well, outperforming the FTSE index by 32% since early June. Stocks in AstraZeneca have actually risen 4% since June, flaunting advice from Goldman Sachs a week or so before the Lehman Brothers crash. On 11 September, the US investment bank was advising people to sell shares in the company. Pharma’s problems (patent expiries, few new drugs, and so on) may not have vanished, but companies have two things going for them they didn’t have before the crash: they are a better bet for investors than the consumer sector and, unsettled times tend to work in their interests by raising the general level of demand for medicines. The bad news, as EvaluatePharma CEO Jonathan de Pass points out, is that governments have less money to spend. “We are in uncharted territory, but one thing we do know is that government finances are shot to pieces,” he says. “And that will affect health budgets. 15 Executive Profile Dr Jacques Servier 19 IT Using IT to maximise a company’s brain power 23 Event Review Last month’s EuroBIO in Paris 25 Last Words Who said what in the last four weeks

Table of Contents for the Digital Edition of Pharmaceutical Executive Europe - November 2008

Pharmaceutical Executive Europe - November 2008
Contents
From the Editor
News Round-Up
Calendar
Brussels Report
Using the Wooden Spoon
VC: Virtuous or Vampire Capital?
Is Pharma Recession-Proof?
Servier: Patience and Passion
Boost Your Brain Power
Innovation, Innovation, Innovation
Last Words

Pharmaceutical Executive Europe - November 2008