Big Pharma Will Trade On the Following Fundamentals: Morningstar Says Big Pharma Well Positioned

In a research report dated 1/21/10, Morningstar healthcare analyst Damien Conover CFA says big pharma is poised to win, no matter what the outcome of health reform in Congress is. That’s because a single payer, or governmentt run insurance plan is unlikely.
Big Pharma should trade on the following important fundamentals:

Clinical Data

Game-changing clinical data are expected throughout 2010. We believe strong data could shift negative investor sentiment surrounding pharma industry pipelines, leading to better valuations for the entire group.

Winners

Pfizer, (NYSE: PFE) (JAK inhibitor).

In the arthritis market, we will likely see data from Pfizer's JAK inhibitor, currently in a Phase III program known as ORAL. Based on very strong Phase II data, we think the drug could significantly dent TNF-alpha dominance in the rheumatoid arthritis market. Since the drug has already established strong efficacy, safety will be key in the Phase III data.
Bristol-Myers Squibb (NYSE: BMY)

AZN) (dapagliflozin). In diabetes, Bristol-Myers

Squibb and partner AstraZeneca should report on the majority of its five remaining trials for dapagliflozin. Based on the drug's strong data demonstrating efficacy and weight loss in the first three studies, we expect positive results in additional studies will position the companies to file for approval in late 2010.

Johnson & Johnson (NYSE: JNJ)

JNJ) (telaprevir, Xarelto). In the hepatitis C market, J&J and Vertex (VRTX
VRTX) should report strong pivotal Phase III data on protease inhibitor telaprevir. We also expect J&J's cardiovascular drug Xarelto will post solid data in the ROCKET study, demonstrating its ability to prevent strokes in patients with atrial fibrillation.

Merck (NYSE: MRK)

MRK) (boceprevir, Vytorin, TRA). While we believe telaprevir may have a leg up on Merck's hepatitis C drug candidate boceprevir based on a shorter duration of treatment, we expect both drugs will become blockbusters. We also expect data from the SHARP study will show favorable results for cholesterol-lowering drug Vytorin, which has been marred by data putting the efficacy of this combination therapy into question. While flying under the radar, Merck's cardiovascular thrombin receptor antagonist (TRA, known as SCH 530348) is positioned to potentially match Plavix sales of over $8 billion, in our opinion. We expect data from the TIMI 50 Phase III trial in September 2010 will confirm the drug candidate's positive Phase II data.