Industry Analysis - Biotechnology


Dec 5, 2012 (5 years and 6 months ago)


Industry Analysis


Ian, Steve, Conor, Jason and Nicholas

Top 15

1. Biotechnology

2. Health Care Distributors &

3. Drug Retail

4. Tobacco

5. Homebuilding

6. Construction & Farm
Machinery & Heavy Trucks

7. Consumer Finance

8. Pharmaceuticals

9. Casinos & Gaming

10. Airlines

11. Systems Software

12. Health Care Facilities

13. Environmental Services

14. Health Care & Equipment

15. Health Care Supplies

Healthcare Distributors and

Neutral to negative investment outlook by
Business Week

18% price increase (ttm, Yahoo! Finance)

Healthcare demand is always high

Stable revenue streams and consistent gross

Small growth at mature stage of business

Chance of government intervention

NovaMed Inc. (NOVA) and Quest Diagnostics


Positive investment outlook by Business Week

7.8% price increase (ttm, Yahoo! Finance)

Potential for large return

Numerous micro and small
cap companies

Potential for large loss

Many have no revenue and burn cash quickly

OSI Pharmaceuticals (OSIP) and Cell
Therapeutics (CTIC)


Investment outlook is neutral

Index dropped 5.6% YTD

Flood of patent expirations offers opportunities for generic

Improved earnings prospects in 2005, and historically low
P/E multiples

Weakness in drug stocks reflect political uncertainty

Possible increased reimportation of drugs from Canada

Merck (MRK) and Boston Scientific Corp (BSX)

Consumer Finance

Investment outlook is positive

Consumer Finance Index gained 4.1% YTD

Margins of credit card issuers to expand

Higher long
term interest rates YoY should help drive
greater loan growth

Pricing pressures will remain intense though

Balances and transaction volumes weaker than expected

Bank of New York (BK) and Fifth Third Bancorp (FITB)

Systems Software

Investment outlook: Neutral

As of August 20
, Systems Software Index down 6.2%

term growth potential in the web technologies and
web services areas

Predicted lower double digit PC software sales growth
over the next year

Growth in software spending has slower than previous

Example Stocks: Microsoft (MSFT), Adobe Systems Inc.

Health Care Facilities

Investment outlook: Neutral

As of July 30
, the Health Care Facilities Index
declined 13.2%

Managed care providers will see continued
earnings growth

Estimated 10% revenue growth resulting in 10
to 15% gains in EPS for the rest of the year

Continued problems with bad debit expense
throughout the industry

Example Stocks: Tenet Healthcare Group (THC),
Healthsouth Corp. (HLSH)

IT Consulting Services

Negative Outlook by Business Week

19.4% YTD Decline

Possible growth through acquisitions and

Modest improvement in 2005

Softness in IT spending

Weak demand for consulting services

Unisys (only S&P 500 in industry); Hewitt

Electric Utilities

Neutral Outlook by Business Week

4.6% YTD Growth

Economic recovery will boost energy demand

Look for companies with strong balance sheets
and growing dividend

High level of pension costs

Many companies have high debt and liquidity

Exelon Corp., National Grid Transco PLC