CAUTIOUS OPTIMISM

Pharma might get solid results

04-13-2009 | REUTERS

Healthcare is traditionally one of the last areas where consumers cut spending and the sector is faring far better than expected

Panama Star LONDON/NEW YORK. Drugmakers should deliver a solid set of quarterly results but investors will be watching for any signs of recession choking demand for more expensive treatments.

Healthcare is traditionally one of the last areas where consumers cut spending and the sector is faring far better than many downturn-hit industries, despite the long-term problems of multiple patent expiries and excess capacity.

"We're going to see some pretty good results that will reaffirm the defensive nature of this industry," said Morningstar analyst Damien Conover.

Currencies, however, will muddy the waters, with a stronger dollar hurting U.S.companies while simultaneously boosting some European rivals. Two diversified U.S. players -- Johnson & Johnson (JNJ.N) and Abbott Laboratories (ABT.N) -- kick off the reporting season on April 14 and 15.

J&J warned in January that the weak economy was weighing on parts of its business, although results from unlisted Biomet on April 8 suggest that the orthopedic reconstruction market, at least, is holding up fairly well.

Investors in Abbott, meanwhile, will be closely watching sales of its arthritis drug Humira amid some signs of weakness in prescriptions for such expensive medicines.

"We believe that the economic environment, rising unemployment, and resulting loss of insurance coverage is negatively impacting use of high-priced anti-TNFs," UBS analyst Bruce Nudell said in a research note, referring to Humira's class of drugs.

Roche Holding AG (ROG.VX) unveils first-quarter sales on April 16.

The Swiss group, which does not report quarterly profits, said a month ago it had performed strongly in January and February, and analysts are confident its market-leading position in cancer treatment will help keep it on track.

For the quarter, Roche group sales are expected to have grown 5 to 10 percent. Michael Leuchten of Deutsche Bank said there was a chance of a bullish outlook statement.

Importantly, Roche may also give an update on the integration process at Genentech, which is now a wholly owned unit following last month's $47 billion buyout.

Citigroup estimates Roche will derive 40 percent of its 2009-12 earnings growth from cost savings and reduced financial expensive in the wake of the Genentech deal. After holding up well last year, drug stocks have lagged recently.