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Credit Suisse Managing Director Catherine Arnold on why it is a good time to invest in pharmaceutical companies.
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In the -- so we constantly hear the chatter surrounding the fiscal cliff but there's another type of cliff and it's called the patent cliff.
As in pharmaceutical patents expiring big pharma companies are facing increasing competition from generics you know when you.
Go to pick up your drug over at CBS sir are Walgreens.
That always -- -- to the generic our next guest says this issue sort of backward looking Catherine Arnold Credit Suisse managing director.
It was clean up talk about what is in store for health care stocks the patent -- how worried should we be or do you jump into pharmaceutical -- because they're the real innovators here.
You know -- -- an analyst Romans fourteen years and I've probably talked about the patent cliff for two thirds of of my career.
It's an -- Bennett and well flags -- time to what's great is now where actually a place where investors understand.
What that means earnings but they're looking ahead there looking at what's coming out of the pipeline we finally gotten -- Out of the -- that we're talking about the new products that are gonna impact.
The outlook for people and for an earnings over the next five was here you know for Eli -- for example which is a company really believe in right now we should mention that you really know from what you speak because you worked at a drug company to -- yes for many years so -- what do the other side to cover -- I trust your opinion.
Eli -- of course is a huge foreign drug company but what is it about this company -- -- -- -- worried about that so called boring story the patent cliff.
Well it's two things really what's the story -- the expectations and stock with Eli Lilly expectations still have room to grow.
There are pipeline -- assets that really were under under appreciated before this year.
Now we're starting to think about -- alzheimer's -- -- thinking about their cancer program are thinking about there -- traders program in diabetes program.
So there are lots of it will be interesting drugs but the market is still not sure about and that's what makes a good investment let's flip over to some American names -- Merck for example we have the CEO Merck on from Davos.
He was very very confident easily you know -- every CEO that I have ever spoken to for Pfizer Merck is -- It's a fact of life that the patents will expire at some point don't worry we're working on a pipeline that is -- a pipeline that could outperform.
Some of their best -- I -- your interview is excellent and I think Ken Frazier really displayed.
A lot of sincerity in his passion about Merck and and taking -- to another level of innovation not why we like it.
Right now I think that we're and a place -- we're gonna hear more good news about osteoporosis treatments for Merck.
About alzheimer's treatments for Merck -- cancer treatments for Merck just to name a few.
And so they have gotten through a more recent on -- generic threat for Cingular there respiratory product.
And they are looking forward they knew was kind they -- as it was kind for fired ten years before.
The -- you know before we were all focused on what their earnings number would be what -- the average number of drugs in the pipeline that you like to see because forest -- a picky like and they have nine and some would say that's a bit low for a pipeline.
It's really not about the number of drugs is obviously about the potential.
You may have a -- has six billion dollar potential or 600 million dollar potential.
And it really what's the what are you trying to feed what's the seals based at that they're losing from the patent expiration.
When they try and treat in the future so we consider all of those things is for there's not a pure asset count actually in the old days industries to put up.
Look how many trucks we -- development and when we -- we don't you don't -- you have to look more critically at at the value as -- -- -- and Allergan chart which is another one of your picks the broader picture health care stocks outperformed the market last year will -- in this year with surprise you think we think -- well I mean what we've done some work.
And looking at the innovation cycle as we collect and essentially what -- the novel products that are coming out we were -- -- right.
-- now on the beginning of what we think is a five to ten year improvement.
In the pipeline output and so that's where that's where you make money on -- -- we found far away.
-- no matter how many good things you might have to say about their dividends or their capital.
Do they have novel products that we'll tell you at the Verizon looks good it's about the business folks and this is the type of person that you want assessing these companies because she's been on the inside thank you so much -- -- -- Catherine Arnold Credit Suisse managing director comeback promise from great -- as the -- inches.
