Buy BigFarma shares!

Adult games: the most profitable shares of pharmaceutical companies
Evgenia Lukyanchuk, "Weekly Pharmacy" www.apteka.uaThe pharmaceutical industry continues to be one of the most promising and profitable sectors of the global economy.

Despite the existing difficulties — increasing regulatory pressure in many countries and a noticeable lack of innovative drugs in product portfolios — the pharmaceutical business continues to develop actively. Thus, the shares of Big Pharma players are always popular with investors who consider such an investment as one of the reliable ways to get a stable income and increase the cost of capital. The aging of the population in many developed countries and the increase in global consumption of medicines, especially in the field of neurophysiology, will contribute to the growth of shareholder returns in the long term. This publication will review the 8 largest pharmaceutical companies with the highest dividend yield.

The demand for pharmaceutical products has always been the basis for the stability of manufacturers as such. Drug costs continue to rise. Thus, according to the forecast published by the analytical company "IMS Health", by 2015 they will reach almost 1.1 billion US dollars. A significant increase in sales of drugs used for arthritis, middle-aged depression, asthma, attention deficit/hyperactivity disorder, etc. is predicted.

The lion's share of the profits received by pharmaceutical companies, the management of such invests in the development of R & D, and also directs to the payment of dividends to shareholders. Thus, the analysis of the stability of the volume of dividends paid by companies is one of the key aspects that investors pay attention to when making their choice in favor of one or another of them. In addition, it is necessary to take into account other factors: the dynamics of changes in the volume of sales of innovative medicines and the number of lawsuits brought by consumers regarding the company's products.

The largest players of Big Pharma mostly consistently pay dividends to shareholders. However, according to the indicator of dividend yield, there is a heterogeneity among pharmaceutical companies (table).

Financial indicators of 8 pharmaceutical companies with the highest dividend yield as of 07/19/2011The company

AstraZeneca is the leader in terms of dividend yield. At the same time, it is one of the smallest in this list in terms of market capitalization. The basis of the company's product portfolio consists of prescription drugs for the treatment of common diseases, the most sold of which are: Crestor™ / Crestor (calcium rosuvastatin) — to control cholesterol levels in the blood; Prilosec ^® / Prilosec ^® (omeprazole) — for the treatment of peptic ulcer; Nexium^® / Nexium ^® (esomeprazole) — for heartburn; Rhinocort (budesonide), Symbicort (budesonide + formoterol) — for asthma therapy. In addition, AstraZeneca produces dental implants and medical devices.

The optimistic financial results of the company in the first quarter of 2011 led to an increase in the value of shares, but only for a short period. Now this indicator has returned to the average value. The ratio of AstraZeneca's market capitalization to its annual profit is the lowest among the companies represented in this list, which is due to the fact that the last 2 years the payment of dividends has been carried out irregularly.

The history of the English pharmaceutical company "GlaxoSmithKline" has more than 100 years. Most of the medicines marketed by it are prescription. The best—selling GlaxoSmithKline drugs: Advair^® (salmeterol +fluticasone) — for the treatment of asthma; Augmentin™/Augmentin™ (amoxicillin + clavulanic acid) — for the treatment of respiratory infections; Levitra^® /Levitra™ (vardenafil) — for the treatment of erectile dysfunction; Valtrex^® /Valtrex^® (valacyclovir) - from herpes; health products — Sensodyne toothpaste; Nicorette and Nicoderm.

Currently, a large number of the company's drugs are in the final stages of clinical trials, but along with this, the patent protection period for many of its drugs is expected to expire in 2012. An important achievement of GlaxoSmithKline is the growth of its sales in emerging markets, whose revenue in 2010 amounted to 3.6 billion pounds ($5.8 billion). In addition, the company has achieved significant success in the field of vaccine development. Thus, in 2010, the volume of sales of vaccines in physical terms amounted to about 2.5 billion doses.

At the same time, the dividend yield remains at a fairly high level, despite the not very strong balance of payments, which is due to the relatively high ratio of external debt to equity of the company and the low ratio of interest on loans.

It should be noted that over the past 3 months, GlaxoSmithKline shares have increased by 12.2%, which contributed to an increase in the ratio of the company's market capitalization to its annual profit to 37.8. In addition, high dividend yields are not characterized by stability in the long term.

In 2011 and the next few years, Bristol-Myers Squibb Company expects an increase in competitive pressure from generic versions of drugs whose patent protection terms are expiring (for example, Plavix/Plavix (clopidogrel). However, a sufficient amount of available funds, a strong balance sheet and a large potential of the company's product portfolio are expected to allow it to compensate for losses associated with the expiration of patent protection of certain medicines. However, the upcoming decline in income may cause caution on the part of investors.

Nevertheless, Bristol-Myers Squibb Company continues to remain financially stable and offers its shareholders a fairly high level of dividend yield.

Merck &Co. markets a large list of prescription drugs. Its product portfolio includes: Singulair^® /Singular^® (montelukast) — for the treatment of asthma; Remicade™ /Remicade™ (infliximab) — for the treatment of arthritis; Gardasil^® — vaccine for the prevention of infection with human papillomavirus; Propecia/Propecia (finasteride) — from baldness. The acquisition of Schering-Plough gave Merck &Co. access to a line of brands belonging to the segment of health products: Dr. Scholl's, Lotrimin and Coppertone.

The value of Merck &Co. shares continues to vary significantly. This may be due to the fact that the company has not yet fully recovered from the recent global economic crisis. Today, the level of its dividend yield is quite high, so investing in Merck &Co. shares can be profitable in the long term.

Pfizer produces a wide range of drugs, the best-selling of them are: Lipitor™/Lipitor™/ Liprimar™ (atorvastatin) and Viagra™/Viagra (sildenafil). The company's product portfolio also includes a large list of health products, for example: Advil^®/Advil (ibuprofen) — to eliminate pain; Centrum^® multivitamins. The decision made by the company in 2009 to reduce dividends was widely publicized in investor circles, which was due to the need to obtain additional free funds for the acquisition of Wyeth. Another source of possible risk may be the fact that in 2011 the term of patent protection of the Lipitor blockbuster will expire, and it will face competition from generics. Along with this, Pfizer is actively modernizing its business. Thus, a reduction in expenses for the R&D segment, job cuts were announced, and a multibillion-dollar program for repurchasing the company's shares was put into effect. All these actions are designed to improve the health of a huge corporation.

The company has a moderately strong balance sheet with an average ratio of the company's market capitalization to its annual profit and a ratio of interest on loans.

The Swiss pharmaceutical company Novartis produces a wide range of products: over-the-counter drugs; health products; animal products. One of the most well-known medicines of this manufacturer are Ritalin^® (methylphenidate hydrochloride) and those used for hypertension and epilepsy. In addition, this company markets brands such as Ex-lax, Maalox, No-Doz and Theraflu.

Recently, for $ 50 billion, Novartis acquired the ophthalmology company Alcon Inc., which allowed it to expand its presence in the segment of drugs for the treatment of visual organ pathology.

Novartis has been demonstrating stable financial results for a long time. Thus, the company's balance sheet shows a low level of debt in relation to the amount of equity, as well as high rates of return on dividends. In addition, it should be noted that Novartis has a wide product portfolio. However, the terms of patent protection of some of the company's best-selling drugs expire in the near future and this carries some risk in the short term, but at the same time gives investors the opportunity to make successful investments in the expectation of a stable income in the future.

Over the past 3 months, the increase in the value of Novartis shares has reached 12.5%. At the same time, the ratio of the company's market capitalization to its annual profit is at the level of 14.6. The yield on dividends is characterized by stable growth, but now is not the best time to invest in the company's shares, since their value is quite high.

Despite the fact that the company's product portfolio does not have many bestsellers, the large volume of sales of Humira™/Humira™ (adalimumab) and other leading medicines, along with several previous acquisitions, gave Abbott Laboratories the opportunity to diversify its business and thus increase the company's capitalization. At the same time, a detailed examination of its balance sheet indicates the presence of some difficulties, for example, significant debt.

It is difficult to achieve significant results by repeating the strategy that is used by most players in the pharmaceutical market. This is confirmed by the activities of Johnson & Johnson, which has somewhat slowed down the pace of its development over the past 2 years. Last but not least, this was due to several cases of recall from the market of products that did not pass quality control. Nevertheless, despite the temporary difficulties, the company continued to diversify its business, which allowed it to provide a large income and, thus, a strong financial position.

Johnson & Johnson produces a large number of medicines, among which are: Remicade™ / Remicade™ (infliximab) and Simponi™ (golimumab) — for the treatment of arthritis. The health products that the company produces — including such trademarks as Clean&Clear, Neutrogena, Aveeno, Neosporin, Band-Aid, Listerine, Lubiderm, Visine, Tylenol, Zyrtec — make up a significant part of its product portfolio along with medical products and drugs.

"Johnson & Johnson" conducts active M&A activities. Thus, an important event in the company's work was the achievement of an agreement on the takeover of Synthes for $ 21 billion. This transaction will allow Johnson & Johnson to strengthen its market position in the segment of orthopedic products. In addition, the company's management continues to invest heavily in the development of R&D, since it relies mainly on revenues from sales of original drugs.

Now the value of Johnson & Johnson shares is at its highest level in the last 52 weeks. At the same time, the dividends paid by the company are among the highest among the companies represented in this list. In addition, the ratio of the company's market capitalization to its annual profit is at 15.2.

Thus, the large volume of Johnson & Johnson dividends and their growth over the past decades allows us to count on a stable income from the company's shares in the long term, despite the relatively low level of dividend yield.

EXPLANATIONS FOR "DUMMIES":A dividend is a part of the company's profit, which is distributed among its shareholders on the basis of a decision of the board of directors.
Usually, the amount of dividends is determined based on 1 share. It can also be specified as a percentage relative to the current market value of the shares, called the dividend yield or dividend yield.
Dividend yield (from the English — dividend yield) is the ratio of the amount of dividends to the current market value of the company's shares, which is expressed as a percentage (per annum) in relation to investment costs (current market or nominal value of shares). In the absence of an increase in capital, the dividend yield is the return on investment for the shares.
The dividend yield is determined as follows:
Dividend yield = (annual dividend per share/share price)•100%
The ratio of the company's market capitalization to its annual profit (English — PE ratio, P/E, earnings multiple) is one of the main indicators used in the comparative assessment of the investment attractiveness of joint-stock companies. Its lower value indicates that the profit of a certain company is estimated in the market lower than the profit of the one for which the coefficient is higher.

Portal "Eternal youth" http://vechnayamolodost.ru20.07.2011