BUSINESS
CHEMICAL STOCKS BEAT THE REST SHARES of chemical firms outdid those of drug and biotech companies in the fourth quarter WILLIAM J. STORCK, C&EN NORTHEAST NEWS BUREAU
THE FOURTH QUARTER was good for chemical company stocks but less beneficial to the share prices of major pharmaceutical companies and biotechnology firms. By the end of the quarter, C&EN's chemical stock index was 10.0% higher, at 235.8 (all C8cEN indexes are 1992 = 100), than its third-quarter close. This is better than the growth in C8tEN's pharmaceutical index, which fell 0.1% to 393.4, and its biopharmaceutical index, which was up 3.1% to 567.6. The chemical index was the only one of the three C8cEN measures to outperform the stock market's broader indexes. The Dow Jones industrial average gained 6.7% in the quarter, while the NASDAQ was up 6.9%. The same pattern holds when the C8cEN indexes are compared with the end of 2005. The chemical index was up 20.3% over where it had been at the end of the previous year, and the pharmaceutical index rose 13.2%. The biopharmaceutical index finished the year just two-tenths of a point higher than the 567.4 posted on the final trading day of 2005. Meanwhile, the Dow Jones was up 16.3% over 2005's close, and the NASDAQ rose 9.5%. For the chemical companies that make up C8cEN's index, the gains were widespread. Comparing the end-of-the-year stock price for individual firms with those of the third-quarter close, just two companies saw declines. PPG Industries was down 3.5% to close the year at $64.21 per share, and Georgia Gulf closed at $19.31 per
share, down 28.7%. Georgia Gulf's decline came after the company reported an 8.6% earnings decrease in the fourth quarter; Chief Executive Officer Edward A. Schmitt said the company expects continued softening in demand. The largest gain among the 25 chemical companies that make up the index was at
fertilizer producer Terra Industries, whose stock price jumped 58.4% from the end of the third quarter and more than doubled, increasing 113.9%, from the end of 2005 to $11.98 per share. Although not quite in Terra's league, fellow fertilizer maker Mosaic also did well, posting a 29.8% quarterly rise and a 46.0% annual increase to $21.36 per share. One reason for the increases, according to securities analysts, is the expectation that farmers will take advantage of the high price of corn by increasing the acres they plant, and fertilize, this year. After Terra, the largest year-to-year chemical company gain was at Albemarle. Its share price increased 87.2% over yearend 2005 to $71.80. The company's quarter-to-quarter gain was also pretty good, at 33.1%.
CHEMICAL STOCKS Almost half the year-to-year Index growth happened in the fourth quarter PRICE/ CHANGE CHANGE FROM FOURTH-QUARTER STOCK PRICE3 THIRD-QUARTER FROM 2005 EARNINGS HIGH LOW CLOSE CLOSE RATIOb CLOSE
Air Products Albemarle Arch Chemicals Cabot Celanese
7.4% 33.1 19.2 16.5 44.1
18.7% 87.2 11.4 21.7 35.4
$72.45 73.30 34.26 43.57 25.88
$66.69 54.01 2745 36.79 17.59
$70.28 71.80 33.31 43.57 25.88
20.8 22.0 20.3 27.4 11.7
Chemtura Cytec Industries Dow Chemical DuPont Eastman Chemical
9.76 59.01 41.45 49.47 90.02
8.37 52.26 38.46 42.72 54.20
9.63 56.51 39.94 48.71 59.31
11.0 2.1 0.1 14.4 10.1
-24.2 18.6 -8.9 14.6 15.0
21.9 17.0 9.5 19.0 12.1
Ferro FMC Corp. H.B. Fuller Georgia Gulf Hercules
21.56 77.15 27.07 28.54 19.52
17.41 64.55 22.95 18.65 15.73
20.69 76.55 25.82 19.31 19.31
16.0 20.4 12.4 -28.7 23.8
10.3 44.0 -19.5 -36.5 70.9
36.9 14.4 17.9 5.4 17.7
Huntsman Corp. Lubrizol Mosaic Nalco PPG Industries
18.99 50.25 22.70 20.93 69.28
17.12 45.00 16.46 18.47 64.15
18.97 50.13 21.36 20.46 64.21
2.5 9.7 29.8 11.4 -3.5
10.2 15.4 46.0 15.5 10.9
13.8 17.3 62.8 30.5 11.7
Praxair Rohm and Haas Sigma-Aldnch Stepan Terra Industries
63.54 53.86 78.82 31.67 12.21
58.05 46.71 74.32 28.41 7.95
59.33 51.12 77.72 31.67 11.98
1.0 8.9 2.8 7.6 58.4
12.0 5.6 22.8 17.8 113.9
21.7 14.8 19.2 24.0 def
C&EN chemical stock indexc (1992 = 100) Dow Jones industrial average
237.9
214.3
235.8
10.0%
20.3%
12510.6
11670.4
12463.2
6.7%
16.3%
a Adjusted for stock splits, b As of Dec. 29. 2006. c Based on the average stock price for the 25 companies listed. def = deficit in previous four quarters.
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JANUARY 15. 2007
DRUG AND BIOTECH STOCKS Drug stocks showed lackluster growth in quarter; biotechs did better FOURTH-QUARTER STOCK PRICE3 HIGH
Nicole Daniel, Albemarle's head of investor relations, attributes the healthy stock price rise in part to greatly improved earnings—they were up 71.9% for the first nine months of the year. Another positive was Albemarle's 2004 acquisition of Akzo Nobel's refinery catalyst business. Investors took a wait-and-see attitude toward the deal during 2005, she indicates. But with good 2006 results, they got back on board. How did the big guys do? Stock performance at Dow Chemical and DuPont took divergent roads. Industry leader Dow's stock price rose just 0.1% from the third quarter and was off 8.9% year-to-year to $39.94 per share. Dow's stock price certainly was not helped by rumors, late in the year, that the company would buy Georgia Gulf. DuPont, on the other hand, saw its stock price rise 14.4% from the end of the third quarter and 14.6% from the end of 2005 to close 2006 at $48.71 per share. STOCK PRICE GROWTH was rather lack luster among the nine companies making up C8cEN's pharmaceutical index, although an exception was Schering-Plough. The company turned in the largest quarter-toquarter increase of the pharma group, with 7.0% growth to $23.64 per share as its financial turnaround continues and investors take more interest in the firm. For the year, Schering-Plough's stock price was up 13.4%. The two big drug companies with quarter-to-quarter stock price declines were Eli Lilly 8c Co. and Pfizer. Both companies had problems. In Pfizer's case it was with a new cholesterol drug, torcetrapib. Clinical trials were halted after a safety monitoring board found a significant increase in mortality rates among patients taking a combination of torcetrapib and Lipitor, Pfizer's flagship cholesterol agent. In Lilly's case, the problem was an agreement to buy biotech firm Icos. Often, investors just don't like acquisitions until they are shown to work, as in Albemarle's case with the refinery catalyst business.
LOW
MAJOR PHARMACEUTICAL COMPANIES $49.00 $45.65 Abbott Baxter 47.21 43.56 Bristol-Myers Squibb 26.32 24.30 Eli Lilly & Co. 58.25 51.35 Johnson & Johnson 69.10 64.58 46.21 41.42 Merck Pfizer 2841 24.80 Schering-Plough 23.90 21.25
CHANGE FROM CHANGE PRICE/ THIRD-QUARTER FROM 2005 EARNINGS
CLOSE
CLOSE
$48.71 46.39 26.32 52.10 66.02 43.60 25.90 23.64
0.3% 2.0 5J5 -86 17 41 -81_ 7.0
CLOSE
RATIOb
23.5% 23.2 145 -19 09 371 1L1 134
19.3 29.0 21.9 16.6 18.1 15.7 12.0 375
16.7
53.19
47.59
50.92
02
105
405.9
383.2
393.4
"
-0.1%
13.2%
12510.6
11670.4
12463.2
"
6.7%
16.3%
BIOPHARMACEUTICAL AND DRUG DISCOVERY COMPARES $76.50 $68.31 $68.31 " Amgen Biogen Idee 52.26 43.91 49.19 15.52 13.39 13.99 Celera Genomics Cephalon 78.15 62.77 7041 Cytogen 3.23 2.27 2.33 86.28 79.82 81.13 Genentech Genzyme 70.07 60.19 61.58 6975 62.03 64.93 Gilead Sciences
-4.5% 101 05 140 -03 -1.9 -81_ -J56
-10.0% 8i3 276 83 450 -12.3 -13.0 23,5
Icos
33.85
24.90
3379
34.8
22.3
153.6
Medlmmune Millennium Pharmaceuticals PDLBiopharma d Vertex Pharmaceuticals Xoma C&EN biopharmaceutical indexe (1992 = 100) NASDAQ
3343 11.97
28.84 9.83
32.37 10.90
106 9.7
-16 12.4
def def
23.23 45.12 244 604.7
18.89 33.32 1.88 544.9
20.14 3742 2.20 567.6
49 1L2 164 3.1%
-291 3^2 375 0.0%
41.1 def def
2465.0
2237.6
2415.29
6.9%
93%
Wyeth C&EN pharmaceutical indexc (1992 = 100) Dow Jones industrial average
" "
~ 18.2 224 def 14.2 def 41.6 237 273
a Adjusted for stock splits, b As of Dec. 29. 2006. c Based on the average stock price for the nine drug companies listed, d Formerly Protein Design Laboratories, e Based on the average stock price for the 14 biopharmaceutical companies listed, def = deficit in previous four quarters.
The result was that Pfizer's stock price fell 8.7% from the third quarter to close the year at $25.90 per share, although it was still 11.1% ahead of where it had been at the end of 2005. Lilly's share price declined 8.696 from the end of previous quarter to $52.10. Its closing price was down 7.9% year-to-year. If there was one big sigh of relief, it could have come from investors in Merck. As a result of its record, thus far, in winning lawsuits over the withdrawn arthritis drug Vioxx, the company's stock price increased 4.1% from the end of September and 37.1% from the end of 2005 to $43.60 per share. Only a handful of the thousands of suits have been decided, however. Among the biotech companies, Lilly's $32.oo-per-share offer for Icos, ultimately raised to $34.00, was the smaller compaWWW.CEN-0NLINE.ORG
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JANUARY 15. 2007
ny's gain. Icos' stock price jumped 34.8% in the quarter, although it was up just 22.3% from the end of 2005, to $33.79 per share. The three largest companies among the group of 14 firms making up C8cEN's biotech index did not show up well in the survey. The largest biotech company, Amgen, saw its stock price decline 4.5% from the end of the third quarter to $68.31 per share, and it was off 10.0% from the end of 2005. The number two company, Genentech, which traditionally seems to be more esteemed by Wall Street than Amgen, saw its share price fall 1.9% from the end of September and 12.3% from the last trading day of a year earlier. And Genzyme's stock declined 8.7% from the third quarter and 13.0% from the previous fourth quarter to $61.58 per share. •
