BUSINESS
CHEMICAL STOCKS PERFORM WELL
Downstream companies seemed to have stock price increases that were smaller than average during the quarter as investors wor ried about the firms' ability to pass along cost increases. For instance, shares of Arch Chemicals were up just 1.0%; Cytec In dustries, 5%; H.B. Fuller, 4.1%; Hercules, 4.2%; and Rohm and Haas, 2.9%. Donald Carson, research analyst for chemicals at Merrill Lynch, sees a contin ued upside for commodity chemical pro ducers. 'With the strong second-half 2004 share price performance for most com modity chemical producers, many in vestors are wondering whether the pend-
Pharmaceuticals and biotech shares, while up, lagged broader indexes in the fourth quarter WILLIAM J. STORCK, C&EN NORTHEAST NEWS BUREAU
I
NVESTORS LIKED CHEMICAL STOCKS
in the fourth quarter. C&ENPs index of U.S. chemical stocks continued to gain in the fourth quarter, as it had for most of the year. Pharmaceutical and biotech nology stockindexes, however, while up from the end ofthe third quarter, continued to lag the major market indexes such as the Dow Jones industrial average and the NASDAQ. C&EN's index of 25 chemical compa ny stocks ended the fourth quarter at 203.5 (all C&EN indexes are 1992 = 100), up 10.1% from the end of the third quarter. The index of nine major pharmaceutical stocks rose 4.4% to 358.5, while the index of 15 biotechnology and drug discovery companies increased 4.0% to 467.8. Meanwhile, the Dow Jones industrial average rose 7.0% in the quarter and the NASDAQ was up 14.7%. For the full year, chemicals did even bet ter. The end-of-the-year index for chemi cal companies was 21.4% ahead of the last trading day in 2003, while the pharma ceutical index fell 5 3 % and the biotech in dex rose 8.0%. The Dowjones was up just 3.1% for the year while the NASDAQ in creased 8.6%. In the fourth quarter, the breadth ofstock increases among the companies was much greater than it has been for some time. For instance, in the third quarter, just 13 of the 25 companies saw their share prices increase over the three-month period. In the fourth quarter, all but one—FMC Corp.—had share pricerises.And FMC's stock price was down just 0.6%. For the full year, only three companies— Ferro, H.B. Fuller and Stepan—had de clines in their stock prices. The stock price for industry leader Dow Chemical rose 9.6% for the quarter, to $49.51 per share, and was up 19.1% for the full year. Number-two-ranked DuPont, on the other hand, had a 14.6% rise for the quarter, to $49.05 per share, but only a 6.9% increase for the full year. The improving agricultural economy helped a couple of companies in the quar ter. Monsanto's stock price jumped 52.5% to $55.55 per share. And shares of Mosaic, the new combination of IMC Global and 24
C&EN
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Cargill Crop Nutrition, rose 8.8% from its start of trading on Oct. 25 to finish the year at $16.32 per share. Mosaic replaces IMC Global in the C&EN index.
CHEMICAL STOCKS Many chemical firms saw good gains in share prices for quarter and year CHANGE FROM
FOURTH-QUARTER STOCK PRICE 3 HIGH
Air Products Albemarle Arch Chemicals Cabot Cambrex
LOW
THIRD-
CLOSE
$58.87 $52.31 40.32 33.18 30.57 26.91 39.27 33.15 27.10 21.70
$57.97 38.71 28.78 38.68 27.10
CHANGE
PRICE/
FROM 2003 EARNINGS
QUARTER CLOSE
CLOSE
6.6% 10.3 1.0 0.3 23.5
9.7% 29.2 12.2 21.5 7.3
RATIOb
22 21 21 19 29
Crompton Cytec Industries Dow Chemical DuPont Eastman Chemical
11.80 51.73 51.02 49.15 57.97
8.94 44.92 42.57 41.40 45.13
11.80 51.42 49.51 49.05 57.73
24.3 5.0 9.6 14.6 21.4
64.6 33.9 19.1 6.9 46.0
148 20 17 21 26
Engelhard Ferro FMC Corp. H.B. Fuller Georgia Gulf
30.78 23.45 50.00 37.32 57.65
26.96 20.42 43.85 25.92 42.97
30.67 23.19 48.30 28.51 49.80
8.2 6.3 -0.6 4.1 11.7
2.4 -14.8 41.5 -4.1 72.4
16 na 16 21 21
W.R. Grace Great Lakes Chemical Hercules Lubrizol Monsanto
U.95 29.62 15.09 37.26 56.20
9.34 23.97 13.97 32.38 36.41
13.61 28.49 14.85 36.86 55.55
44.0 11.3 4.2 6.5 52.5
429.6 4.8 21.7 13.3 93.0
13 38 18 15 37
Mosaic0 PPG Industries Praxair Rohm and Haas Stepan
18.35 68.55 45.97 45.17 25.95
14.96 58.92 41.44 40.36 23.72
16.32 68.16 44.15 44.23 24.36
8.8 11.2 3.3 2.9 2.4
na 6.5 15.6 3.6 -5.0
na 18 22 21 41
10.1%
21.4%
7.0%
3.1%
C&EN chemical stock 178.9 205.1 203.5 indexd (1992 = 100) Dow Jones industrial average 10854.5 9750.0 10783.0 a Adjusted for stock splits, b As of Dec. 31, 2004. c Data from Oct. 25. 2004, first day stock was traded. d Based on the average stock price for the 25 companies listed, na = not available.
C&EN chemical index. 1992 = 100 220 Γ 200 180 160
High • Close Low
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BUSINESS ing peak has been fully discounted," Carson wrote in a report issued last week. "We see an additional upside in select commodity chemicals stocks such as Dow Chemical, Lyondell, and Olin." While the C&EN chemical index had a double-digit increase, the index for pharmaceutical companies was up just 4.4% for the quarter and down 53% for the full year, as many firms came under scrutiny over
drug safety concerns and other problems. Merck, which withdrew its COX-2 inhibitor Vioxx in the third quarter because of safety problems, saw its stock price continue to decline. Merck stock finished the year at $32.14 per share, down 2.6% from Sept. 30 and off30.4% fromyear-end2003. Pfizer stock also got hit with the COX2 bug. Its Celebrex and Bextra drugs came under scrutiny, and the company's stock
DRUG AND BIOTECH STOCKS Pharmaceuticals outperformed biotechs in the quarter, but lagged for the year CHANGE FROM CHANGE PRICE/ THIRDFROM 2003 EARNINGS QUARTER CLOSE RATIOb CLOSE
FOURTH-QUARTER STOCK PRICE3 HIGH LOW CLOSE
MAJOR PHARMACEUTICAL COMPANIES Abbott $46.99 $40.64 Baxter 34.59 29.68 Bristol-Myers Squibb 25.83 22.95 Eli Lilly 62.01 50.44 Johnson & Johnson 63.76 55.32 Merck Pfizer Schering-Plough Wyeth
10.1% 7.4 8.2 -5.5 12.6
$46.65 34.54 25.62 56.75 63.42
0.1% 13.2 -10.4 9.9 -9.8
20 20 17 21 21
-30.4 -23.9 20.1 0.3
11 13 77 16
34.23 31.30 21.12 42.80
26.00 24.29 16.72 36.58
32.14 26.89 20.88 42.59
360.1
321.5
358.5
4.4%
-5.3%
10854.5
9750.0
10783.0
7.0%
3.1%
BIOPHARMACEUTICALAND DRUG DISCOVERY COMPANIES Amgen $64.76 $52.70 $64.15 12.9% 55.34 Biogen Idee 67.92 66.61 8.9 Cèlera Genomics 14.48 11.07 13.75 17.6 Cephalon 51.42 45.45 50.88 6.2 Chiron 62.13 30.76 33.33 -24.6
3.8% 81.5 -1.2 5.1 -41.5
28 55 def 26 33
Cytogen Genentech Genzyme Gilead Sciences Icos
11.52 55.80 58.16 39.04 29.47
9.45 42.87 50.36 32.94 21.12
11.52 54.44 58.07 34.99 28.28
9.3 3.9 6.7 -6.4 17.1
5.9 -41.8 17.8 20.1 -31.5
def 72 35 38 def
Medlmmune Millennium Pharmaceuticals Protein Design Labs Vertex Pharmaceuticals Xoma
28.42
24.23
27.11
14.4
6.8
108
13.39 20.77 11.91 2.74
11.02 17.54 10.01 1.96
12.14 20.66 10.57 2.59
-11.2 5.5 0.7 11.6
-34.9 15.4 2.1 -60.8
def def def def
C&EN biopharmaceutical indexd (1992 = 100) 472.0 2178.3 NASDAQ
405.6 1903.0
467.8 2175.4
C&EN pharmaceutical index0 (1992 = 100) Dow Jones industrial average
a Adjusted for stock splits, b As of Dec. 31, 2004. c Based on average stock price for the nine drug companies listed, d Based on the average stock price for the 15 biopharmaceutical companies listed, def = deficit in previous four quarters.
-2.6 -12.1 9.5 13.9
C&EN biopharmaceutical index, 1992 = 100 550 ~ High Close 500 Low
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price fell 12.1% in the quarter and 23.9% for the year. Eli Lilly saw its stock decline 5.5% in the quarter to $56.75 per share, although for the full year the price was up 9.9%. Like Merck, Lilly's problems began in the third quarter when its antidepressant Prozac was linked to teen suicide, causing its stock price to fall 14.1%. The decline continued in the fourth quarter after the company is sued a warning on its attention-deficit-dis order drug Strattera. THE TWO LARGEST stock gains came at Wyeth andJohnson &Johnson, which coincidently had the two largest earnings in creases in the third quarter—16.0% and 13.6%, respectively Wyeth's stock price for the quarter rose 13.9% to $42.59 per share, although for the year it was up just 0.3%. J&J's stock price increased 12.6% for the quarter to $63.42 per share; for the year, it was down 9.8%. For the quarter, the biotech index per formed slightly below that for pharma ceuticals, rising just 4.0%. For the full year, however, it vastly outperformed the drug index,rising8.0% against the 5.3% decline for pharmaceuticals. Of the 15 biotech and drug discovery stocks that C&EN follows, 12 were high er for the quarter andfiveof these showed double-digit increases. For the full year, de spite the higher percentage increase, just nine companies saw improved stock prices. Industry leader Amgen saw its stock get off the ground and rise 12.9% to $64.15 per share in the quarter after the U.S. Dis trict Court in Massachusetts affirmed the company's erythropoietin patents. The big loser during the quarter was Chiron, which saw its stock decline 24.6% to $33.33 per share after British regulato ry officials suspended the company's li cense to manufacture Fluvirin influenza virus vaccine at its Liverpool facility, caus ing Chiron to write off the entire invento ry of the vaccine. Chiron's stock price was down 41.5% for the year. Once again, some firms with no earn ings had respectable share price gains for the quarter. Cèlera Genomics rose 17.6% to $13.75 per share, Cytogen was up 9.3% to $11.52 per share, and Protein Design Labs increased 5.5% to $20.66 per share. While the fourth quarter saw increases in all the indexes, what there was of a yearend rally stopped in the first week of the new year, with all three indexes moving lower. The biotech index was off 2.0% to 458.8, the pharmaceutical index was down 0.6% to 356.2, and the chemical index dropped 4.8% to 193.9. • HTTP://WWW.CEN-ONLINE.ORG
