business saw its stock price fall 14.7% to end the quarter at $114 per share. This occurred despite a 16% gain in earnings in the fourth quarter of last year and forecasts of more earnings increases. But Dow Chemical, which is in the process of acquiring Union Carbide, seems to get little respect on Wall Street, even with analysts' projections that the acquisition, since it is wholly a stock deal, will not be dilutive to earnings. One analyst tells C&EN that no matter formance for the quarter,rising26.3% to how much he recommends Dow stock, he just can't seem to get anybody to listen. end the period at $43%. Union Carbide's stock price, which is On the down side, Dow Chemical, the second largest firm on the list and the moving almost in lockstep with Dow's, one with the most weight on the index, fell 12.6% to $5815/i6.
Chemical Stocks Suffer, But Show Late Rebound First-quarter stock prices were down, drug stocks also fell, biotechs rose William J. Storck C&EN Northeast News Bureau Ann M. Thayer C&EN Houston
T
he April 11-14 stock market debacle in which the Dow Jones industrial average fell 8.7% was an encapsulation of the volatility of the markets for chemical, drug, and biotech stocks for the previous month. In fact, except for biotech stocks, which ended March higher than they had been at the beginning of the year, the entire first quarter was unkind to chemical-related securities. C&EN's latest survey of the stock prices of 25 major chemical companies shows an overall drop for the period. And for every company showing a higher stock price at the end of the quarter, four were down from their levels at the end of 1999. The result was that C&EN's chemical stock index fell 8.0% for the quarter to 151 (1992 = 100). This compares with a 5.0% drop for the Dow Jones industrial average. However, in the last couple of weeks of the quarter, chemical stocks started to gain favor as investors began to cut their positions in technology stocks, including biotech, and put their money into socalled value stocks—companies with low price-earnings ratios that have good growth potential. So despite ending the quarter some 8% below the high for the three-month period, the C&EN index was up 16.4% from the low, which was posted on March 14. And the Dow was up just 11.5% from its quarterly low, which occurred on March 7, one week before the low for the chemical index. Among individual companies, the best stock growth for the quarter was at one of the oldest and seemingly most basic on the list, carbon black producer Cabot Corp., up 49.7% from the end of 1999 to $30% per share. Its position in carbon black and silicas feeds into electronic chemicals, and security analysts now see it as a stock to buy. Cambrex, with its mix of chemical intermediates for the drug and biotech industries, also showed good stock per-
Chemical stocks lost ground in first quarter _
First-quarter stock price Low
Close
$24 3 /i6
$28 7 /i6
Change Price/ Dividend __ from 1999 earnings yield, ratio* % of price close -15.0%
16
2.5%
Albemarle
20%
14 /i6
20%
8.1
11
2.1
Arch Chemicals
20V4
16
201/4
-3.3
11
4.0
Cabot
30V2
19%
30V2
49.7
22
1.4
Cambrex
43V 2
31V2
43V2
26.3
29
0.3
CK Witco
13 15 /i6
2.0
30%
-24.3 33.2
def
30%
95/l6 22V2
10V8
Cytec Industries
-14.7
19
3.1
Air Products
$36
Dow Chemical
140
9
95V2
114
12
—
Du Pont
71 13 /l6
615/16
52%
-19.7
7
2.6
Eastman Chemical
50 9 /i6
34 3 /i6
45V2
-4.6
76
3.9
-16.1
5
-1.4
9
315/16
Ethyl Corp FMC
211/16
59%
46 11 /i6
2 15 /l6 56 1 / 2
— —
H. B. Fuller
68V2
35 13 /i6
39 15 /i6
-28.6
12
2.1
Georgia Gulf
29 15 /i6
19 1 / 4
26
-14.6
25
1.2
W.R. Grace
14 15 /i6
91/2
12 11 /i6
-10.2
7
5
—
Great Lakes Chemical
39%
27 /i6
34
-11.0
14
Hercules
273/4
14 9 /i6
15 15 /i6
-42.8
10
0.9 6.7 2.2
IMC Global
18 3 / 4
12%
14 11 /i6
-10.3
def
Lubrizol
33V2
28 13 /i6
-6.7
13
3.6
NL Industries
16 5 /i6
23% 13 11 /i6
13 11 /i6
-9.1
4
4.6
Praxair
54 1 / 2
31 13 /i6
41%
-17.3
15
1.5
Rohm and Haas
46%
34 7 /i6
44%
9.7
36
1.7
Solutia
17 3 /i6
11%
13%
-13.4
7
0.3
Stepen
23 3 /i6
19 11 /i6
21 11 /i6
-7.2
10
3.0
Union Carbide
67%
45 11 /i6
58 5 /i6
-12.6
27
1.5
C&EN index c Dow Jones industrial average
164
130
151
-8.0%
11723
9793
10922
-5.0%
— —
— —
a Adjusted for all stock splits, b As of March 31. Includes extraordinary and nonrecurring items. c. Based on average stock value for previous 25 companies, def = net loss in past 12 months.
APRIL 24,2000 C&EN
27
business Industry leader DuPont also had its troubles during the quarter. Its price fell 19.7% to $52%. Of the 25 companies on the list,fivehit their quarterly highs on the last day of March and four more were within 10% of their highest stock prices in the quarter. Like chemical company stocks, and along with the broader Dow Jones indus trial average, a group of 10 U.S. drug pro ducers saw their stocks fall in the first quarter. The average drop from the end of 1999, as shown by C&EN's pharma ceutical index, was just 1.7%. However, that doesn't reflect individual company stock performance. For example, Abbott Laboratories saw its share price fall 3.1% during the quar ter. Eli Lilly, Merck, and Bristol-Myers Squibb had somewhat larger declines, and Johnson & Johnson and ScheringPlough had double-digit drops. In sharp contrast, merger dealings boosted War ner-Lambert and American Home Prod ucts (ΑΗΡ) stock. But Pfizer, which pre vailed over ΑΗΡ in its takeover bid for Warner-Lambert, saw its share price fall. While more traditional, old-line busi nesses such as pharmaceuticals and chemicals took a slight beating in the stock market, the action occurred in tech nology stocks. These stocks—which in clude those of biotechnology, genomics, and small drug discovery firms—typically trade on the National Association of Securi ties Dealers Automated Quotations (NAS DAQ) exchange. The NASDAQ index rose 12.4% in the first quarter of this year. Stocks of 15 representative biophar maceutical and drug discovery firms rose a combined 15.9%. The exception was Biogen, with a drop of 17.3%, due to recent changes in the stock market. Still, the news is not where stocks end ed the quarter, but where they have been and are going. Biotechnology has been a very hot sector, fueled largely by the promise that the human genome will soon be sequenced. Biotech stock prices took off dramatically in late 1999 and con tinued rising in 2000. C&EN's biophar maceutical stock index ended 1999 at 460 (1992 = 100). By March 6, it hit a high of 861, but ended the quarter down at 533. March and April have been highly volatile periods. In mid-March, a state ment by President Bill Clinton and Brit ish Prime Minister Tony Blair on the availability of genomic data initiated a dramatic sell-off of biotech stocks (C&EN, March 20, page 10). Investors continued to pull their mon ey out of technology stocks, including 2 8 APRIL 24,2000 C&EN
Drug stocks fell, while biotech stocks took a wild ride First-quarter stock price" 2 L High Low Close
d ,£ϊ?58!α Ï ' S ' . D îlyield, ,5 n d from 1999 Jearnings close ratio" % of price
MAJOR PHARMACEUTICAL COMPANIES
Abbott Laboratories $3515/ie American Home Products 551/2 Baxter International 679/ie Bristol-Myers Squibb 68V2 Eli Lilly 711/ie Johnson & Johnson Merck Pfizer Schering-Plough Warner-Lambert
961/2 78 13 /i 6 37% 48 9913/ie
C&EN pharmaceutical 440 index0 (1992 = 100) Dow Jones industrial 11723 average
$29% 39% 5113/ie 42% 54%
$353/i6 5313/ie 62 11 /i 6 585/ie 62%
67 53% 307/ie 309/ie 79%
703/i6 621/e 369/ie 36% 97 5 /i 6
-3.1% 37.1 -0.2 -9.2 -5.8 -24.7 -7.5 -12.7 -13.3 18.8
22 def 22 28 25
2.2% 17 sd 1.7 1.7
23 25 45 26 49
1.6 1.9 1.0 1.4 1.0
337
403
-1.7%
—
—
9796
10922
-5.0%
—
—
BIOPHARMACEUTICAL AND DRUG DISCOVERY COMPANIES Amgen $7411/i6 $521/4 $61% 2.2% Biogen 119% 69% 69% -17.3 Cephalon 725/ie 32% 371/2 8.5 Chiron 671/2 397/ie 49% 17.7 Cytogen 19% 2% 811/is 234.9
60 50 def 58 495
nd nd nd nd nd
Genentech Genzyme Gilead Sciences Icos Immunex
234% 61% 82% 5615/i6 82 2 % 2
122% 40% 45 28% 29 2 % 2
152 50% 63% 36% 637/ie
13.0 11.4 17.1 23.5 73.8
def 27 def def 793
nd nd nd nd nd
Medlmmune Pharmacopeia Protein Design Labs Vertex Pharmaceuticals Xoma
222% 97% 3271/4 88 1413/i6
1297/i6 22% 59 1 % 2 33% 213/ie
174% 49 79% 46 13 /i 6 7%
5.0 116.6 13.6 33.8 158.3
166 288 def def def
nd nd nd nd nd
419
533
15.9%
—
—
3727
4573
12.4%
—
—
C&EN biopharmaceutical 861 index* (1992 = 100) NASDAQ6 index 5049 a Adjusted for all stock splits, b As of March 31. Includes extraordinary and nonrecurring items, c Based on average stock value for previous 10 companies, d Based on average stock value of 15 preceding companies, e National Association of Securities Dealers Automated Quotations. def = net loss in past 12 months, nd = no dividend, sd = stock divi dend paid.
those of computing, Internet, and biotech Technology stocks had become inflated firms, in early April, following a verdict in price as investors poured money into that went against Microsoft in its antitrust that market sector. It only took a few lawsuit. After a few bruising days for NAS events to cause a shift to other invest DAQ-traded shares, Clinton clarified his ments. Developments in the past quarter statement on gene discoveries, and bio confirm two things—that money will shift tech shares recovered many of their loss in and out of markets as investors' moods es, only to fall again in this month's turmoil. change and that single events can cause The stock volatility was expected. large mood swings.**!
