BUSINESS rinated biphenyl (PCB) liabilities, its stock had plunged 58.9% to hit a low of 90 cents per share on Aug. 20. Howev er, an announcement that the company had reached a PCB litigation settlement in Anniston, Ala. (C&EN, Aug. 25, page 10), sent its stock soaring the next day, up 3 4 4 % to $4.00 per share. Solutia ended the quarter at $3.99 per share, up 83-0% from the end of the second quar ter and 9.9% from the last trading day in 2002. The largest percentage fall was W.R. Grace's 29.7% drop to $3.10 per share. However, this price was still 58.2% bet ter than its stock value at the end of 2002.
STOCKS TURN IN A MEDIOCRE QUARTER Prices were up for chemicals and biopharmaceuticals, but fell for drug firms WILLIAM J. STORCK, C&EN NORTHEAST NEWS BUREAU ANN M. THAYER, C&EN HOUSTON
T
HE T H I R D QUARTER WAS NOT AS
kind to chemical, pharmaceuti cal, and biopharmaceutical stocks as it might have been. Chemical stocks were increas ing nicely through the first two-thirds of the quarter but got hit in September by rising oil prices and investor worries about future earnings growth. Stocks of major pharmaceutical companies, beset by in creased generic competition, declined. And biopharmaceuticals showed a mod est gain, after surging in the first half of the year. Chemical stock prices showed rather modest growth by the end of the third quarter. C&EN's index of 25 major chem ical company stocks ended the quarter at 141 (1992 = 100), up just 4.0% over the second-quarter close. Compared with the end of 2002, the index increased a mere 1.4%. In contrast, the Dow Jones indus trial average grew a slower 3.2% quarterto-quarter but was up a much greater 11.2% for the nine-month period. Chemical company stocks had a good run going in the quarter until worries over the high price of oil and its effect on the industry, and the economy in general, put the brakes on what had been a decent rise. The chemical company index posted its low of 135 on the first day of trading in the quarter. By Sept. 5, it had risen 10.4% to a high of 149. It leveled off for several days and then started to sink, losing about 6% of its value between Sept. 15 and the end of the month. Despite the end-of-the-quarter de cline, most of the stocks making up the index ended the period higher than they had started. Of the 25 companies, 16 saw their stock prices grow during the quar ter. However, this is slightly fewer than the 19 that improved in the preceding three-month period. And while nine of the companies saw their stocks fall from the April-to-june period, 11 of the firms ended lower than they had been at the end of 2002. Solutia posted the largest percentage HTTP://WWW.CEN-ONLINE.ORG
increase during the quarter. But it had to suffer first. Troubled by financing woes and investor concerns about polychlo-
CHEMICAL STOCKS Most chemical companies saw only modest stock gains in the third quarter THIRD-QUARTER
CHANGE FROM
STOCK PRICE 3
SECOND-
HIGH
Air Products Albemarle Arch Cabot Cambrex
LOW
CLOSE
$48.64 $41.37 $45.10 29.11 26.38 27.45 22.86 18.73 20.80 30.60 25.30 28.51 25.20 20.11 22.70
QUARTER CLOSE
8.4% -1.9 8.9 -0.7 -1.4
CHANGE
PRICE/
FROM 2002 EARNINGS CLOSE
RATIO b
5.5% -3.5 14.0 7.4 -24.9
20 17 32 15 15
Crompton Cytec Industries Dow Chemical DuPont Eastman Chemical
7.56 38.76 35.30 45.22 36.60
5.23 34.60 30.52 39.62 31.46
5.81 36.50 32.54 40.01 33.50
-17.6 8.0 5.1 -3.9 5.8
-2.4 33.8 9.6 -5.6 -8.9
34 15 65 20 40
Ferro FMC H.B. Fuller Georgia Gulf W.R. Grace
23.50 27.46 28.80 24.28 5.52
20.75 22.94 22.45 19.52 2.57
21.36 25.20 24.27 23.35 3.10
-5.2 11.4 10.2 17.9 -29.7
-12.5 -7.8 -6.2 0.9 58.2
22 12 14 14 def
Great Lakes Chemical Hercules IMC Global Lubrizol Monsanto
22.03 12.13 8.21 34.23 26.05
20.11 9.65 6.41 31.28 21.02
20.11 11.33 6.41 32.45 23.94
-1.4 14.4 -4.5 4.7 10.6
-15.8 28.8 -39.9 6.4 40.8
24 15 def 14 22
PPG Industries Praxair Rohm and Haas Solutia Stepan
56.47 65.25 36.98 4.96 25.44
49.15 60.01 30.96 0.90 22.78
52.22 61.95 33.45 3.99 22.78
2.9 3.1 7.8 83.0 0.8
4.1 7.2 3.0 9.9 -8.9
19 18 24 def 15
149
135
141
4.0%
1.4%
9659
9036
9275
3.2%
11.2%
C&EN chemical index0 (1992 = 100) Dow Jones industrial average
a Adjusted for stock splits, b As of Sept. 30. c Based on the average stock price for the above-named 25 chemical companies, def = deficit in previous four quarters.
C&EN chemical index, 1992 = 100 180 Π ~
140 120
High
• Close Low
160
h**t Ι- μ Γ
-LL
100 S 0 Ν D L- 2 0 0 2 ^
F M A M J J - 2003 -
A
C & E N / OCTOBER 13, 2003
37
BUSINESS DRUG AND BIOTECH STOCKS Major drug company stocks fell while those for biotech firms rose THIRD-QUARTER
CHANGE FROM
STOCK PRICE 3
SECOND-
HIGH
LOW
CLOSE
QUARTER CLOSE
MAJOR PHARMACEUTICAL COMPANIES Abbott Laboratories $44.98 $37.85 $42.55 Baxter International 30.66 23.99 29.06 Bristol-Myers Squibb 27.60 25.17 25.66 Eli Lilly 70.33 57.99 59.40 Johnson & Johnson 53.60 49.14 49.52
-2.8% 11.8 -5.5 -13.9 -4.2
Merck Pfizer Schering-Plough Wyeth
-16.4 -11.0 -18.1 1.2
CHANGE CLOSE
6.4% 3.8 10.8 -6.5 -7.8
61.89 34.65 19.35 48.90
49.76 29.55 14.95 41.53
50.62 30.38 15.24 46.10
392
349
357
-7.4%
-2.4%
9659
9036
9275
3.2%
11.2%
BIOPHARMACEUTICAL AND DRUG DISCOVERY COMPANIES Amgen $71.54 $64.52 $64.52 -2.2% Biogen 43.36 36.18 38.12 0.4 Cèlera Genomics 12.61 8.89 11.69 13.3 Cephaton 50.03 41.79 45.89 11.8 Chiron 56.75 43.23 52.36 18.1
33.5% -4.8 22.4 -5.7 37.8
C&EN pharmaceutical index0 (1992 = 100) Dow Jones industrial average
PRICE/
FROM 2002 EARNINGS
-10.6 -0.6 -31.4 23.3
RATIO5
21 16 19 23 20 16 19 19 20
40 24 def 36 36
Cytogen Genentech Genzyme Gilead Sciences Icos
13.69 87.72 52.32 69.99 43.46
8.27 71.85 41.42 55.00 29.60
10.71 80.14 46.31 56.04 38.35
28.6 11.1 10.6 0.9 4.0
229.5 141.7 56.6 64.8 63.8
def 71 37 57 def
Medlmmune Millennium Pharm. Protein Design Labs Vertex Pharmaceuticals Xoma
40.30 16.50 15.75 16.28 9.82
32.00 11.50 10.85 12.18 5.17
33.03 15.45 14.05 12.30 7.48
-9.2 -1.8 -1.1 -15.9 40.6
21.6 94.6 65.3 -22.4 76.8
28 def def def def
452 1910
394 1640
414 1787
C&EN biopharmaceutical indexd (1992 = 100) NASDAQ index
a Adjusted for stock splits, b As of Sept. 30. Excludes extraordinary and nonrecurring items. c Based on average stock value for the abovenamed nine companies, d Based on average stock value for the above-named 15 companies. def = deficit in previous four quarters.
• Close Low
400
200
38
C & E N / OCTOBER 13, 2003
41.6% 33.8%
-
C&EN biopharmaceutical index, 1992 = 100 500 High
300
Major drug company stocks have been in the doldrums, declining in the third quarter while the broader market rose. C&EN's pharmaceutical index dropped 7.4% during the quarter to close at 357 (1992 = 100). For the ninemonth period, pharmaceutical stocks were off 2.4%. The index was above 500 back in 2001 and early 2002 when investors were shift
5.2% 10.1%
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xa
U L ιτψ^r
j ι ι ι ι ι ι ι ι ι ι L S O N D J F M A M J J A S L 2002 —! ' 2003 '
ing their money to drug stocks, which of ten do well during a market downturn. But the tide has turned and, with the stock market regaining some life, in vestors have been looking elsewhere. And although drug sales remain strong, generic competition is pressuring com pany earnings. Not surprisingly, share prices have fallen for Bristol-Myers Squibb and Eli Lilly, and even more dra
matically for Schering-Plough, which faces a host of other problems, as well as generic competition (C&EN, Sept. 22, page 15). The market has been tough on Merck; its stock dropped 16.4% in the quarter and was down 10.6% for the first nine months of 2003. A decline began back in July when the company reported lowerthan-expected first-half results and then accelerated when AstraZeneca's anticholesterol drug Crestor moved closer to entering the U.S. market and competing with Merck's Zocor. Stock in Pfizer, which markets the anticholesterol drug Lipitor, also fell. In contrast, the period was bright for biopharmaceutical firms, which as a group saw share prices rise 5.2% in the quarter. This was only a modest gain, however, since the sector had already shot up 34.7% in the first half. Over nine months, C&EN's biopharmaceutical stock index jumped 41.6% to end at 414 (1992 = 100), after hitting its 2003 high of452onSept. 18. INVESTOR INTEREST has been reinvigorated by recent good news, including sev eral regulatory approvals, strong clinical data, and better-than-anticipated earn ings for the major firms. For example, Xoma's shares climbed 40.6% during the quarter on expectations that its psoriasis drug Raptiva would advance through the regulatory process. And Genentech, Xoma's partner, saw its shares gain 11.1% during the quarter. Genentech's stock has soared 142% this year on the strength of other products advancing. Stocks of other industry stal warts—such as Chiron, Genzyme, and Medlmmune —and of up-and-comers Gilead Sciences, Icos, Millennium Phar maceuticals, and Protein Design Labs ex perienced double-digit gains this year ranging between 22 and 95%. In contrast, investors have been dis satisfied with Vertex Pharmaceuticals. The government has charged a former company attorney with insider trading; the firm and its management now face shareholder lawsuits. Its stock price fell 15.9% in the third quarter and was down 22.4% for the first nine months. Biopharmaceutical and drug stocks cooled a bit in the latter half of Septem ber, as did the stock market overall. How ever, the first few days of October brought a new burst of energy, with the indexes for both sectors gaining about 3%. The chemical stock index rose about 2% in early October. • HTTP://WWW.CEN-ONLINE.ORG
