Sunny Outlook for Novartis

Swiss pharmaceutical giant Novartis(NVS Quote) has seen its stock jump 11% this year and has a slew of drugs on the market and in the pipeline. Is now a good time to buy?

It could be, according to analysts. At a recent presentation on research and development, the company said it has seven drugs on the market that will each generate more than $1 billion in annual sales by 2008. In addition, Novartis has 10 drugs in late-stage clinical trials that it expects to generate $10 billion in U.S. sales once approved and marketed.

Analysts had low expectations going into the Nov. 19 briefing. The company had disappointed investors in the year-earlier session when it announced one-year delays for three drugs. But investors cheered this year's product announcements, driving the stock to a 52-week high near $42 a share.

"Novartis has many products still in the early phases of their lifecycle. We expect these drugs should drive long-term pharma sales growth of 11%, faster than the industry average of 8%," said Matthew Weston, a Lehman Brothers analyst.

Many analysts agree that the company is making valid claims in touting what it describes as its industry-leading product pipeline and fast product-development cycles. Analysts polled by Thomson First Call expect the company to report 2003 earnings of $2.02 a share on revenue of $24.4 billion, up from earnings of $1.88 a share on revenue of $20.9 billion in 2002. That would represent a gain of 7% and 16%, respectively. Of 52 analysts surveyed, 60% rated the stock a buy, compared with 33% who rated the stock a hold and 7% who recommended selling, according to Thomson First Call.

The stock has been a solid investment, rising 11% since the beginning of the year. At $42.60, it is trading at a new 52-week high. Nonetheless, Chief Executive Thomas Ebeling said he is frustrated that the company's stock valuation doesn't recognize the firm's product-development position and analyst ratings. Ebeling, who was recruited by Novartis in 1997 from Pepsi-Cola Germany, said, "Our stock is a solid investment. We have kept every promise we have ever made."

Drug Wars Here's how the big pharmaceutical companies stack up against Novartis.
Company	Price	2004 Projected Earnings (First Call)	P/E
Eli Lilly	71.71	2.94	24.39
Novartis	41.26	2.27	18.18
Johnson & Johnson	51.59	2.96	17.43
Abbot	43.54	2.51	17.35
GlaxoSmithKline	46.05	2.78	16.56
Pfizer	33.68	2.1	16.04
Bristol Myers	26.00	1.65	15.76
Merck	45.14	3.17	14.24