10 Things to Watch in Big-Cap Health Care

7. Gilead Sciences.

Gilead Sciences (GILD Quote - Cramer on GILD - Stock Picks) is a somewhat different beast now that it is about to close its acquisition of Myogen. If Myogen's drug lives up to its promise, Gilead will have demonstrated once again why it has A-plus managers. I haven't forged a concrete opinion on it yet. I am concerned about upcoming guidance for 2007, as spending will likely be high after the acquisition closes.

8. Wal-Mart.

I believe Wal-Mart's (WMT Quote - Cramer on WMT - Stock Picks) efforts to exercise its marketing power on the drug supply chain will not live up to the hype, and we should find out in 2007. If it is successful in driving more consumers to its pharmacies, then the other drug retailers, the drug distributors and the pharmacy benefit managers face some risk. But the vast majority of drug consumers are not cash-paying customers, and their decisions are driven by their PBM and/or HMO that sets their co-pays.

9. Sword-rattling from the Democratic Congress?

I don't think there really is any way to know how this will turn out this year, but it makes the list here because it should be a concern for anyone who saw what happened to health care stocks in the days of Hillary-Care. Pharmaceuticals and HMOs are usually the ones to take the first bullets, but I believe large-cap biotech could be breaking into that elite group with the cost of biologics and the lack of clear pathways for biogenerics, which brings me to ...

10. Biogenerics.

I believe that at some point in the next few years, a few of the large-cap biotech stocks will be facing a compressed-multiple fate because of the threat of biogenerics. There are many outstanding questions on how these generic versions of biotech drugs will be regulated, approved and ultimately marketed and accepted, but they will unquestionably be a part of medicine within the next handful of years.

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