NEW YORK ( Karvy) -- Novartis ( NVS), Teva Pharmaceutical ( TEVA), Dr. Reddy's Laboratories ( RDY), WuXi PharmaTech ( WX) and ShangPharma ( SHP) could provide returns in the range of 16% to 25% over the next 12 months based on analysts' consensus estimates.

The global pharmaceutical market is poised to grow 5% to 7% in 2011 to $880 billion, compared with growth in 2010 of 4% to 5%, according to IMS Health. In March 2010, IMS ranked 17 high-growth pharmaceutical markets as pharmemerging -- markets that are expected to grow faster than the overall global market. The countries in this ranking are forecasted to grow at 15% to 17% in 2011 to $180 billion. China, the biggest emerging market pharma country, is expected to be a $50 billion market, growing at 25% to 27% in 2011.

Murray Aitken, senior vice president of IMS, said IMS expects the "pharmerging markets to continue their rapid expansion next year and remain strong sources of growth, and also see the potential for several significant innovative treatment options that are becoming available for patients in areas that include metastatic melanoma, multiple sclerosis and acute coronary syndrome."

We have identified five pharma stocks -- four from emerging-market economies and one from a developed economy -- that are likely to benefit from higher growth rates. The stocks selected are trading at 10 times to 17 times one-year forward earnings and are expected to deliver returns of up to 25%.

The stocks are stacked in terms of upside, higher to highest.

5. Novartis is a Switzerland-based holding company that has a broad health care portfolio with core businesses in vaccines, diagnostic tools, generic medicines and consumer health products.

During the third quarter, net sales rose 13% year over year to $12.6 billion. Recent acquisitions and new products boosted revenue growth during the quarter, contributing $1.7 billion toward sales, or 30% growth over the prior year. Sandoz, a generic subsidiary of the company, supported the company through new product launches, especially enoxaparin. The acquisition of Alcon ( ACL) was completed in August. Volumes overall grew by 11% during the quarter.

Net income increased 10% during the quarter. Commenting on the strengthening momentum in the company's product pipeline, Joseph Jimenez, CEO of Novartis, said in a press statement, "Approvals such as Gilenya, a breakthrough first-line oral treatment for multiple sclerosis, and Tasigna, a new first-line treatment for chronic myeloid leukemia, have the potential to change patients' lives. Data on new medicines such as MenB, meningococcal vaccine candidate, give me confidence that our pipeline will continue to deliver/"

The stock is trading at 10.9 times its 2011 estimated earnings.

4. WuXi PharmaTech is a China-based pharmaceutical, biotechnology and medical device research and development outsourcing company, with operations in China and the United States. The company has a broad portfolio of laboratory and manufacturing services.

Total revenue for the third quarter grew 20% year over year. Revenue from laboratory services grew 19% during the same period, benefiting from stronger demand for drug discovery and development services. The manufacturing services segment saw a revenue increase of 23%, aided by higher demand for pharmaceutical advanced intermediates and active ingredients.

In a press statement, Ge Li, WuXi chairman and CEO, commented on the expansion initiatives: "We made a decision to establish a new laboratory in Wuhan that will house laboratory chemistry operations to leverage lower costs in central China. We are also planning to build manufacturing facility in the city of WuXi to produce biological products for preclinical and clinical trials. We expect these expansion initiatives to drive continued revenue growth in future years."

Wuxi increased its full-year 2010 revenue guidance to $330 million to $333 million from the earlier guidance of $320 million to $325 million. Management expects operating income growth of 28% to 32% for 2010, up from an earlier forecast of 15% to 20%.

The stock is trading at 15.9 times its estimated 2011 earnings.

3. Teva is an Israel-based global pharmaceutical company engaged in the development and production of generic drugs. The company's principal products include Copaxone for multiple sclerosis and Azilect for Parkinson's disease, respiratory products and women's health products.

Third-quarter net sales were up 20% year over year to $4.3 billion over the comparable period in 2009. Net income rose to $1.2 billion, an increase of 47% from a year earlier. Copaxone, representing about one-fifth of Teva's total sales, grew 4% during the quarter. Copaxone occupies a 30% global market share and continues to be the leading treatment option for multiple sclerosis. Teva completed the acquisition of Ratiopharm in August.

The company generates about two-thirds of its revenue from North America, while Europe contributes about 24%. Meanwhile, bigger markets like the U.S. and Europe witnessed revenue increases of 34% and 33%, respectively. in the September quarter. As of October 2010, Teva had 203 pending product applications for FDA approval, including 45 tentative approvals.

The stock trades at 10.3 times its estimated 2011 earnings.

2. Dr. Reddy's is an India-based pharmaceutical company operating in three business segments: global generics, pharmaceutical services and active ingredients.

During the September quarter, revenue improved 2%. Global generics sales rose 8% during the quarter, while pharmaceutical services and active ingredients saw a revenue decline of 14%. However, operating profit margin increased to 17% from 14% in the year-earlier period. Net profit improved 32% year on year during the same period.

The company announced the launch of 41 new generic products and filing of 21 new product registrations and 13 drug master files globally. Growth in North America and Europe, the company's largest markets, contributing more than 50% towards sales was slower than in markets like India and Russia. Revenue from North America and Europe declined 2% and 14% for the September quarter, respectively, compared to a 21% and 17% growth for India and Russia, respectively.

1. ShangPharma is a China-based pharmaceutical and biotechnology research and development outsourcing company servicing nearly 100 customers worldwide.

Total revenue for the third quarter increased 17%, led by faster growth in fee-for-service-based services (FFS). Full-time-equivalent-based services grew slower at 12%, compared to FFS at 32%. However, gross margins declined slightly to 32.5% from 32.9% during the same quarter last year. Net income rose 32.7% from the third quarter of 2009, primarily due to higher profit from operations and higher other income.

Kevin Chen, chief financial officer and chief operating officer of ShangPharma, expects good quarterly numbers in the fourth quarter.

"We successfully completed several high margin projects at the end of September 2010. The revenues for these projects were recorded in October 2010. As a result, we expect to see acceleration in revenue growth in the fourth quarter, and are well on our way to deliver year-over-year revenue growth of approximately 26% to 33% in the fourth quarter of 2010," he said.

The stock is trading at 13.5 times its estimated 2011 earnings.
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