Healthcare Bill Will Be Law By New Year Says Morningstar Strategist

• On 1:50 pm EST, Monday November 9, 2009

67 WALL STREET, New York - November 9, 2009 - The Wall Street Transcript has just published its Pharmaceuticals Report offering a timely review of the sector to serious investors and industry executives. This 76 page feature contains expert industry commentary through in-depth interviews with public company CEOs, Equity Analysts and Money Managers. The full issue is available by calling (212) 952-7433 or via The Wall Street Transcript Online.

Topics covered: Small-Cap Specialty Pharma - Patent Expiration - Pending Health Care Reform - Cultivating And Expanding R&D Pipelines - Chinese Drug Manufacturers - Brisk M&A Activity - Indian Pharma VS. U.S. Pharma - Competition From Generics - FDA Approval Process - Clinical Research Outsourcing Market - Stem Cell-Based Technology - Cancer Radiation Therapy - Expansion Into Asian Markets - Traditional Chinese Medicine VS. Western Medicine In Chinese Pharma

Companies include: Aeolus Pharmaceuticals (AOLS.OB); Nutra Pharma (NPHC.OB); Quick-Med Technologies (QMDT.OB); Abbott Labs (ABT); Alexza Pharmaceuticals (ALXA); AmexDrug Corporation (AXRX.OB); Aurobindo Pharma (AUROBINDOP.BO); BioClinica (BIOC); BioPharm Asia (BFAR.OB); Biocon (BIOCON.BO); Cephalon (CEPH); China Sky One Medical, Inc. (CSKI); Claris Lifesciences (CLARICH.BO); Cortex Pharmaceuticals (COR); Daiichi Sankyo (DSKYF.PK); Dr.Reddy's (RDY); Elan (Elan); Eli Lilly (LLY); Forest (FRX); GeoPharma (GORX); Glaxo (GSK); Glenmark (GLENMARK.BO); Johnson & Johnson (JNJ); Lupin (LUPINSL.BO); Mannatech (MTEX); Matrix Laboratories (ATRIXLAB.BO); Medical Nutrition (MDNU); Merck KGaA (MKGAY.PK); Mylan (MYL); NeoStem (NBS); Novartis (NVS); Pfizer (PFE); Piramal Healthcare (PIRAMALHE.BO); Provectus Pharmaceuticals (PVCT.OB); Ranbaxy (RANBAXY.BO); Salix Pharmaceuticals (SLXP); Shire (SHPGY); Telik (TELK); Winston Pharmaceuticals (WPHM.OB).

In the following brief excerpt from just one of the in depth interviews in the 76 page report, an industry expert discusses the outlook for the sector and for investors.

Damien Conover is the editor of Morningstar's Healthcare Observer as well as a healthcare strategist for Morningstar. Mr. Conover has been covering the healthcare industry for close to a decade with a primary focus on pharmaceutical and biotechnology companies. Before joining Morningstar in July 2007, he held equity analyst positions at Raymond James, Bank of Montreal, and Tucker Anthony. Mr. Conover is a recognized authority in healthcare investing, appearing regularly on Bloomberg TV, CNBC and CNN. Mr. Conover holds a bachelor's degree as well as master's degree in finance from the University of Wisconsin, where he was a member of the Applied Security Analysis Program. Conover is a CFA charterholder

TWST: What's your guess on the timing at this point?

Mr. Conover: We are anticipating that we will likely see some sort of passage by year-end. I think the only thing that could potentially disrupt that is how much posturing and how much bickering there is between the House and the Senate bill. I think the Senate comes together pretty quickly and gets the bill together, but getting that reconciled between the two Houses could take some time. Once that is done, I think the President signs it. I don't think the President is going to stop any sort of passage that gets to his desk.

TWST: So, year-end, plus or minus a bit?

Mr. Conover: Yes, we are looking probably year-end. We don't think it's likely that it goes too far into the following year. We don't think this is going to be an issue that a lot of politicians want hanging over them during the reelection process. We think it's more likely that it gets done well before that process really starts up in full swing.

TWST: Is the industry positioned to accommodate to these changes?

Mr. Conover: I think so. I think what you are going to see is increased volumes of drugs. I don't think this will be too challenging for the capacity constraints, as it has not been a major issue. There may be some increased demand on some of the other products that are a little bit harder to produce. But I don't anticipate that being much of a problem. As far as funding this cost, the pharmaceutical firms keep a tremendous amount of cash on their balance sheet. Any sort of fees or any sort of pricing concessions that they may have to make before the volume elements really start to re-emerge, shouldn't be a problem at all for the pharmaceutical industry.

TWST: What will be the effect, if any, longer-term on R&D spending of these changes?

Mr. Conover: I think what we are going to see is probably some pricing concessions by pharmaceutical firms. I think there is going to be a little bit less pricing power of pharmaceutical firms in United States. It kind of starts with the government plans or the government spending; so this is for Medicaid, Medicare, but it trickles down to some extent to the private payers as well. I think that over the very long-term, we will see less pricing power in the United States, which really has been an element that has subsidized the rest of the world's research and development spending, meaning when pharmaceutical firms look at the return potential of a new drug and decide whether or not to invest in it, they definitely realize the potential in the United States is greater than other countries. When you do the math and look at the reward potential of doing R&D, I think the rewards won't be as great. I still think we are not looking at a huge differential in that factor, but I do think there might be some small downward pressure on R&D spending just because the rewards of the most important market may be slightly diminished as far as pricing goes. It's offset a little bit, as we said before, by increased volumes. But it's an element I think that could potentially happen, but we do think it's relatively small in magnitude.

The Wall Street Transcript is a unique service for investors and industry researchers - providing fresh commentary and insight through verbatim interviews with CEOs and research analysts. This 76 page special issue is available by calling (212) 952-7433 or via The Wall Street Transcript Online .

The Wall Street Transcript does not endorse the views of any interviewees nor does it make stock recommendations.

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