We are generally positive on the pharmaceutical industry heading into 2009. We expect the majority of stocks to fair far better in 2009 than they did in 2008, based on a number of attributes.

Firstly, almost all the names in the group are trading at very reasonable valuations. Several of the largest players are trading at PEs below 10x, including Pfizer Ltd. (

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Wyeth Pharmaceuticals (WYE) is one of the world's largest research-driven pharmaceutical and healthcare products companies. It focuses on the discovery, development, manufacturing and marketing of pharmaceuticals, vaccines, biotechnology products and non-prescription medicines.Wyeth's recent performance has been stunted due to the entry of generic Protonix in late 2007. EPS growth through 2009 will benefit from recently implemented productivity initiatives and share repurchases. Recent pipeline setbacks and generic competition will cause a drag on financial performance.The next wave of sustainable revenue growth will not come until 2012. We believe the current valuation is fair and rate the shares a Hold with a $42 price target.Jason Napodano, CFA contributed to this report.Read the full analyst report on WYE "WYE" Free Stock Analysis: Buy? Sell? Hold?Zacks Investment Research

Schering-Plough Corporation (SGP) is engaged in the development, manufacturing and marketing of pharmaceutical products around the world. The company focuses on prescription drugs, animal health, foot-care and sun-care products. In November 2007 Schering-Plough closed acquired Organon Bio for $15 billion.Recent prescription flight of Vytorin/Zetia prompted management to implement an aggressive cost-cutting initiative. We expect sales of Vytorin and Zetia to continue to suffer.Significant near-term risks linger, but the addition of Organon and the new cost-cutting strategy should help EPS growth. We rate the shares a Hold with a $19 price target.Jason Napodano, CFA contributed to this report.Read the full analyst report on SGP "SGP" Free Stock Analysis: Buy? Sell? Hold?Zacks Investment Research

Abbott Laboratories (ABT) discovers, develops, manufactures and sells a diversified line of healthcare products. We expect double-digit EPS growth over the next few years driven by strong sales of Humira and the company's rapidly growing vascular business.Several new drug applications have recently been filed with the FDA which should accelerate sales in the pharmaceutical business. Based on our model, the company is expected to deliver high single-digit EPS growth through the end of 2013.We believe ABT possesses a low-risk profile and will continue to trade at an industry premium. Accordingly, we reiterate our Buy recommendation with a price target of $65.Jason Napodano, CFA contributed to this report.Read the full analyst report on ABT "ABT" Free Stock Analysis: Buy? Sell? Hold?Zacks Investment Research

Shire Limited (SHPGY) is a specialty pharmaceutical company focused on three therapeutic areas: Central nervous system (CNS), gastro intestinal (GI), and renal disorders. Based in England, the company has operations in the U.S., Canada, France, Italy, Spain, and Germany. Shire Limited trades in the U.S. as an American Depository Receipt (ADR). The company's ADHD [attention deficit hyperactivity disorder] franchise continues to perform very well, increasing market share to over 32%. Vyvanse, the company's new flagship ADHD product, continues to perform well and will be the key driver of the top-line. Strong top-line growth should continue in 2008 as a number of new drugs ramp. Beyond 2008, we expect revenue growth to significantly slow due to the presence of generic Adderall XR. We maintain our Hold rating with a price target of $50 per ADR. This is 14.2x our 2008 estimate of $3.53 per ADR....

For those of you still holding onto AtheroGenics (AGIX), the research-based pharmaceutical company with a drug development program (according to Zacks senior drug industry analyst Jason Napodano, CFA, who published a report on AGIX last week), the company has just announced today it has filed for Chapter 11 bankruptcy.

The question now seems to be who, if anyone, will pick up the pieces of the late-phase candidate AGIX had been developing.  But for anyone shocked by today's announcement, they shouldn't be.  From the same AGIX report: "The company released phase III data on lead compound AGI-1067 that did not meet the primary end point."

And this: "In September 2008 AtheroGenics announced it will not repay the its 4.5% Convertible Notes due September 2, 2008, nor will it make its scheduled interest payment on the 2008 Notes or the 4.5% Convertible Notes due March 1, 2011."

In a recent

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Eli Lilly and Company (LLY) is a global healthcare company with core products in a number of primary-care pharmaceutical markets. The leading product is Zyprexa, a treatment for schizophrenia and bipolar disorder. The company's other leading drugs include Gemzar (pancreatic cancer), Evista (osteoporosis), Cymbalta (depression), Byetta (type-II diabetes), Cialis (erectile dysfunction), Strattera (ADHD), and Alimta (chemotherapy).The company is entering a challenging period, brought about by recent pipeline disappointments, most notably uncertainty surrounding antiplatelet drug Prasugrel. Although we believe the underlying fundamentals of the company remain solid, the recent pipeline setbacks and lack of clarity surrounding prasugrel will likely limit the upside to the stock. We also believe that sales of Zyprexa will begin to decline in 2008 as generic Risperdal eats into market share. We see little movement in the stock until the above issues are addressed. We rate the shares a Hold with ...

We have once again eavesdropped on what our Zacks Equity Research senior analysts have been discussing with one another lately.  The most recent topic?  The proposed suspension of "mark-to-market" accounting (that is, the assigning of value based on an item's current market price):

Dirk van Dijk, CFA, Director of Zacks Equity Research: I'm not sure how many accounting principals are more fundamental than "lower of cost or market."  There are some transactions being done between willing buyers and sellers.  That is the best way of finding out what the "true" value of something is.  Suspending mark-to-market is just an attempt to hide the real condition of the banks -- it allows them to pretend that the garbage on their books is really gold. 

Isn't misrepresenting the values on your books the very core of the idea of securities fraud?  That is all that doing away with mark to market would be, legalizing and legitimatizing

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Indianapolis-based Eli Lilly and Co.Â’s (LLY) leading product is Zyprexa, a treatment for schizophrenia and bipolar disorder. Zypadhera, the trade name in Europe for the long-acting formula of Zyprexa, was recommended for approval by the Committee for Medicinal Products for Human Use in September. We expect to hear back from E.U. regulators within the next few months.

In April and September, Alimta received approval in combination with cisplatin in the E.U. and U.S. for first-line treatment of non-small cell lung cancer. According to the management, the drug currently holds 20% market share in the second-line indication.

We also expect Lilly to follow the approval of Cymbalta with the launch of a DTC campaign for the fibromyalgia indication, which should help to extend the very strong sales growth of the drug.

Although we believe the underlying fundamentals of the company remain solid, the recent pipeline setbacks and lack of clarity surrounding antiplatelet

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GlaxoSmithKline (GSK) is the world’s second largest pharmaceutical company, with global operations based in the U.K. and the U.S. Although Glaxo has made significant progress with its late-stage pipeline, we are worried about the recent negative news surrounding the company’s second-largest-selling drug, Avandia, as well as generic competition to several other products.

Given the issues regarding Avandia and significant sales erosion of other products from generic competition, we expect 2008 sales to come in only about 2% higher than 2007. The company’s efficiency initiative should keep SG&A expenses in check. We think Glaxo possesses one of the stronger late-stage pipelines in large-cap pharma but believe the shares will remain constrained until there’s more visibility on the Avandia issue. Our price target is $47.

While the management’s guidance for 2008 came as somewhat of a disappointment, we continue to like the fundamentals at Glaxo. We believe with the Avandia issue already

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