Bristol-Myers Squibb, Inc. (BMY) remains one of our top-picks in the pharmaceutical industry for 2009. We like Bristol for a number of reasons, including the company's solid financial position, a deep pipeline with significant biologic exposure, and turnaround/acquisition potential.Bristol also offers a big dividend of $1.24 per share (recently confirmed Thursday), which yields 5.5%. The company has the lowest exposure to foreign exchange translation among its U.S. peers, and is expected to grow the bottom-line by approximately 11% CAGR [compound annual growth rate] through 2012.Oh, by the way, Bristol is sitting on over $8 billion in cash, and just announced today they will be spinning off the Mead Johnson Nutritional business to shareholders in 2009. The Mead Johnson IPO is expected to fetch another $1 billion in cash for Bristol.  By the end of the first quarter 2009, Bristol could be sitting on nearly ...

The two critical elements to watch in the pharmaceutical industry are product development and FDA approvals. If a company’s product development pipeline starts to get a bit thin, it will eventually lose revenue generating capacity as patents expire and competition moves in. If FDA approval isn’t obtained, the company is simply sunk in the US for that product.

As an investor, watching the product pipeline is the key. This is important not only for the company’s current and future profitability, but because other companies, which may not have the same product development strength, may become interested in acquiring it. In today’s pharmaceutical marketplace, this point is even more relevant as several larger pharmaceutical companies have exceedingly large pools of cash and pipeline/patent issues.

Avanir Pharmaceuticals Inc., a pharmaceutical development company, works to develop pharmaceutical products directed at chronic disease and neuropathic diabetic pain. The company is best known for

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The USD 1bn Saudi pharmaceutical market is structuraly well positioned to benefit from growing population and rising demand fo health care in the region. The local players remain focused on basic medicines but this is no bad place to be in a country where the governement has only recently become focused on the cost of treatment. br /br /There are 27 pharmaceutical manaufacturing companies in the Kingdom. The largest are Saudi Pharmaceutical Insdustries and Medical Appliances Corporation (SPIMACO), TABUK, Al Jazeera, Dal Al Dawa and Riyadh Pharma. Riyadh is the fastest growing. SPIMACO is our prefered listed name with over 170 brands under license from names such as Eli Lilly, Schering-Plough and GlaxoSmithKine.br /br /Saudi Arabia is on the USTR Watch List for infringement of intelectual property rights.

China Pharma Holdings Inc. (OTCBB: CPHI) develops, manufactures and markets generic and branded specialty pharmaceutical products in China. The company today announced its third-quarter results for the period ended September 30, 2008, marking significant increases in revenues and net income.

China Pharma posted a 52 percent increase in revenues, reported at $12.61 million, up from $8.29 million for the same quarter last year. The company attributes this to its expansion of marketing and promotional activities implemented to boost sales of existing products and the introduction of new ones. Revenue for the nine months ended September 30, 2008 rose 47% year-over-year.

“We are confident that our continued strong revenue growth for the third quarter of 2008 is a reflection of our focus on the largest segments of China’s pharmaceutical market, in disease areas of high incidence and high mortality. Our rapid growth is supported by the ongoing delivery of new products, product

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Performance Health Technologies, Inc. is a company that develops and markets performance evaluation and rehabilitation products that monitor and guide exercise and give real-time motivational feedback. Based in New Jersey, the young company is led by a group of Board of Directors that are second to none.

Amongst the leaders on the Performance Board of Directors is Dr. Gary N. Goldstein. Dr. Goldstein serves in numerous roles in the medical and academic community. Currently Dr. Goldstein is an attending physician at Graduate Hospital in Philadelphia, Virtua Health Care System, Kennedy Memorial Health Care System, Surgical Center of South Jersey, Summit Surgical Center, Cherry Hill Surgical Center, and Cooper Medical Center. Besides holding memberships in various organizations in his profession, Goldstein is widely published and brings with him a powerful name in the medical field.

Serving with Dr. Goldstein is Roger Harrison.

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Sinobiomed (SOBM) is a Chinese developer of genetically engineered recombinant protein drugs and vaccines. The company’s drugs treat diseases and ailments such as malaria, hepatitis, surgical bleeding, cancer, rheumatoid arthritis, diabetic ulcers and burns, and blood cell regeneration. Sinobiomed currently has 10 products: three on the market, four in clinical trials and three in research and development.

Sinobiomed, based in the bustling metropolis of Shanghai, could be on the forefront of the burgeoning Chinese biotechnology industry. China’s biotech industry is expected to continue its rapid expansion of 20 percent to 30 percent annually to $8.5 billion by 2010 helped by government contributions of $600 million annually. The Chinese pharmaceutical industry is expected to be the world’s 5th largest market by 2010.

Sinobiomed is considered a market leader in the area of recombinant protein drugs and recently acquired a distributor to facilitate a more expeditious sale of some its drugs. The

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Checking on the biotechnology sector, we spoke with Zacks senior analyst Grant Zeng, CFA about recent developments among these companies. We discussed M&A [mergers and acquisitions] activity as well as top Buy recommendations.

How has earnings season gone this quarter? Any major surprises?

As you know, most of the companies covered by me are small-cap biotech companies which usually report their quarterly earnings quite late. I just finished updating all my companies last week and I have both positive and negative surprises.

On the positive side, Celgene’s (CELG) Revlimid beat our estimate by $15.8 million; Vidaza sales beat our estimate by $7.2 million. Total product sales beat our estimate by $16.5 million with quarterly sales of $542 million. Celgene’s adjusted EPS also beat our estimate by 6 cents. We have a Hold rating on Celgene due to valuation concerns.

For BioMarin (BMRN), sales for all three

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The pharmaceutical industry is proof of the profit-powers of patents. There are no controls on how much we must fork out to stay well. Exorbitant drug prices have large parts in the ongoing health-insurance crisis.

Patent protection does not last forever. No corporation can be certain that the flow of new inventions will flow to market unchecked. The very nature of research implies that a company may suffer a dry spell with respect to viable new molecules. Stock investors should back stocks of companies that have the competencies to thrive without patent protection.

Corporations from the third world are arguably more skilled at branding generics, than their American and European peers. Countries such as India have not had product patents in place for decades. Global companies in consumer goods have a similar situation, as neither soaps, nor cell phones are made and sold under any exclusive covers.

Process is invaluable know-how, and you

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In last quarter’s letter, we discussed the Fund’s purchase of shares of Sanofi-Aventis S.A. (“Sanofi”), one of the largest pharmaceutical companies in the world. Numerous issues which are clouding the outlook for the pharmaceutical industry – including a stricter Food and Drug Administration, the upcoming Presidential Election in the U.S., intensifying generic competition, and the ongoing push by governments to contain health care costs – in addition to company specific issues, enabled Fund management to purchase shares of this well-financed, highly profitable and cash generative business at what we believe is an attractive valuation, without attributing any value to Sanofi’s pipeline. While we believe Sanofi represents an attractive investment opportunity for the Fund on a stand-alone basis, the company, and the pharmaceutical industry ingeneral, are subject to inherent uncertainties whose outcomes are difficult to predict with a high degree of certainty.

One of the most notable of these uncertainties is

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