Are defensive stocks still holding up in crisis?

The main pharmaceutical issuers are Biofarm (“BIO”), Antibiotice (“ATB”) and Zentiva (“SCD”), producers of drugs and pharmaceutical products.

Farmaceutica Remedia has been recently introduced in the trading arena at the second category, however given its profile (drug retail) is not analyzed in this segment. The pharma sector had a roughly similar trend as the BET indice, marking a 52% drop versus September 2008.

“Unfortunately, in 2008, the entire pharmaceutical sector has been negatively influenced by the sagging local currency against euro (especially importers), by the regulations established by the Ministry of Health on the use of marketed name instead of the active substance, as well as by the conflict between suppliers and Ministry of Health”, Mirela Maxim, director of Bucharest-based subsidiary of SSIF Interdealer Capital Invest Cluj told Wall-Street.

Two of the aforementioned companies have already made public their 2008 earning report, Antibiotice Iasi marking a 68% drop in after-tax profit , while the turnover shrank be merely 5.9%.

“Biofarm’s financial results were quite discouraging, the company recording a heavy 21-million lei loss, due to a 31.5-million lei provision, following a wavering depreciation of stock holding at BSE (especially investments in FICs)”, she said.

Paul Brendea, analyst at Prime Transaction, highlights the narrow market share changes of the issuers in last year.

“We see steady companies with steady market, their products are very well known and the lowering market share reflects the rising living standards of the population which now is shifting focus to more expensive products, to multinational makers. Nevertheless, I think that starting with 2009, the deterioration of the living standard will act in the benefit of Romanian drugmakers”, the analyst commented.
Translated by Camelia Oancea.