Zacks Industry Rank Analysis Highlights: Abbot Laboratories, AstraZeneca, Chattem, Cubist Pharmaceuticals and ViroPharma

Business Wire, Oct 23, 2008

CHICAGO -- Zacks.com releases the latest Zacks Industry Rank. Stocks featured in this week's analysis includes Abbott Laboratories (NYSE: ABT), AstraZeneca (NYSE: AZN), Chattem (Nasdaq: CHTT), Cubist Pharmaceuticals (Nasdaq: CBST) and ViroPharma (Nasdaq: VPHM).

To see the Zacks Industry Rank and the trend in earnings estimates revisions for more than 200 industry groups, visit http://at.zacks.com/?id=3154.

Zacks Industry Rank Analysis is written by Charles Rotblut, CFA, Senior Market Analyst for Zacks.com.

This week: Unexpected Industries With Bullish Forecasts

Key Points:

* The credit crunch, combined with continued market volatility, has many investors looking at more conservative sectors.

* Medical-Drugs (http://at.zacks.com/?id=4921) not only is a less economically-sensitive group, but also offers growth opportunities

* Analysts have become more bullish on drug stocks

* Medical-Drugs contains 7 Zacks #1 Rank ("strong buy") and 27 Zacks #2 Rank ("buy") stocks

Big Earnings For Large-Cap Pharma

Abbott Laboratories (NYSE: ABT) topped expectations last week and raised its full-year guidance.

The large-cap pharmaceutical company earned 79 cents per share in the third quarter, besting expectations by 2 cents. It was the 3rd positive surprise in 4 quarters. Net income rose 18.1% to $1.24 billion.

Revenues rose 17.6% to $7.5 billion. Several of ABT's divisions delivered double-digit growth: Nutritionals ( 15%), Pharmaceuticals ( 17%), Diagnostics ( 15%) and Vascular ( 58%).

Contributing to the growth was Humira, an anti-inflammatory treatment for rheumatoid arthritis and psoriasis, and Depakote, used for seizures. Humira not only saw higher sales, but also gained market share. ABT is also experiencing higher demand for its nutritional products from emerging markets. Finally, the launch of XIENCE V, a drug-eluting stent, had a stronger-than-expected launch.

Following the strong performance, Abbott Laboratories revised its full-year guidance to between $3.31 and $3.33 per share. All 11 of the covering brokerage analysts adjusted their profit projections in response, pushing the consensus earnings estimate 5 cents higher to $3.32 per share.

The majority of these analysts also raised their fiscal 2009 forecasts. The new consensus earnings estimate of $3.68 per share is 3 cents higher than the average forecast of a week ago.

ABT is a Zacks #2 Rank ("buy") stock.

Good Profits For Smaller Pharmaceutical Companies, Too

Cubist Pharmaceuticals (Nasdaq: CBST) joined ABT by issuing a bullish earnings report last week.

Third-quarter profits totaled 44 cents per share, 10 cents above expectations. It was the 3rd consecutive surprise for the company.

Revenues jumped 41% to $112.4 million. Antibiotic CUBICIN(R) not only saw more prescriptions written, but also gained market share against its primary competitor. Net product revenue from the drug totaled $109.2 million.

The company also saw some early success with MERREM, a treatment for skin infections. Cubist is marketing MERREM in the U.S. for AstraZeneca (NYSE: AZN). Management believes sales of this treatment will have a large impact in the fourth quarter.

Nearly all of the covering brokerage analysts raised their 2008 profit projections following the release of the third-quarter results. CBST is now projected to earn $1.24 per share this year, up 16 cents from last week's average forecast of $1.08 per share.

CBST is also Zacks #2 Rank ("buy") stock.

Estimates Also Raised On Other Drug Companies

As noted above, the Medical-Drugs group contains 10 Zacks #1 Rank ("strong buy") stocks, including AZN and ViroPharma (Nasdaq: VPHM), and 27 Zacks #2 Rank stocks, including Chattem (Nasdaq: CHTT).

AstraZeneca, which makes the acid reflux drug Nexium, is not expected to report until early November. Within the past few weeks, however, 2 of the 8 covering brokerage analysts raised their full-year forecasts. The revisions have pushed the consensus earnings estimate 4 cents higher to $4.85 per share.

ViroPharma will report next Wednesday, Oct 29. Ahead of the report, 3 of the 9 covering brokerage analysts have raised their third-quarter forecasts. The revisions, however, were not large enough to move the consensus earnings estimate, which continues to sit at 23 cents per share.

As part of its earnings release, VPHM could provide an update on Cinryze, which treats angioedema attacks (swelling underneath the skin). The company received FDA approval 2 weeks ago and is expected to launch the drug this quarter. Cinryze could achieve sales of $250 million to $300 million, which would have a significant impact on overall revenues and earnings.

Chattem, which markets over-the-counter treatments such as Coritzone-10 and Icy Hot, raised its fiscal 2008 guidance late last month. The company now projects that fiscal 2008 earnings will be between $4.20 and $4.25 per share, versus the previous guidance of $4 to $4.20 per share.

CHTT also issued initial fiscal 2009 guidance of $4.80 to $5 per share.

Both forecasts were above the consensus earnings estimates. In response, the majority of the covering brokerage analysts revised their forecasts higher. The new consensus earnings estimates are at $4.05 for fiscal 2008 and $4.67 for fiscal 2009.