Pharma Picks: Rx For An Ailing Portfolio

Wondering how to make big money in drug stocks next year? Two analysts told us their winning prescription for your 2007 portfolio on today’s “Morning Call.” Their advice: Look for (positive) newsmakers and buy into generics.

Scott Henry, pharmaceutical analyst at Oppenheimer said, “Valuations in the pharma sector are very tightly wound.”

Two large-caps he’s focusing on are Eli Lily and Wyeth, mostly from a lack of negatives (no big patents expiring, etc.)

He says there are many unknowns in the sector, and the key is finding names where news can be on the upside.

Jeffrey Kraws, senior pharmaceuticals analyst at Crystal Research Associations, added, “Smaller companies have a lot more exposure [to risk]. Holding a basket of companies both large-cap and mid-size will maximize return.”

In large-caps, Kraws likes Wyeth, Johnson & Johnson , Novartis and Lily. He also recommended getting in on the generic drugs market – and said Novartis owns the largest generic manufacturer in the world.

Analyst disclosure: Jeffrey Kraws owns shares of CRXL, XOMA, PLI.SV, AMRN, GENT. Crystal Research Associates has prepared and been compensated for the production of our Executive Information overview report on the following companies: CRXL, XOMA, PLI.SV, AMRN, GENT.