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Before The Bell: Pharma's New Blockbuster; Bank-Lending Drought


Big Pharma companies are looking for the next blockbuster drug. BIS warns of further credit crunch extending into 2008.

Morning Perspective: Pharma's New Blockbuster

WSJ reports big pharma companies are trying to find a new blockbuster drug in the global blood-thinning market. With at least five next-generation bloodthinners in advanced testing, these drugs could reach the market as early as 2009. The big pharma companies such as Johnson & Johnson (JNJ), Bristol-Myers Squibb (BMY), Pfizer (PFE), and Eli Lilly (LLY) are all racing to find a drug for Atrial fibrillation, a heart condition that affects 5.5 mln people worldwide and requires daily therapy for the rest of the patient's life. Analysts estimate the market for these drugs could exceed $10 bln by 2015. Todd mentioned the pharma space in his Minyan Mailbag.

From the Bull Pen: Todd said he believed pharma will relatively outperform going forward. Bulls may see a play in JNJ, sell-stops below $66.50. Bulls may also play the broader iShares Pharma ETF (IHE), sell-stops below $53.92.

From the Bear Cave: Bears may see a down-side play in Pfizer (PFE), believing the stock is following a downtrend line from its June high; buy-stops placed above $24.80.

Bank-Lending Drought

Bloomberg reports the Bank of International Settlements (BIS) says the global credit crunch could extend beyond the first quarter of 2008. The BIS said in its latest survey that models using derivatives based on money-market rates show investors expect a persistent lack of liquidity and remained concerned about counterparty risk. Further, one analyst warned that this lack of bank liquidity has become a more serious problem than subprime "though both are correlated." Counterparty risk is evident in Professor Mike Mish Shedlock's Sell Now, Ask Questions Later.

From the Bull Pen: Bulls may see long-side plays in consumer non-durables in a slowing economy. Procter & Gamble (PG) may be an option; near-term sell-stops below $72.00.

From the Bear Cave: Bears can look to the financials for a downside play should liquidity concerns continue. Bank of America (BAC) may be a reasonable option with an entry at $47.30, which resembles a 50% retracement line from the October high. Buy-stops may be set above.

Click on Minyanville's Stocks To Watch for more company-specific ideas.

Quick Check Around the World

Asian trading closed with the Hang Seng -1.18%, Nikkei -0.20%, Sensex -0.18%, Taiwan -1.43% and Shanghai +1.38%.

A quick look towards Europe finds the CAC +0.25%, DAX +0.30%, FTSE +0.01%, ATX -0.53%, Swiss Mkt. +0.60% and Stockholm +0.31%.

A Look At Commodities

Crude oil is up this morning 0.29 to 88.57. Gold is higher 7.80 to 808.00. Silver is up 0.09 to 14.59, and copper is down -4.3 to 308.30.

As of 8:45 AM, S&P futures are up by +5.50 points, and Nasdaq futures are higher by 7.00 points.

On the Radar


10:00 Pending Home Sales

Click here for the full trading radar.

Happy Monday, everyone! Good luck today!
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No positions in stocks mentioned.

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