According to Fitch Ratings, diversification beyond ethical pharmaceuticals is more popular with European pharma companies. Unfortunately, while this diversification may remove some risk related to patent cliffs, and may help those companies enter emerging markets with generics or OTC products, it also cuts profit margins.
It's the old risk versus reward trade off. Non-ethical pharma businesses add more stablility in this unstable climate but also pay off less. That's why a few of the ethical pharma stalwarts of the industry, like Roche, are still focusing on ethical pharmaceuticals and only ethical pharmaceuticals. See Seeking Alpha.
Posted by Bruce Lehr November 23rd 2010.
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