Stocks of healthcare companies in the Central and Eastern Europe due to their defensive nature are bound to regain their appeal this year, after having fallen from investors’ grace in 2009, according to an Erste Group research.

“Going forward, their defensive nature will play both for and against CEE pharma stocks. For 1Q10, the sentiment is foreseen to favor cyclicals, with investments in pharma titles to be sidelined. However, as economic conditions remain fragile and the impact of the economic slowdown will still be reflecting in cyclicals’ business results, we might see a return of investors to defensive titles later in the year,” explains Vladimíra Urbánková (photo), pharma sector analyst at Erste Group.

Erste analyst added that that healthcare - and especially generics players - should be among the preferred picks in 2010.

CEE pharma companies are poised to deliver solid business results, although - due to the restrictive drug pricing reimbursement measures - the tempo might be somewhat tempered compared to pre-crisis days.

Also in 2010, CEE pharma stocks, representing a safe haven in times of turbulences and uncertainty, will undoubtedly continue to be driven by changing investor sentiment (apart from their business results).

“However, with their current valuations far below their earlier peaks, the top CEE pharma stocks retain their long-term appeal”, Erste said in the report.

“Reduce” recommendation for ATB, “Buy” for BIO

Although Romanian pharmas’ forex fortunes are set to be slightly more favorable this year, analysts expect their profitability margins to be squeezed by the worsening payment discipline and sales tax recently introduced in Romania.

The Antibiotice target price is revised to 0.624 lei per share and the Reduce recommendation on the stock is confirmed.

Although Erste Group analysts continu