Drugmakers to show defensive colours in crisis

By Ben Hirschler and Sam Cage

LONDON/ZURICH (Reuters) - Investors seeking shelter from the financial storm may be reassured about the defensive qualities of pharmaceuticals when the world's top drug manufacturers report third-quarter results from next week.

But deep-rooted concerns about a sector that is struggling with increasingly aggressive generic competition, a dearth of new products and pressure on prices have not gone away.

Recent weeks have seen an increasing flow of funds moving into the pharmaceutical sector for its relatively secure earnings and dividends.

A second big appeal is the minimal leverage of most Big Pharma companies, which have traditionally been conservative in taking on debt. In the past, that's led to charges of running flabby balance sheets. Today, it looks smart.

"From a stock market standpoint, the ... sector remains a safe haven from the current deterioration in the economic situation," Oddo Securities analyst J.J. Le Fur said.

"However, in the longer term the sector is likely to be buffeted by head winds."

Most large U.S. and European companies are set to report a rise in earnings for the quarter and analysts see few reasons for managements to change full-year outlooks, given the stability of demand for medicines across the economic cycle.

Johnson & Johnson and Abbott Laboratories, two of the industry's more diversified groups, kick off the reporting season on October 14 and 15 respectively.