14.2 Pharmaceutical Industry. An equities analyst is studying the pharmaceutical
ID: 3120238 • Letter: 1
Question
14.2 Pharmaceutical Industry. An equities analyst is studying the
pharmaceutical industry and would like your help in exploring and
understanding the financial data collected by her firm. Her main objective is to
understand the structure of the pharmaceutical industry using some basic
financial measures.
Financial data gathered on 21 firms in the pharmaceutical industry are
available in the file Pharmaceuticals.xls. For each firm, the following
variables are recorded:
1. Market capitalization (in billions of dollars)
2. Beta
3. Price/earnings ratio
4. Return on equity
5. Return on assets
6. Asset turnover
7. Leverage
8. Estimated revenue growth
9. Net profit margin
10. Median recommendation (across major brokerages)
11. Location of firm’s headquarters
12. Stock exchange on which the firm is listed
Use cluster analysis to explore and analyze the given dataset as follows:
a. Use only the quantitative variables (1–9) to cluster the 21 firms. Justify the various choices made in conducting the cluster analysis, such as weights accorded different variables, the specific clustering algorithm(s) used, the number of clusters formed, and so on.
b. Interpret the clusters with respect to the quantitative variables that were used in forming the clusters.
c. Is there a pattern in the clusters with respect to the qualitative variables (10–12) (those not used in forming the clusters)?
d. Provide an appropriate name for each cluster using any or all of the variables in the dataset.
e . Do the clusters formed seem reasonable? Try different numbers of clusters and examine theresults. Feel free to experiment with other criteria as needed. Explain the reasons for your selections, and identify the best clustering in your opinion
Symbol Name Market_Cap Beta PE_Ratio ROE ROA Asset_Turnover Leverage Rev_Growth Net_Profit_Margin Median_Recommendation Location Exchange ABT Abbott Laboratories 68.44 0.32 24.7 26.4 11.8 0.7 0.42 7.54 16.1 Moderate Buy US NYSE AGN Allergan, Inc. 7.58 0.41 82.5 12.9 5.5 0.9 0.6 9.16 5.5 Moderate Buy CANADA NYSE AHM Amersham plc 6.3 0.46 20.7 14.9 7.8 0.9 0.27 7.05 11.2 Strong Buy UK NYSE AZN AstraZeneca PLC 67.63 0.52 21.5 27.4 15.4 0.9 0 15 18 Moderate Sell UK NYSE AVE Aventis 47.16 0.32 20.1 21.8 7.5 0.6 0.34 26.81 12.9 Moderate Buy FRANCE NYSE BAY Bayer AG 16.9 1.11 27.9 3.9 1.4 0.6 0 -3.17 2.6 Hold GERMANY NYSE BMY Bristol-Myers Squibb Company 51.33 0.5 13.9 34.8 15.1 0.9 0.57 2.7 20.6 Moderate Sell US NYSE CHTT Chattem, Inc 0.41 0.85 26 24.1 4.3 0.6 3.51 6.38 7.5 Moderate Buy US NASDAQ ELN Elan Corporation, plc 0.78 1.08 3.6 15.1 5.1 0.3 1.07 34.21 13.3 Moderate Sell IRELAND NYSE LLY Eli Lilly and Company 73.84 0.18 27.9 31 13.5 0.6 0.53 6.21 23.4 Hold US NYSE GSK GlaxoSmithKline plc 122.11 0.35 18 62.9 20.3 1 0.34 21.87 21.1 Hold UK NYSE IVX IVAX Corporation 2.6 0.65 19.9 21.4 6.8 0.6 1.45 13.99 11 Hold US AMEX JNJ Johnson & Johnson 173.93 0.46 28.4 28.6 16.3 0.9 0.1 9.37 17.9 Moderate Buy US NYSE MRX Medicis Pharmaceutical Corporation 1.2 0.75 28.6 11.2 5.4 0.3 0.93 30.37 21.3 Moderate Buy US NYSE MRK Merck & Co., Inc. 132.56 0.46 18.9 40.6 15 1.1 0.28 17.35 14.1 Hold US NYSE NVS Novartis AG 96.65 0.19 21.6 17.9 11.2 0.5 0.06 -2.69 22.4 Hold SWITZERLAND NYSE PFE Pfizer Inc 199.47 0.65 23.6 45.6 19.2 0.8 0.16 25.54 25.2 Moderate Buy US NYSE PHA Pharmacia Corporation 56.24 0.4 56.5 13.5 5.7 0.6 0.35 15 7.3 Hold US NYSE SGP Schering-Plough Corporation 34.1 0.51 18.9 22.6 13.3 0.8 0 8.56 17.6 Hold US NYSE WPI Watson Pharmaceuticals, Inc. 3.26 0.24 18.4 10.2 6.8 0.5 0.2 29.18 15.1 Moderate Sell US NYSE WYE Wyeth 48.19 0.63 13.1 54.9 13.4 0.6 1.12 0.36 25.5 Hold US NYSEExplanation / Answer
HEy this question is easy but i am not able to get this data properly though i have tried in s[readheet and i got this
K mean clustering
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