The Patent on a Major Drug Produced by a Pharmaceutical

question 86

Multiple Choice

The patent on a major drug produced by a pharmaceutical company will soon expire.Sales of the drug contribute 10% to the company's net income.Which of the following statements is most likely to be true in these circumstances?

• A)The P/E ratio will probably fall when the patent ends.
• B)The P/E ratio will probably rise because the share price will rise and the earnings will fall.
• C)The P/E ratio will probably fall as investors factor in the future drop in net income.
• D)The P/E ratio will probably rise because the share price will fall and the earnings will fall.

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