GlaxoSmithKline plc (ADR) (GSK), Pfizer Inc. (PFE), Merck & Co., Inc. (MRK): These Biotech Companies Are Facing Setbacks, but Investors Shouldn’t Worry

Page 1 of 2

GlaxoSmithKline plc (ADR) (NYSE:GSK)Historically known as a defensive sector, biotech stocks have recently come under pressure as patent expirations, regulation, and litigation hit the industry.

Most recently, executives working for the U.K.-based GlaxoSmithKline plc (ADR) (NYSE:GSK) in China have been accused of, and confessed to, serious corruption and tax-related offences. GlaxoSmithKline plc (ADR) (NYSE:GSK) is not alone, as Chinese authorities are currently undertaking a sweeping analysis of foreign firms operating in the country in an attempt to weed out corruption. The allegations include bribing officials in order to increase sales and open up new sales channels for the company.

Unfortunately, GlaxoSmithKline plc (ADR) (NYSE:GSK) itself disagrees with these allegations, stating that it has monitored the situation in China and found no evidence of corruption or wrongdoing among its employees. These allegations also follow similar claims that GlaxoSmithKline plc (ADR) (NYSE:GSK)’s sales staff showered Chinese doctors with cash for promoting the company’s Botoxanti wrinkle treatment. Allegedly, GlaxoSmithKline plc (ADR) (NYSE:GSK)’s marketing staff had planned to pay doctors $490 for meeting prescription quotas.

Financially, these allegations will not hurt GlaxoSmithKline plc (ADR) (NYSE:GSK) significantly in the short-term as only 3% of the company’s revenue comes from the Chinese market. However, this market is a key area of growth for the company and while sales slow down in other markets, rising sales in China have been offsetting some of the decline. However, if the company faces a selling ban in the country, it could hold back future growth unless some agreement is made with the Chinese authorities.

There are other problems in the industry

On the other hand, biotechnology giants Pfizer Inc. (NYSE:PFE) and Merck & Co., Inc. (NYSE:MRK) are both suffering from patent expirations and falling sales.

Indeed, at the end of the first quarter, Pfizer Inc. (NYSE:PFE) cut its full-year diluted EPS guidance from $1.50-$1.65 to $1.44-$1.59. Pfizer Inc. (NYSE:PFE) blamed part of this decline on currency fluctuations, in particular, the weak yen and the strong U.S. dollar. Unfortunately, these issues are not going to disappear anytime soon as the yen has only become weaker and the dollar stronger.

In addition, the company has been suffering from declining sales due to rising competition and patent expirations. Sales of Pfizer’s key Prevnar 13 drug only raked in $440 million in sales during the first quarter, well short of estimates (10% less) and sales of the company’s second most popular drug, Enbrel, slid 2%. However, the well-known Viagra sold about 10% more than analysts expected.

Unfortunately, it does not seem that Pfizer Inc. (NYSE:PFE)’s new drugs coming to market will be enough to offset the company’s declining sales from existing products. Indeed, sales of the company’s new and highly anticipated blood thinner, Eliquis, and rheumatoid arthritis treatment, Xeljanz, were not reported in first-quarter results, but Pfizer Inc. (NYSE:PFE)’s Eliquis partner, Bristol Myers Squibb Co. (NYSE:BMY), reported sales of $22 million for its share of the drug, about 50% below analyst estimates.

Merck & Co., Inc. (NYSE:MRK) was also hit hard by a rapid drop-off in sales during the first quarter. The company’s leading asthma drug, Singulair, saw sales drop a staggering 75% year-on-year. Moreover, the company’s Januvia product franchise failed to meet targets and sales slipped 4%. The company’s sales did grow in some areas, however. Sales of the company’s HIV drug grew 8% and cervical cancer vaccine Gardasil expanded 30%. That said, Merck & Co., Inc. (NYSE:MRK) still expects revenue to come in 5% below initial estimates for the year.

Page 1 of 2
blog comments powered by Disqus
Insider Monkey Headlines
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months Click to see monthly returns in table format!

Lists

The 10 Countries with the Highest Suicide Rates

The 10 Most Technologically Advanced Countries in the World

The 10 Safest Countries in the World to Live in Peace

The 10 Top Selling Smartphones in the World 2014

The 12 Biggest Shopping Centers in the World

The 10 Friendliest Countries in the World

Qihoo 360 Technology Co Ltd (QIHU), Actavis plc (ACT), Yahoo! Inc. (YHOO) Among 20 Long Ideas from Sohn Canada

The 10 Laziest Countries in the World

The 10 Most Polluted Countries in the World

The 10 Most Dangerous Cities in America 2014

The Top 10 Gold Producing Countries in the World

The 10 Tallest Buildings in the World

The 10 Richest Stand Up Comedians in the World

The 10 Fattest Countries in the World

The 5 Best Summer Jobs for Teens

The 10 Most Religious Countries in the World Keeping the Faith

The 10 Most Educated Countries in the World

The 10 Most Popular Cell Phones in the World

The 10 Drunkest Countries in the World

The 10 Most Expensive Private Schools in the World

The 10 Smallest Countries in the World

Walking Dead Season 5 Spoilers You’ll Wish You Didn’t Know

The 10 Poorest Countries in the World

The 10 Greenest Countries in the World

The Top 10 Countries with the Highest Population in the World

The 10 Most Visited Countries in the World

The Top 10 Star Wars Characters in the Iconic Series

The 10 Most Expensive Android Phones in the World

5 Reasons Why The Illuminati Is Real and a Threat to Society

The 6 Scariest Halloween Costumes Ever Screamed At

The 4 Biggest Hedge Fund Managers in the World Today

The 15 Most Densely Populated Countries in the World

The 10 Biggest Tea Drinking Countries in the World

Top 6 Ways to Improve Your Checkout Process and Close Sales

The 5 Most Profitable Online Businesses You Can Start Today

The 20 Most Profitable Hospitals in the US

The 5 Most Profitable Home Businesses to Start

The 7 Teams that Will Win the Stanley Cup in 2015

The Top 10 Most Expensive Digital Cameras to Snap Stunning Shots With

The 10 Highest Quality Fast Food Restaurants In America Today

The 8 Best Halloween Decorating Ideas to Spook Up Your House

10 Marvel Women that Should Get a Movie Right Now

The 20 Best Remixes of Popular Songs that Will Make You Forget the Originals

7 Most Expensive Cities in the World

5 Least Expensive Cities in the World

10 Celebrities Who Believe In Scientology

10 High Margin Food Products to Build a Business Around

The 10 Most Expensive Clothing Stores in the United States to Get Decked Out At

The 5 Biggest Kickstarter Scams That Swindled Backers’ Donations

The 10 Most Expensive Boarding Schools In the World

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 47.6% in its first year! Wondering How?

Download a complete edition of our newsletter for free!