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Number Cruncher

Taking the pulse of Big Pharma Add to ...

What are we looking for?

Pharmacy stocks that may have been oversold as investors brace for several top-selling drugs to lose their patent protection in the United States.

Pharmaceutical stocks are usually known as defensive plays in volatile markets, which would make this an ideal time to flock to the sector. But an unprecedented wave of expiring drug patents in the near term promises to dramatically force down medicine prices while heightening the pressure on drug makers to come up with new medicines.

Generic versions of seven of the world’s 20 best-selling drugs, including the top two – cholesterol fighter Lipitor and blood thinner Plavix – are hitting the market over the next 14 months. And lower prices are hardly a prescription for higher revenues and profits for the drug makers.

What we found

This screen takes a look at how the big-cap names are faring. We set a criteria for market cap, as well as revenues, of at least $1-billion (U.S.) and all companies are listed either on the TSX or a major U.S. exchange.

Most stocks were in negative territory for the month of July, but interestingly, the company taking the biggest hit was Mylan Inc., which is one of the world’s leading generic drug companies. While the company last month reported stronger-than-expected second-quarter earnings, it’s facing weaker sales and pricing pressures in Europe. In July, it fell more than 11 per cent and year-to-date is only up 4.8 per cent, trailing many of its rivals.

Another stock looking rather sickly is Hospira Inc., down 10.8 per cent in July as well as year-to-date. The global specialty pharmaceutical company focuses on medicines that help improve the safety of patient care.

Pfizer, maker of Lipitor, slipped 8.4 per cent in July but is still up almost 11 per cent for the year. Its price-to-earnings ratio of 8.5 is among the lowest in our screen. Plavix maker Bristol-Myers Squibb, down just 2.1 per cent over in the past month, also has a relatively low price-to-earnings ratio of 13. Plavix, as well as the company’s Avapro high-blood pressure drug, come off patent next year, but the company has a pipeline of new drugs coming to market in key areas such as cancer.

 
  • MYL-Q
  • HSP-N
  • PFE-N
  • BMY-N
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