Pharmaceutical stocks are often thought of as big, safe, defensive names. With the market as turbulent as ever, we thought it would be a great time to catch up with Jason Napodano, CFA
, our senior pharmaceutical analyst.
Jason, as always, thanks for being here.
You bet Mark, thanks for having me.
So we are mid-way through the second quarter. What's the story with big pharma?
Well, I'd say a whole lot of ebb and flow. Most of the stocks are stuck in sideways trends and have been for the past several years. If you look at three-year charts of some of the biggest names in the industry, including J&J (JNJ), Abbott Labs (ABT), Glaxo (GSK), Eli Lilly (LLY), Bristol (BMY), Wyeth (WYE) and Sanofi-Aventis (SNY), they are virtual overlays of each other.
With the exception of Abbott Labs, one of our only buy-rated names in the group, all of the above stocks are down between 5% and 20% over the past three years. Others, such as Pfizer (PFE), are down even more. Only Merck (MRK) and Abbott have positive three-year charts, and Merck's stock is down 35% year-to-date, so I wouldn't necessarily say the stock is out-performing.
Jason, why does big-pharma seem to be stuck in this rut?
It's pretty simple Mark, revenue growth has slowed due to patent expirations. And, for many of the names I spoke about above, it's only going to get worse. Last year the industry saw almost $13 billion in lost sales due to loss of exclusivity on blockbuster drugs. That figure should stay about even in 2008, and peak in 2012 when some of the world's biggest drugs like Pfizer's Lipitor and Viagra, Bristol and Sanofi's Plavix, and Merck's Singular all lose exclusivity.