Bristol-Myers Squibb, Novartis AG and GlaxoSmithKline Could Be Big Movers in Healthcare Today

Today's movers in the pharmaceutical sector.

Jan 24, 2014 at 9:24AM

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

Good morning, fellow Foolish investors! It's time to check in on the movers and shakers in health care today.

Bristol-Myers Squibb beats earnings estimates
Bristol-Myers Squibb (NYSE:BMY) is up in pre-market trading after the company handily beat fourth quarter earnings estimates. Specifically, the company announced this morning that fourth quarter revenues exceeded estimates by a whopping $100 million. That said, you need to understand that the bulk of this increase is due to the sale of the company's diabetes franchise to its former partner, AstraZeneca (NYSE:AZN).

In fact, U.S. revenues from product sales only increased by 1% compared to a year ago, although international sales did jump by a healthy 11%. Looking ahead, Bristol-Myers management gave a lukewarm outlook for 2014, suggesting that earnings per share could be relatively flat in subsequent quarters.

What's my take? I'm not particularly surprised that earnings jumped following the sale to AstraZeneca. So, what matters most is what is going to happen down the road. Despite growing revenues for most of the company's flagship products, research and development costs are increasing as well, slightly offsetting these gains. As such, I don't believe Bristol-Myers will have as good of a year compared to its big biotech peers. 

Market not impressed with GlaxoSmithKline's diabetes drug?
Although a European Medicines Agency, or EMA, committee recommended GlaxoSmithKline's (NYSE:GSK) type 2 diabetes drug for approval today, the company's shares are falling in premarket trading. The drug, known as albiglutide, is a once-weekly GLP-1 therapy that will compete against Novo Nordisk and AstraZeneca's drugs in the same group. Albiglutide is also up for regulatory review in the U.S. on April 15 of this year. Looking ahead, the drug could be approved in the EU before the end of this quarter, following this positive recommendation.

So, why are shares falling? My view is that the market is unsure about the drug's commercial potential, and there are questions about the drug's ability to be approved in the U.S. Put simply, albiglutide is expected to compete in a crowded space, and the drug does have some unpleasant gastrointestinal side effects that may be off putting for potential users. Regardless, GlaxoSmithKline is always a good name to keep tabs on, and diabetes drugs, more often than not, fare well on the commercial front. Time will tell. 

The EU says no to Novartis heart drug
Novartis AG (NYSE:NVS) is down in pre-market trading this morning following a negative opinion from the EMA for the company's experimental therapy for acute heart failure called Serelaxin. Serelaxin is expected to generate sales topping $1 billion if it's eventually approved in the U.S. and the EU, so this rejection is important to the company's bottom line. Novartis plans on refiling the drug's application in the EU once a late-stage study concludes this September.

Despite this setback, Serelaxin likely has an easier path to approval in the U.S. after the U.S. Food and Drug Administration, or FDA, gave the drug breakthrough  designation last year. Moreover, the bulk of the drug's potential revenues are expected to come from the U.S. market. As such, you shouldn't fret too much over this rejection in the EU. Novartis has a strong commercial portfolio, positive cash flows, and an stellar clinical pipeline, giving investors multiple reasons to dig deeper into this biotech.

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George Budwell has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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