Dow Up Slightly as Merck's Earnings Show Continued Slide for Big Pharma

Watch stocks you care about

The single, easiest way to keep track of all the stocks that matter...

Your own personalized stock watchlist!

It's a 100% FREE Motley Fool service...

Click Here Now

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.

Stock markets were mixed today as employment data did little to inspire either bulls or bears on Wall Street. Payment processing firm ADP said private employment rose 175,000 people in January, which was the worst reading in five months but was probably affected by cold weather across the country.  

At 3:30 p.m. EST the Dow Jones Industrial Average was up about 16 points, a lull in the sell-off we've seen on Wall Street recently.

Big challenges face Big Pharma
Merck (NYSE: MRK  ) was the big earnings report today and it continued the negative slide for pharmaceutical companies. Fourth-quarter revenue was down 3.4% to $11.3 billion and net income fell 14% to $781 million, or $0.26 per share. Asthma treatment Singulair continue to suffer from the loss of patent protection, seeing a 38% decline in revenue on top of a 67% drop in the year-ago period.

Merck's numbers were largely in line with expectations and the stock is up about 0.2%, but Pfizer (NYSE: PFE  ) is now pulling back from its gains of the last few days. The challenge for Big Pharma is easy to see in the chart below. As drugs have come off patent they haven't been replaced by new products, and that's led to sliding revenue over the past three years. Net income has remained fairly strong but margins can only be expanded so far before the top line becomes concerning over the long term.

MRK Revenue (TTM) Chart

MRK Revenue (TTM) data by YCharts.

The hope is that new cancer treatments will fill the pipeline for drugmakers; on that front Merck today announced three separate collaboration agreements to test the effects of Merck's MK-3475 immunotherapy cancer treatment in combination with treatments from Pfizer, Amgen, and IncyteAnother 20 cancers were also added to the list of cancer types Merck will test the treatment for.

Cancer treatments are the next growth engine for Big Pharma, as the excitement for Pfizer over the last week shows. The hope is that Merck took a step in the right direction with its announcements today.

Keep an eye on the long-term trends
Investors need to keep in mind the long-term thesis in their investments, not just the short-term moves of the market. With that in mind, our CEO, legendary investor Tom Gardner, has permitted us to reveal The Motley Fool's 3 Stocks to Own Forever. These picks are free today! Just click here now to uncover the three companies we love. 

Read/Post Comments (0) | Recommend This Article (0)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 2825383, ~/Articles/ArticleHandler.aspx, 8/28/2015 1:59:51 AM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...

Travis Hoium

Travis Hoium has been writing for since July 2010 and covers the solar industry, renewable energy, and gaming stocks among other things.

Today's Market

updated 4 hours ago Sponsored by:
DOW 16,654.77 369.26 2.27%
S&P 500 1,987.66 47.15 2.43%
NASD 4,812.71 115.17 2.45%

Create My Watchlist

Go to My Watchlist

You don't seem to be following any stocks yet!

Better investing starts with a watchlist. Now you can create a personalized watchlist and get immediate access to the personalized information you need to make successful investing decisions.

Data delayed up to 5 minutes

Related Tickers

8/27/2015 4:01 PM
MRK $54.95 Up +0.53 +0.97%
Merck & Co., Inc. CAPS Rating: ****
PFE $33.26 Up +0.83 +2.56%
Pfizer CAPS Rating: ****