Adversity Continues for Avandia

It might not be a skull and cross bones, but a "black box" warning is not the type of label that most pharmaceutical companies like to see on any of their products. But that is exactly what the FDA is going to require GlaxoSmithKline (NYSE:GSK) and Takeda Pharmaceutical to place on their respective diabetes drugs, Avandia and Actos. The warning indicates that the drugs are linked to an increase in heart failure.

The stock price of Glaxo has been minimally affected since the news was released after yesterday's closing bell. Most of the damage to Glaxo's stock price was inflicted by Avandia back in May, when it came to light that as many as 100,000 heart attacks might be linked to its use since it first hit the market. At that point, shares were trading near the stock's 52-week high. Shares have since pulled back more than 15%.

I am not indicating that the stock is now a buy, although many of the large-cap pharmaceutical stocks are beginning to look increasingly attractive after the beating the market has laid on the sector. Novartis (NYSE:NVS), for example, is a prime illustration of a company that has been growing earnings while trading down at a level not seen since last summer.

Fools still looking for a diabetes treatment play that's been spooked by Avandia's troubles might check out Amylin Pharmaceuticals (NYSE:AMLN), which in the not-too-distant future is expecting positive data from mid- and late-stage trials for Exenatide LAR, an injectable diabetes drug.

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Fool contributor Billy Fisher does not own shares of any of the companies mentioned. Glaxo is an Income Investor recommendation. The Fool's disclosure policy is the cure for what ails you.