With health care remaining a major issue in today's political and financial world, big pharmaceutical firms have been under the microscope for some time. Legislation earlier this year from Washington created quite a buzz, as the bill executed an overhaul of our entire health-care system. On top of this, many big pharma firms who have been coasting along with their big name drugs, are fast approaching a patent cliff, suggesting that some of their most popular drugs -- and important revenue streams -- are likely to disappear as they go generic in the coming years. When this happens, it could be a very difficult time for the pharmaceutical industry, which makes the time before the cliff all the more important as companies scramble to shore up their product lines and get their balance sheets in order before their products lose their patent protection [see also Is Your Biotech ETF A Leader Or Laggard?].
Aside from losing their patents, the individual companies' overall performance has also been scrutinized in this poor economic environment, even though the demand for a good portion of their products are relatively inelastic since many rely on these drugs for survival. Sales remain sluggish across much of the industry and a wave of consolidation has spread across the sector as some of the larger firms scoop up mid-cap companies that have more robust product pipelines. Today, Merck & Co.
Analyst estimates look good for the pharma giant; the firm is expected to haul in EPS of $0.82 with revenues of $11.23 billion. These figures represent a robust 85% sales growth from the third quarter of 2009, showing a significant turnaround in the financial status of the company even if it hasn't been rewarded by the stock market. Investors should note that Merck has either met or surpassed analyst estimates for the last four fiscal quarters, setting the bar high for today's release. The company will report before market open, and will likely be a big mover on the day [see also Next Frontier Of ETF Investing: Long/Short Trades].
In light of this major data release, the SPDR Select Sector Fund -- Health Care
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