The healthcare industry is undoubtedly marked by change and turmoil, but one thing is for sure: it is not going away. With recent healthcare legislation from President Obama's administration and other governments worldwide, firms certainly operate in an environment filled with both surprise and opportunity.
Global healthcare company Sanofi (NYSE:SNY), formerly known as Sanofi-Aventis, has shown both stability and progress within such a challenging sector. The 52-week range of its stock price is $30.98 to $40.58, and its price has steadily climbed since June 1st. Competitor Merck (NYSE:MRK) has a 52-week range of $29.47 and $39.50. Bristol-Myer Squibb (NYSE:BMY) has a 52-week range of $25.69 and $35.44. Pfizer (NYSE:PFE) stock ranged between $16.63 and 23.30. Bayer (OTCPK:BAYRY) has a 52-week range of $49 to $84.92. Sanofi can clearly boast a very stable stock price. This factor alone is not a good reason to consider investing in a firm, but it does indicate a lower level of risk. You may not make enormous returns, but there's much less chance you will lose all your invested funds too. The risk return tradeoff is very apparent here.
While Sanofi's most recent annual earnings per share (EPS) of $2.71 is not in the lead within its sector, its dividend yield of $4.76 surpasses most of the competition. These dividends may make the stock even more appealing to risk-averse investors who still want to diversify a portfolio with some equity in the healthcare industry.
Progress and setbacks
Sanofi has some exciting opportunities on the horizon. The firm has seven growth platforms on which to stand: innovative drugs, emerging markets, vaccines for humans, solutions for diabetes, remedies for rare disease, products for consumer healthcare and animal healthcare, as well. Within these platforms, Sanofi maintains a pipeline of projects - several of which are just awaiting approval from regulatory authorities.
At the beginning of June, Sanofi announced positive test results for a multiple sclerosis drug called Aubagio. Multiple sclerosis is a debilitating and currently incurable disease that attacks the nervous system and can cause paralysis. A study of 1,169 participants concluded that the relapse rate was reduced by 36% when compared to the placebo. Aubagio has an advantage over the competition in that it is administered orally rather than by injection. While its results may be somewhat less impressive than other alternatives, Aubagio can boast milder side effects, which is a major deterrence for patients when considering whether or not to take medication. Analysts expect the new drug to generate sales of $1.8 billion by 2018 and have upgraded their expectations for Sanofi's stock price accordingly.
Sanofi also recently announced a new vaccine used to combat the mosquito-borne disease dengue fever, which plagues over 50 to 100 million people a year worldwide. It also kills an estimated 20,000 each year. The firm is conducting studies in Thailand currently and expects positive results. If its expectations are met, Sanofi intends to file for approval by 2013 in countries where dengue is particularly invasive, such as Thailand, Singapore, Mexico, Malaysia, and Australia. This timeframe would set Sanofi up for a commercial launch by early 2015. This puts the company five years ahead of its competition in creating this vaccine. The tough part then would be how to price the three-dose vaccine, as many of the countries plagued by dengue fever are also characterized by low wages. Nonetheless, there is great potential for Sanofi to help millions while producing some profits for shareholders.
Sanofi has another venture even further along the pipeline. Lyxumia is a drug designed to treat Type II diabetes by controlling glycemic sugar levels in patients. Attempting to strengthen its diabetes platform by producing more comprehensive solutions, Sanofi is expecting approval in the U.S. by the fourth quarter of this year. The company has also recently applied for regulatory approval from the Japanese government, hoping to expand its market further.
As can be expected in the healthcare industry, there are both ups and, unfortunately, downs. Reviewers from the Food and Drug Administration (FDA) are questioning Sanofi's semuloparin injection designed to prevent blood clots in patients receiving chemotherapy treatment for cancer. Without challenging its effectiveness, these reviewers are simply questioning the value of the drug. Though recipients of chemotherapy typically have a risk 6.5 times that of an average person to get blood clots, the rates of clotting among the study participants may have been too low to indicate any significance. Whether the panel of reviewers recommends this drug to the FDA remains to be seen.
Meanwhile, the competition continues to stiffen as other firms continue to seek opportunities of their own. Sanofi's drug Lantus may see some challenges from Novo Nordisk's new degludec drug, which is also aimed at reducing the rates of nighttime hypoglycemia among patients with Type II diabetes. Study results may indicate superior results, but (luckily for Sanofi, though not for diabetics) the FDA has extended its review period and requested more data. Both companies' stock prices may reflect a final decision whenever that ultimately occurs.
Sanofi is also in stiff competition with other pharmaceutical companies, including Merck, Bristol Myers Squibb, and AstraZeneca to acquire Amylin Pharmaceuticals (AMLN), which specializes in diabetes drugs. The winner of this acquisition may be able to gain an edge in the increasingly fearsome market for diabetes drugs.
Overall, the pharmaceutical market has become more and more highly competitive in its aim to provide medical solutions to the world. Consumers will undoubtedly benefit from the future, as will shareholders.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.