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Wyeth (WYE)
Wyeth Finds that Positive Earnings Are Not Always Enough
With earnings season in full swing the inevitable mixed message hit Madison, NJ-based Wyeth on Thursday. The pharmaceutical company posted positive earnings for the second quarter, but worries over some of the company's drug trials led investors to knock down shares by as much as 2.7% in morning trading. While the trend reversed later during the trading session, a dark cloud still hangs over Wyeth and other pharmaceutical companies. Will Wyeth go the way of Pfizer (PFE: Charts, News, Offers), or will it show that Thursday was just a road bump?
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Shares of Wyeth fell slightly Thursday, despite the company releasing positive earnings report. Negative reaction on Wall Street probably stemmed from the company's upcoming Food and Drug Administration (FDA) target date for its new drug, Pristiq. The new drug is designed to reduce the frequency of hot flashes in post-menopausal women, but high doses have led to side effects of nausea. While the company has begun experimenting with lower doses, the side effects could prompt the FDA to put the drug on hold. The hold decision could be very expensive, especially considering the high costs of new drug development.
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The company's future prospects are similar to many other pharmaceutical companies. With the costs of finding new blockbuster drugs rising and with increased competition from generic versions, executives have felt the pressure from stockholders to keep performance trending upward. It's a tough balance. Bentley Pharmaceuticals (BNT: Charts, News, Offers), a company based in New Hampshire, recently received approval from Spain and Ireland to produce generic versions of Wyeth's depression drug, Effexor, earlier this week. While the news could have been worse, the company at least has several drugs in the pipeline, including schizophrenia drug Bifeprunox, a new formulation of oral methylnaltrexone and another post-menopausal drug, Bazedoxifene.
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Wyeth's Thursday earnings announcement was not poor by any means. The company beat 2Q 2007 earnings expectations on revenue of $4.75bn, 10% higher than the same period last year. The stock has shown steady growth since 2003 ($38.8 to $56.83 (53.84%), and has traded up nearly 11% in 2007. Performance has been closely correlated with that of competitors Eli Lilly (LLY: Charts, News, Offers) and Merck (MRK: Charts, News, Offers), while outpacing Pfizer and Barr Pharmaceuticals (BRL: Charts, News, Offers).
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