SOURCE: Five Star Equities

Five Star Equities

February 20, 2012 08:20 ET

Pfizer and GlaxoSmithKline Look to Curb Costs as Generic Competition Cuts Into Revenues

Five Star Equities Provides Stock Research on Pfizer & GlaxoSmithKline

NEW YORK, NY--(Marketwire - Feb 20, 2012) - Pharmaceutical stocks have underperformed the broader market in the early stages of 2012. The iShares Dow Jones U.S. Pharmaceuticals Index Fund (IHE) -- which measures the performance of the pharmaceuticals sector of the United States equity market, and includes pharmaceutical companies such as manufacturers of prescription or over-the-counter drugs or vaccines -- is trailing the Dow Jones industrial average by more than 30 percent year-to-date, as major drug manufacturers continue to cope with patent expirations making way for a rise in generic competition. Five Star Equities examines the outlook for companies in the Drug Manufacturers - Major Industry and provides equity research on Pfizer, Inc. (NYSE: PFE) and GlaxoSmithKline Plc (NYSE: GSK) (LSE: GSK). Access to the full company reports can be found at:

To offset the loss in revenues as a result of generic competition, several drug manufacturers have turned to employee layoffs to cut costs. According to a recent survey from PharmaIQ, roughly 44 percent of pharmaceutical employees are fearful they will lose their jobs. Approximately half of the surveyed company executives said they're expecting staffing levels to stay the same for now. Although nearly 32 percent of those surveyed expect their departments to lose employees, a mere 19 percent expect their staffs to grow in the near term.

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As reported in Fierce Pharma, many of the recent job cuts have been "laid at the foot of generic competition." As no big sales forces are necessary to sell drugs that have or soon will lose patent protection, for example.

Earlier this month the U.S. FDA proposed guidelines for approving the first lower-cost copies of biologic drugs derived from living cells. While low-cost copies of biotech drugs are used in Europe, none has yet been approved in the U.S. The law requires the FDA to establish a review process for the treatments that may save public health programs like Medicare about $7 billion in a decade, according to the Congressional Budget Office.

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