Big Pharma Slumps as the Dow Turns South

Big Pharma Slumps as the Dow Turns South

Although we don't believe in timing the market or panicking over daily movements, we do like to keep an eye on market changes -- just in case they're material to our investing thesis.

Stocks are falling across the markets, but the Dow Jones Industrial Average hasn't taken too bad of a beating so far through most of the trading day. As of 2:45 p.m. EDT, the Dow has lost around 90 points. Big pharma's certainly not having a good day, however, as Pfizer and Merck are hanging near the bottom of the Dow. Let's catch up on what you need to know.

Will Zilmax make a comeback?
Merck's stock has fallen about 0.7% today, still suffering some of the impact of a poor earnings report that impressed no one on Wall Street. However, the company issued an important announcement today that it will attempt to relaunch sales of animal food product Zilmax in the U.S. and Canada, according to Reuters.

Zilmax first hit the skids in August when animal behavior concerns arose from food giant Tyson Foods . Tyson reported that cattle that had been fed products including Zilmax showed less ability to move normally. While the company couldn't isolate Zilmax as the specific cause of the concern, it did list Merck's product as one possible factor. Merck shut down sales then, but the company now plans to conduct an audit on the drug's use. If all goes well, Merck will have Zilmax back on the market before long.

Why is this a concern? Merck's animal health unit is much smaller in terms of revenue than its lucrative drugs business, but it's generally been a consistent cash cow over the years. However, the division lost 2% in sales year over year in the third quarter, a surprising statistic that some chalked up to Zilmax's troubles.

The future of Merck's animal health business won't make or break this company, but its slump in the third quarter puts it behind the growth seen around the business. Zoetis , Pfizer's former animal health business and one of the biggest names in the industry, has managed consistent growth in 2013 after being spun off from its parent corporation. On a year-over-year basis, Zoetis pulled in nearly 3% sales growth over the first half of 2013.

Animal health isn't the kind of growth industry that the pharmaceutical business is, although Zoetis' solid growth hasn't yet translated to its stock yet, as shares of this company have only gained around 3% since it launched earlier this year. Merck investors shouldn't fret over the declining performance of its animal health group after just one quarter, and if Zilmax returns to the market expect this division to turn around in the coming quarters back to its consistent self.

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