(By Alexander Crawford)
Novartis AG (NVS), Europe’s second-largest drugmaker, just released their third-quarter earnings along with an announcement that they plan to cut 2,000 jobs in the U.S. and Switzerland and shift 700 of them to China and India – a plan to save over $200 million annually. This may indicate that biotech firms in these countries are at a significant cost advantage that shouldn’t be forgotten.
Earnings for the Swiss drugmaker were mostly in line with analyst estimates. The company saw third-quarter earnings rise to $3.54 billion ($1.45 share) vs. $3.15 billion a year prior. 19 analysts surveyed by Bloomberg expected $1.44 a share in earnings on average.
According to FierceBiotech, Novartis also reported delays for U.S. approval of a two-drug combination therapy for COPD, which will now require new clinical data for submission. Michael King, analyst at Nomura Code, told Reutersthat the developer could be looking at a two-year delay.
Novartis is eager to market new drug programs, as their blockbuster hypertension medicine Diovan is losing patent protection this year in Europe and next year in the U.S. Novartis is also losing patent protection for blockbuster cancer drug Gleevec in 2014.
But the move of 700 jobs to China and India may make you wonder whether firms in these countries are at a significant cost advantage to American and European competitors.
For a look at these firms, we list 4 US-traded firms based out of China (no Indian biotech firms are US-traded).
Do you think these firms are poised to do well?
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1. 3SBio Inc. (SSRX): Engages in the research, development, manufacture, and distribution of pharmaceutical products in the People’s Republic of China. Market cap of $232.60M.
2. China Biologic Products, Inc. (CBPO): Engages in the research, development, manufacturing, and sale of plasma-based pharmaceutical products. Market cap of $229.44M.
3. ShangPharma Corporation (SHP): Operates as a pharmaceutical and biotechnology research and development outsourcing company. Market cap of $165.90M.
4. Sinovac Biotech Ltd. (SVA): Engages in the research, development, manufacture, and commercialization of vaccines against the hepatitis A, hepatitis B, and influenza viruses in the People’s Republic of China. Market cap of $80.14M.
Interactive Chart: Press Play to see how analyst ratings have changed for the stocks mentioned above. Analyst ratings sourced from Zacks Investment Research.