International Forecaster Weekly

Bad Week for Big Pharma

This is spooking the market right now, which is worrying how this is going to eat into the bottom line of what could have been lucrative deals.

James Corbett | September 24, 2014

As bombs begin to fall on Syria, the U.S. stock market also begins to dive, with both the Dow Jones and the S&P edging off last week's Fed-fueled high. What's the market take on it? Big Pharma's to blame by way of Burger King.

            In the wake of the Burger King Boondoggle that saw the King conquer Tim Horton's and move his throne to Canada, the Treasury Department has started a crackdown on “corporate inversions” that would merge companies with overseas acquisitions to avoid American taxes. In effect the Treasury is closing the barn door behind the Burger King cow on a number of U.S. companies that were planning to do just that, including AbbVie and Medtronic, which had the two biggest inversion deals in history planned. The rules will eliminate, amongst other things, the ability of such “inverted” corporations to get foreign cash without paying US taxes through so-called “hopscotch” loans. This is spooking the market right now, which is worrying how this is going to eat into the bottom line of what could have been lucrative deals. The primary impact is on health care stocks with a secondary impact on financials, which could have raked in the merger fees if the deals went ahead as planned.

            In other notable Big Pharma news, GlaxoSmithKline is still reeling from a $490 million fine it was slapped with by a Chinese court last week after it was found guilty of bribery. The ruling included a suspended three-year jail sentence for Mark Reilly, the company's ex-chief of operations in the country, who is now waiting to be deported. The case involves a systemic culture of corruption in the firm's Chinese branch that included bribes and payola for Chinese doctors to help sell their products. The company conducted its own internal investigation last year and made adjustments to its bonus structure to try to rein the problem in, but the court became the final arbiter in the scandal. As a result, GSK has issues a formal apology: "GSK Plc sincerely apologizes to the Chinese patients, doctors and hospitals, and to the Chinese government and the Chinese people...and [it] must work hard to regain the trust of the Chinese people." The market's reaction? “China clarity makes Glaxo a buy!” Especially odd advice considering the company is still facing a criminal probe into fraud by UK investigators fresh off the largest fraud settlement in US history ($3 billion) just two years ago for failing to report safety data on some of its most popular products.

            And just when you think things can't get worse for Big Pharma... the CDC whistleblower story continues to mushroom. At first it was “merely” a story about Dr. William Thompson's admission that he and his coauthors deliberately committed fraud by omitting data from a 2004 CDC study on the link between the MMR vaccine and autism. The omitted data, in Thompson's own confession, “suggested that African American males who received the MMR vaccine before age 36 months were at increased risk for autism.” However, as Jon Rappoport, who has been on the case since day one, reports this week: “Thompson has sent out thousands of pages of CDC vaccine data to several people. And as yet, we don’t know what these pages contain.” The story has so far picked up steam in the social media world but has yet to break through into the mainstream in any way more significant than “Of course there was some fraud committed in this study; the science still stands!” rejection fodder from mainstream science websites. If Rappoport's hunch is right and this treasure trove of data does contain more smoking gun info on a CDC cover up of a vaccine / autism link, the implications for Big Pharma are grand indeed...if the documents ever get released, that is.