3 Stocks to Avoid in Healthcare

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Advair, an asthma and COPD medicine, accounts for about 15% of GlaxoSmithKline's revenue, and patents protecting Advair from generics have already expired. Patents protecting Diskus, the inhaler that delivers Advair, have kept generics on the sidelines,but Diskus' patents expire this year, and that means a big hunk of GlaxoSmithKline's sales are about to be called into question.

Mylan, much maligned recently for its EpiPen pricing,is among the generic-drug makers that are circling. The FDA expects to issue a decision on whether to approve Mylan's generic Advair next March.

Ahead of that decision, GlaxoSmithKline is attempting to protect Advair's market share with other asthma and COPD drugs, but sales of those drugs remain tiny in comparison with the $1.1 billion-plus that Advair Diskus hauled in worldwide last quarter.

Overall, Advair Diskus' uncertainty makes me think that GlaxoSmithKline's dividend could be at risk, and for that reason, I'm more interested in owning other Big Pharma stocks.

A stalled growth engine

Brian FeroldiSanofi(NYSE: SNY) hasn't given its investors much reason to cheer over the past few years. This company has relied heavily on uber-successful drugs such as Lantus and Plavix to generate growth, but sales of both are falling because of pricing pressure and competitive launches. In turn, the company's shares have lost nearly a quarter of their value over the past three years, badly underperforming the S&P 500.

SNYYCharts

In response to the weak performance, Sanofi's board brought in a new leader named Olivier Brandicourt and tasked him with getting the company back on track. However, given Sanofi's size and product portfolio, that won't be easy.

Brandicourt attempted to appease Wall Street by laying out his five-year vision. His plan centers on the successful launches of six new blockbuster drugs, which he believes will reverse the revenue decline. If everything goes according to plan, then sales will grow by 3% to 4% annualized between now and 2020.

While I alwaysappreciate it when a company lays out a long-term plan, I have a hard time getting excited about low-single-digit revenue growth. That's especially true considering Sanofiis banking on all of those newproduct launches to help it hit its numbers. What happens if one of them turns out to be a dud?

Sanofi may not be the worst investment in healthcare, but why bother owning this stock when faster-growing giants can be purchased just as easily? For that reason, I plan on avoiding Sanofi's stock until it turns these promises into a reality.

Uncertainty galore

Cory RenauerSarepta Therapeutics (NASDAQ: SRPT) stock is best avoided in the near term. The FDA's controversial

With more exon skipping DMD drugs in development, Sarepta's price would be justified if there were some solid evidence its drug is effective. DMD patients suffer from theinability to produce enough dystrophin, and Exondys 51 is designed to allow production of a shorter yet functional version of this vital muscle component. Untreated, patients' muscles get progressively weaker, and patients usually succumb to their disease by age 30. The FDA based Exondys 51's conditional approval on observed dystrophin increases in some -- not all --patients treated with the drug, because many samples had to be thrown out because of Sarepta's failure to implement high-quality procedures.In addition, while this conditional approval is based on increased dystrophin production, there's no clear evidence that the drug actually helped patients maintain muscle strength.

The open disdain that multiple FDA officials have expressed for Sarepta's approach to drug development is enough reason to avoid this stock. If regulator opinions aren't enough for you, though, consider this: To maintain Exondys 51's approval, Sarepta needs to show patients secretly randomized to receive a higher dosage of the drug benefit significantly, as measured by the rigorous North Star Ambulatory Assessment.Beyond DMD, the company's clinical-stage pipeline is limited to a few antivirals in phase 1 development. If Exondys 51 fails its post-approval study, it would lead to devastating losses.

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Brian FeroldiCory RenauerTodd Campbellfree for 30 daysconsidering a diverse range of insightsdisclosure policy