Abbott Laboratories

Abbott Laboratories markets diversified pharmaceuticals and medical devices. The company's more than 60,000 employees create over $1.7 billion in net income on revenue of more than $22.4 billion. While Abbott's net profit margin doesn't seem very large by industry standards, the company isn't a pure play pharma stock. Rather, the company has a profitable but much lower margin business selling nutritional supplements like Ensure, a flavored shake with more medicinal marketing than Slimfast that is nonetheless substantially the same product.

Abbott Labs has been particularly vulnerable to an industry-wide trend toward class-action lawsuits centering around drugs that the FDA allows on the market but later finds to be toxic or somehow unsafe. Cancer drug Humira, weight loss drug Meridia, and painkiller OxyContin are all prominent examples of drugs that already have or will cost Abbott hundreds of millions of dollars to settle lawsuits.

Abbott Laboratories has spent hundreds of millions of dollars on basic research and development, clinical trials, and other expenses related to bringing new medications to market. The fact that many of the drugs that ultimately blew up in Abbott's face passed FDA review suggests that just getting medications onto the market may not be enough to guarantee massive profits. Abbott Laboratories might be the canary in the coal mine, or not, but investors considering the pharma sector should pay careful attention.