E.I. du Pont de Nemours & Company (DD)

Licensing fees from Cozaar® and Hyzaar® hypertension drugs provided a billion dollars in PTOI in 2008. These fees provided an average of 22% of DuPont's pretax operating income from 2006-2008. This income will begin to decline in 2010 as the patents expire and will cease in 2013 according to the terms of the license agreement with Merck. There will be no corresponding cost reductions as this earnings stream disappears since there are virtually no costs required to generate these earnings. Thus the reduction will directly reduce earnings per share and cash flow from operations. In Q2 2010, pharmaceutical profits fell 74% on expiration of Cozaar in April 2010. S&P expects full-year pharmaceutical profit to be down 55% and maintains a sell rating on DD despite strong Q2 earnings for this reason.

Since DuPont uses oil as a raw material to make plastics and burns natural gas as a fuel to make its products, significant fluctuations in oil or natural gas prices will impact the company's profits. Widespread commodity price increases have led DuPont to preemptively raise prices for many products. In some cases increased raw materials costs can be passed on to consumers, but in other cases the company is not so fortunate. For example, in 2008 the Performance Materials segment reported a 3% decrease in sales after increasing prices by 11% because of a 13% decrease in sales volume. After Hurricane Katrina in 2005, DuPont raised prices on 35,000 products to counter the increasing price of oil and other raw inputs.

Energy prices will increase over the next few years putting pressure on DuPont’s production costs.

DuPont will fail to execute on new product development.

Larger than expected liabilities will result from the Teflon intermediate PFOA lawsuit.

New DuPont hires are management tracked (or not) from the first day. Performance is utterly immaterial to career advancement. Hence the upper echelons at DuPont are chock full of 'diverse' clones who cannot tell a business achievement from a business meltdown, and who do not care to learn. Short of a wave of external hiring driven by stockholders, this company is doomed to fail and has been doing so consistently for decades.

In West Virginia, Dupont is attempting to reduce a $318 million verdict against it for allegedly dumping carcinogenic chemicals, exposing local residents.

The company has faced other lawsuits as well. In March 2010, the New York law firm Weitz and Luxenberg began filing the first of over a 100 lawsuits against DuPont alleging the emission of hazardous chemicals from its Pompton Lakes Works explosives factory for decades.