Big Pharma's fortunes rise and fall on the ability to sell hope. Hope for an immortal you.
But a study two weeks ago showed that the blockbuster cholesterol pill from Merck and Schering Plough --Vytorin -- is no more effective than a cheaper alternative. So those promises made on TV... well, haven't been kept.
Merck lost one-fifth of its value and Schering-Plough lost a whopping 30% since that report. Three years ago Merck gave investors a similar sinking feeling after withdrawing the wildly popular painkiller Vioxx amid concerns over increased heart risks.
And this isn’t an isolated case. A recent report in the New England Journal of Medicine questions the effectiveness of a dozen leading antidepressants. If the chorus of concern over drugs such as Pfizer's Zoloft and Wyeth's Effexor grows louder, this $21 billion-a-year industry could need triage.
Is there any hope for the stocks that trade on hope?
This is a sector that investors have to trade carefully, says Pete Najarian. But for me the question is -- will doctors continue to prescribe these medicines? I think, yes and sales should continue.