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.
This might actually be the time to think about buying Merck, says Guy Adami. I like it at current levels, but I don’t see a need to get into it ahead of earnings.
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Trader disclosure: On Jan 28, 2008, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s Fast Money were owned by the Fast Money traders; Macke Owns (YHOO), (EMC); Finerman Owns (GS); Finerman's Firm Owns (AEO), (GLNG), (TSO), (VLO), (YHOO), (WMT); Finerman's Firm Is Short (MDY), (IYR), (IJR), (SPY), (IWM); Finerman's Firm Is Short (LEH) And Owns (LEH) Puts; Najarian Owns (C), (EMC), (MS), (MCD), (MSFT), (BIIB); Najarian Owns (AAPL) Calls, (BBY) Puts, (COP) Calls, (CTSH) Calls, (YHOO) Calls, (YRCW) Calls; Najarian Owns (DOW) Calls; GE Is The Parent Company Of CNBC