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Halftime Report: Da Bears Are Winning

This halftime report is not brought to you by (pick your prescription drug).

So, we're pretty much at the midway point of Big Pharma's earnings season, and Goldman Sachs analyst James Kelly is sizing things up so far.

In a research note to clients Tuesday morning, Kelly says, "We like the newsflow for 2Q2008 [the second quarter], but acknowledge that investors may prefer to wait on the sidelines, if key events are not positive or economic expectations improve."

The newsflow he's referring to could begin any day now, when Merck is up for Food and Drug Administration approval of a new heart/cholesterol drug called Cordaptive. It combines niacin with a special ingredient that tests have shown reduces the bothersome facial redness and tingling experienced by many patients who take Abbott's Niaspan.

Clearly, investors are not impressed by the reports they've seen so far. As I write this, Pfizer shares just fell below 20 bucks for the first time since Sept. 25, 1997, when they closed at $19.97. (They bounced back up over $20, shortly after Erin Burnett pointed out the stock had become "a teenager" during "Squawk on the Street.")

The timing of the continued decline couldn't be worse for Pfizer, which is set to face shareholders at its annual meeting in Memphis on Thursday. Not even the 6-point-something percent dividend yield, which the bulls so often point to, is giving people a reason to buy PFE.

Kelly points out that, among other things, Pfizer, Merck and Eli Lilly all posted lighter-than-expected revenue and saw "softness" in the U.S. that was not offset by international growth or the weak dollar like it had been in the fourth quarter of last year, or versus what GS was looking for in the first quarter.

We still have to hear from Schering-Plough, GlaxoSmithKline, AstraZeneca, Bristol-Myers Squibb, and Sanofi-Aventis.

Tomorrow morning outgoing GSK CEO J.P. Garnier will make his final quarterly earnings appearance on CNBC at around 7:50am ET during "Squawk Box." The new guy takes over next month. And then on "Squawk on the Street," I'll have an exclusive interview with SGP CEO Fred Hassan.

While PFE may have crossed a threshold, this morning LLY remains the biggest dollar loser in the sector, on top of an ugly day yesterday.

Several analysts are raising concerns about the timeline for potential approval of Lilly's bloodthinner, Effient. It's the biggest and closest product to coming out of the pipeline.

And there seems to be continued investor nervousness over LLY and Amylin's once-a-week version of Byetta. AMLN is getting pummeled again today on a downgrade to "Underperform" by BMO Capital Markets. The crucial test results on the long-acting Byetta are expected to be presented in early June at the American Diabetes Association annual meeting.

Goldman Sachs has done and wants to do more investment banking for PFE, LLY and MRK and makes a market in all three stocks.

Wyeth kicked off the second half this morning. Da Bears are still on top.

Questions? Comments? Pharma@cnbc.com

Symbol
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AZN
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BMY
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GSK
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LLY
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MRK
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PFE
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SNI
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