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Investors Want A New Drug

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Big drug companies might not be so defensive anymore. Here’s why.

CNBC Pharmaceuticals Reporter Mike Huckman joins the panel for this conversation. Following is a summary of the points he made.

Why Big Pharma might not be a defensive play....

1. Patent expiration cycle -- billions of dollars worth of brand-name drugs go off patent over the next few years.

2. Regulatory risks -- Chantix, Avandia, anemia drugs and others under scrutiny

3. Looming elections --investor fears Democrats take control and make the business environment more rigid.

4. Relatively weak pipelines -- there isn't much to replace all the drugs that are going off patent.

5. Overpay for M&A. In the current environment (loaded with cash and on the prowl) analysts fear Pharma could overpay for acquisitions--especially biotech takeouts.

Also analysts say there could be a lot of tax-loss selling.

The fact of the matter is that Merck (MRK), Lilly (LLY) Bristol Myers Squibb (BMY) and Pfizer (PFE) are all facing big troubles, concludes Huckman.

* * * * *

There’s nothing wrong with Merck shouts an obviously irritated Jeff Macke. I’d still by it as a defensive name, he says.

And I still like Lilly adds Pete Najarian.

Symbol
Price
 
Change
%Change
BMY
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LLY
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MRK
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PFE
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Trader disclosure: On Nov. 21, 2007, 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), (INTC); Najarian Owns (COP) Options, (GOOG) Options, (TIBX) Options, (YHOO) Options; Finerman's Firm Owns (LTD), (TSO); Finerman's Firm Is Short (SPY), (IJR), (IYR), (MDY), (IWM), (LEH); Finerman's Firm Owns Russell 2000 Puts; Finerman's Firm And Finerman Own (GS)