Merck probably wishes it could develop a treatment for the malady it’s facing. Shares of the drugmaker continued to fall Tuesday, a day after the second study in six months cast doubts on the effectiveness of Vytorin, a cholesterol pill it sells with partner Schering-Plough.
Following the news several brokerages cut their targets on the stock.
Leerink Swann analyst Seamus Fernandez cut his rating on the stock to "market perform" from "outperform." And Bernstein slashed its target on Merck by $10 to $36.
“There’s fear around the cholesterol market,” explains Lehman Brothers analyst Tony Butler on Fast Money. The study revealed that some people who took Vytorin later developed cancer although it wasn't clear if that was merely a coincidence. But coincidence of not, "we wondered if people would just throw their pills away,” Butler says.
But they haven't. Does that make Merck a buy on the current dip.
”It’s a value play but I don’t know if Merck stock is going anywhere anytime soon,” replies Butler. “But I have a buy on Schering as a growth story,” he says.
Looking ahead, can Pfizer or another drug maker revive the Big Pharma comeback?
“The key with Pfizer is revenue growth which I don’t think they do well,” replies Butler. They’ve been able to buy back shares but that won’t drive their stock.
This wouldn’t be Fast Money without at least one trade. What drug company is best to play this earnings season?
“Bristol will likely have the best numbers out of the group so I’d lean toward them,” replies Butler.