Pharma: May Cause Nausea, Dry Mouth

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.

If you don’t want to play stock picker in biotech land take a look at the SPDR S&P Biotech ETF , counsels Joe Terranova. It spreads your risk exposure.

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Trader disclosure: On July 22, 2008, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s Fast Money were owned by the Fast Money traders; Najarian Owns (AAPL), (AMLN), (C), (CHK), (ETFC), (TSO), (ICO): Najarian Owns (CSCO) Calls, (MRK) Calls, (YHOO) Calls, (HUN) Calls; Macke Owns (GS), (WMT), (MSFT): Finerman Owns (GS); Finerman's Firm Owns (MSFT), (SUN), (TSO), (VLO), (M); Finerman's Firm And Finerman Own (C) And (C) Leaps; Finerman's Firm Is Short (BBT), (WB), (IYR), (IJR), (IWM), (SPY), (MDY); Finerman's Firm Owns (HUN) Calls: Terranova Owns (BNI), (SA), (VLO), (RIMM), (CME), (FCX), (GOOG), (INTC), (IYT), (XLF), (SU), (YHOO); Terranova Is Long September Crude Oil $154 Calls; Terranova Is Short September Crude Oil $130 Puts; Terranova Is Short September Crude Oil $130 Calls;

Terranova Is Chief Alternatives Strategist Of Phoenix Investment Partners, Ltd.; Terranova Is Co-Portfolio Manager Of The Phoenix Diversifier PHOLIO; Phoenix Investment Partners Owns More Than 1% Of (DBV) ,(RWX), (LNET) ,(EXR), (SKT) ,(DLR) ,(IGE) ,(ARE) ,(DBC) ,(ABD) ,(OFC) ,(CLB) ,(BLV) ,(CNTY) ,(FL) ,(HPC) ,(PSPT) ,(ESS) ,(OIIM) ,(BIG) ,(ENG) ,(PFD) ,(DRH); Phoenix Diversifier PHOLIO Owns (IGE), (DBC), (DBV)Charles Schwab Is A Sponsor Of "Fast Money"

An Analyst On Butler's Coverage Team Owns (PFE), (SGP): Lehman Brothers Has Received Non-Investment Banking Compensation From (PFE), (MRK), (BMY) In Last 12 Mos.; (PFE), (BMY) Is Or In Last 12 Mos. Has Been A Non-Investment Banking Client (Securities Related Services) Of Lehman Brothers; Lehman Brothers And/Or Affiliate Has Received Investment Banking Compensation From (BMY) In Past 12 Mos.; (BMY) Is Or In Past 12 Mos. Has Been An Investment Banking Client Of Lehman Brothers And/Or Affiliate