Investing to Wealth

The shares of Dow component Pfizer Inc. (NYSE: PFE) slipped to a fresh 52-week low out of the gate this morning, after the pharmaceutical firm said it was canceling development of two experimental drugs in late-stage trials. Pfizer is scrapping work on esreboxetine, a fibromyalgia treatment, and PD 332,334, a drug for generalized anxiety disorder, because "it was considered unlikely that either compound would provide meaningful benefit to patients beyond the current standard of care."

Currently, Pfizer is fumbling to find a replacement for its successful cholesterol drug, Lipitor, which loses patent protection in 2011. The pharma firm isn't having much luck, though. Two late-stage drugs for pancreatic cancer and for obesity were also recently dust-binned after disappointing study results.

The stock tumbled to $13.13 with the sound of the opening bell -- marking not only a new annual low, but its lowest price since October 1996 -- though it rebounded somewhat by mid-morning. PFE has been pushed south by its 10-week and 40-week moving averages since June 2007, but the security gapped significantly below both trendlines last month after the company's bid to acquire Wyeth (NYSE: WYE) was launched.

Option players apparently anticipated PFE's recent bout of technical weakness; peak put open interest of 37,703 contracts is docked at the in-the-money March 15 strike.

Unfortunately, the equity's losses could multiply if brokerage firms decide to back away from their bullish stance. Zacks reports seven Strong Buys and one Buy, compared to just four Holds. Following today's troublesome fundamental news, any downgrades or price-target cuts from this optimistic group could drag PFE to another multi-year nadir.

Already today, analyst David Moskowitz of Caris & Co. seems dismayed by PFE's decision-making. "This is just another sign that the Pfizer's research and development operation is not as effective as it needs to be," he told Reuters. "If they are killing [projects] in Phase III, they need to go back and look at their decision process."

Elizabeth Harrow is an analyst and financial writer in the research department at Schaeffer's Investment Research. She is featured in the video series Schaeffer's Daily Q&A on SchaeffersResearch.com.

Filed under: Bad news, Pfizer (PFE), Options, DJIA, Stocks to Sell

Pfizer finds new annual low after scrapping two late-stage drugs originally appeared on BloggingStocks on Tue, 24 Feb 2009 12:30:00 EST. Please see our terms for use of feeds.

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