Pfizer "knee jerk" reaction
Pfizer (PFE) is taking it on the chin this morning as investors are running for the hills. The stock is down about 13% from Friday’s close. Dropping from $27/share to $24/share, PFE has lost about $30 billion in market capitalization. The primary reason for the sell off is due to halted development of a key new cholesterol treatment that was heralded as the engine to re-ignite the company's stagnant sales. The news is certainly a disappointment. However, the company did the right thing and cuts its loss instead of attempting to cover up the failed clinical trial, which actually caused a couple of death. If this drug has been released, the damage would be far worse.
The reaction on Wall Street is a prime example of panic. Even if this drug would have been released, it would have not added $30 billion to PFE’s revenue stream. Our view is the sell off is over done. Speaking from experience, this would be the time to buy PFE shares. This remains a great company and this small stumble will pass. A good strategy for situations such as this would be to buy a small position now and wait. The long term outlook remains strong. This is simply a “knee jerk” reaction.
