Pfizer Tumbles After Halting Torcetrapib Development

The stock market does not look kindly on a pharmaceutical company when it suddenly stops development of a new drug that was expected to generate billions of dollars in future revenues. So when Pfizer (PFE) halted development of its cholesterol treatment torcetrapib, investors sold off the stock.

As of 10 AM on December 4, 2006 PFE was down $3.51 (12.6%) to $24.35 after PFE announced that an unexpected number of deaths occurred in the clinical trials with torcetrapib.

At $24.35 the stock is trading a lower end of the current short-term upside channel. And its $0.96 annual dividend produces a 3.9 percent dividend yield.

Is a Pfizer a buy at these prices? The arguments for buying the stock include: the dividend yield is attractive; Pfizer could raise its dividend and buy back shares to support the stock price and the stock is at the low end of the current upside price channel. The arguments against buying PFE include: the stock is on a long-term downside; its future revenue and earnings streams are too uncertain and more bad news could drag the stock down further.

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Posted December 4, 2006.