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Investors Run for Cover after Merck Gets Pummelled, Did You Lose Too?

October 30, 2017
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Another major pharmaceutical company seems set for a major decline as drug-maker Merck’s shares fell for a second straight session according to Reuters. The stock’s pullback can be attributed to a key drug withdrawal. CNBC reports:

The company announced Friday after the closing bell that it was pulling its application [for an oncology drug], a decision analysts at SunTrust Robinson Humphrey deemed “troubling.” Keytruda received accelerated approval from the Food and Drug Administration for treatment of non-small cell lung cancer in May, but analyst John Boris suggested that Merck may be holding off overseas until U.S. regulators get a better sense of trial data from research studies known as “Keynotes.”

This is extremely damaging news for Merck. With arguably its most important drug stuck in limbo for the foreseeable future, the company will need to react quickly to allay investors’ fears of a deepening crisis.

To this effect, CNBC also reports that:

“We and consensus had expected a delay, but not of that duration,” wrote Morgan Stanley analyst David Risinger in a note to clients. He said Merck shares likely will not outperform until the drug tests successfully, and could face pressure from competitors coming on line.

Major drug approval problems have plagued much of the pharmaceutical industry this year and Merck’s most recent example will not give many investors confidence in the sector going into the final quarter.

Read: As Axovant Gets Clobbered, Could Investors be the Biggest Losers?

While this element of investing in big pharma will always be subjected to this kind of uncertainty, investors should be sure to do their due diligence before buying shares in pharmaceutical companies to prevent similar disasters.

To read CNBC’s article on Merck’s downgrade, click here.

To read Reuters’ article on Merck’s withdrawn drug application, click here.

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