Big Pharma Has Tough Road Ahead

Texas Jury Finds Merck Liable in Death of Man Who Took Painkiller Vioxx, Awards Widow $253.4M

Big pharmaceutical companies like Merck (MRK) and Pfizer (PFE) are a lot riskier to own than many believe. Sure they have nice dividends and low P/E’s, but a lack of new drugs to make up for patent expirations, and extreme legal uncertainties will make it tough for these companies to grow.

Before today’s award, Merck was hoping its total Vioxx liability from the thousands of open cases would be no more than $10 billion. Well, the very first judgment against them today should raise some eyebrows.

Many people are recommending the big drug stocks for their fat yields and historically low multiples, but I have been taking the other side of the coin, and will continue to avoid these names.