PFE seems to be winning the battle at the century mark today.
The following San Francisco Chronicle article is an excellent example of why you need to be very careful in reading Pharma analysts' recommendations.
The Cruttenden Roth analyst mentioned was previously active with the investment banking functions of the company that he covered and still has a strong buy on that stock. The other problem is that you can not trust business reporters either. The efficacy rate for MUSE cited in the article is lower than previously reported.
The best advice: track the record of the analysts and know their banking relationships with the company.
I know its tough....but think YTD and have PFun!
BigKNY3
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Vivus Hangs 'For Sale' Sign, But News Doesn't Give Stock a Lift
Investors tired of overzealous sell-side analysts
MARK VEVERKA Wednesday, August 26, 1998
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The credibility of sell-side analysts is declining nearly as rapidly as that of journalists.
And if you take a look at the story behind Vivus, the Menlo Park maker of the impotence treatment Muse, it's not so difficult to understand why.
Yesterday, Vivus management announced that it had hired investment bank CS First Boston to help peddle all or various parts of the devalued medical device firm. (Another option includes finding able marketing partners.)
Whenever a company hangs out a ''for sale'' sign, it is quite often an act of acute desperation. In fact, investors think so little of Vivus and Muse that the announcement didn't even move the stock, despite the fact that prospects of a buyout usually give shares a boost.
But not with Vivus. It stayed flat at $4.75, which still is $1.65 higher than the company's book value of $3.10.
Why didn't investors bite?
Because they've heard Vivus' embellished story too many times and they no longer believe it. It was a stock whose price soared as high as $40.56 (adjusted for a split), thanks largely to the boosterish antics of some overzealous sell-side analysts, who work for brokerage firms.
The biggest bull in the ring was Cruttenden Roth financial analyst Wole Fayemi, who a year ago pounded the table insisting that the stock would hit $125. And that was before Pfizer's Viagra drug hit the market, which of course has become a huge suc- cess. (And a catalyst to more water-cooler jokes than the O.J. Simpson trial.)
Fayemi aggressively touted Muse's alleged clinical strengths versus those of Viagra. And he adamantly defended Vivus management, which at times seemed to contradict itself, fund managers say. He even apologized for the company's troubles in getting Food and Drug Administration approval for a production plant.
What's more, Fayemi was among the first to call journalists with documented disclosures about deaths associated with Viagra's clinical trials. If nothing, Fayemi has been a loyal bull to the end. As of yesterday, he maintained a ''strong buy'' recommendation, according to Bloomberg. Neither Fayemi nor Vivus chief executive Leland Wilson returned calls.
The problem was that the stock simply wasn't real. Buy-side analysts (who work for companies that buy stocks such as mutual and hedge funds) say they've talked to doctors who made it clear that they were not inclined to prescribe Vivus. Vivus' demise ''has been a long time in coming,'' says one buy-side analyst who specializes in medical stocks.
Vivus was early to market with its impotency drug and device (a pill that is injected into the urethra). But longtime bears of the company say it never possessed the fundamentals to justify the price it once fetched.
As it turns out, Muse is effective on about 25 to 40 percent of patients, bears say. It is expensive, about $23 a dose. And it is invasive. Not a good combination.
''A lot of people listen to the Wall Street hype. But with medical device stocks, the truth lies with the opinions of the clinicians,'' a buy-side analyst says.
Of course, much attention recently has been paid to sell-side analysts' changing roles and how they are pressured to publish optimistic research to aid the corporate finance side of their investment houses. Yet there still are plenty of analysts who stick to the numbers and who are beyond reproach.
Unfortunately, as with any group dynamic, a few bad apples can spoil the whole barrel.
sfgate.com
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