¶ … buy Bristol Squib Meyers stock today? Why?

Investing the pharmaceutical industry is always a dicey prospect. Although the drug industry has the advantage that many of its customers cannot opt out of buying its product, there are also many disadvantages to buying pharmaceutical stocks. First of all, drug patents are finite, which means that even a successful drug is likely to have a short life of generating a great deal of money for the company, as was seen with Pfizer's Prozac. The new type of antidepressant eventually spawned many spin-offs from Pfizer's competitors, as well as a generic version. The same thing is likely to happen to Glucophage, now that its patent has ended. Also, a company can spend a great deal of money on a new drug's development, only for the drug to fall flat in terms of its effectiveness, as was seen in the case of Erbitux.

In today's litigious environment, there are more concerns about drug's side effects and the ethics of pharmaceutical advertising of new treatments to consumers. Even if Bristol-Squib Meyers is not directly implicated in all of the cases surrounding this issue, fears about the over all health of the industry will affect stock prices. And finally, there is increased consumer outrage about drug costs and pressure to change current regulations about providing effective health care to Americans. Whatever the long-term impact upon the industry, the government is likely to have to devote considerable resources to health care reform in the near future. Changes in regulation, whatever they are, will make pharmaceutical stocks very volatile for the next 5-7 years.

Finally, the particularly negative publicity surrounding ImClone, justified or not, will negatively impact stock prices for all of the companies connected to the scandal, and Bristol must struggle and devote valuable corporate resources to generate positive media coverage to regain its faltering ethical reputation in the eyes of investors and consumers.