Merck’s stock plunged on the NYSE yesterday due to a new study that showed its antiarthritis COX-2 inhibitor, Vioxx, doubled the risk of heart attack and stroke in patients.
At a P/E of ~11 now, forward P/E <10, and with a yield of about 4.5%, I think it is very attractively priced. The stock is at an eight-year low, and it happened overnight.
The stock pays its dividend today (10/1) so should drop a bit more. If the stock doesn’t bounce today (despite the payout, which should push it down more), IMHO it would be a good idea to buy some on Monday.
No doubt lawyers will attack the company, but the study report shows that five people died while on Vioxx, and five people died while on a placebo.
It’s a risky bet, but it’s the best one I’ve seen in a major company in the last year.