Short term opportunity after PAIN

SGP Schering-Plough Corp:

Dropped 25% today to $14 and change due to a negative RCT on SGP's novel cholesterol drug Vytorin. This is a huge over reaction, leaving SGP one of the cheapest big Pharma players around. The forward P/E multiple is just 8. It has a bit more debt than I'd like to see with the recent $14 Billion Organon acquisition (D:E almost 1); however, the pipeline looks healthy for the future and there is a potential blockbuster anaesthetic drug called Sugammadex nearing release worldwide. A new anti-platelet agent called TRA (for Acute Coronary syndromes) is also promising.

Morningstar has indicated that it feels the FMV of SGP as of today is $31, giving a greater than 50% margin of safety.

Fred Hassan is a CEO with an excellent track record. He has introduced a much leaner infrastructure which should continue to improve operating margins down the line.

I already own a few shares of SGP and have put in a bid to double my stake today.

Addenum:

Summary of Morningstar's take: "Despite our reduced expectations for Vytorin and Zetia, we continue to believe Schering-Plough SGP holds much potential. Outside of what we believe to be an overreaction to the Enhance data, Schering-Plough offers a robust new pipeline of drugs and relatively minimal patent exposure."