Pfizer (NYSE:PFE) didn’t have the best of times in the market last week, and for good reason. The company was served subpoenas on Wednesday, leading to investor fears. Today, we’ll talk about the subpoena’s, why investors pushed the stock down as a result, and what traders should be watching for ahead. So, let’s get right to it.
Pfizer Served Subpoenas In US Antitrust Case
As mentioned above, Pfizer had a rough week in the market last week, and a good portion of the declines can be attributed to subpoenas the company was served by the United States Department of Justice. The subpoenas are part of a widespread antitrust investigation surrounding saline fluids during the flu season about 3 years ago.
You see, during this season, saline fluids are in high demand as more and more consumers find themselves ill and dehydrated. As the law of supply and demand tells us, when supplies are low and demand is high, the price of the product must rise. Well, rise it did. However, there’s a strong argument that the price of saline fluids went far above natural supply and demand growth. In fact, those prices went up by around 200% and 300% at Hospira, a company that Pfizer acquired and is now dealing with the backlash surrounding.
While normal supply and demand based growth in price is completely legal, the Department of Justice is investigating to see if the gains in the price were legal or an illegal activity known as price gouging. Of course, if price gouging did take place with regard to a product as important as saline fluid, chances are that there will be quite a bit of legal recourse as a result.
Why This Is Leading To Fear Among Investors
At the end of the day, the reason that Pfizer is down is a big deal. You see, Pfizer is one of the many companies that has centered its business around saving lives and improving the quality of life among the ill. While price gouging alone is a bad thing, price gouging with regard to products that are needed in the medical community is a major concern.
As a result, investors are expecting that Pfizer will have quite a bit of money coming out of its pockets in relation to this issue. After all, even if the company didn’t do anything wrong, these investigations usually lead to legal expenses that can reach into the millions. On the other hand, if Hospira (previously acquired by Pfizer) did price gouge on such an important product, well, the cost to Pfizer could prove to be a major one.
What Traders Should Be Watching For Ahead
Moving forward, traders should be keeping a close eye on Pfizer as the stock is likely to present several opportunities ahead. However, if you’d like to take advantage of these opportunities, it’s important that you pay very close attention to the news. In particular, keep a close eye on the antitrust case that Pfizer is facing at the moment. As mentioned above, if this thing goes the wrong way, it could prove to be an incredibly large cost to the company, and ultimately lead to declines. However, that’s not the only story to watch. Continue to watch the company’s work with regard to its pipeline, sales, and other key business metrics as any news with regard to these will likely cause movement as well.