Down on Drug News?

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A new FDA Public Health Advisory for antidepressants goes in part like this:

FDA is asking manufacturers to change the labels of 10 drugs to include stronger cautions and warnings about the need to monitor patients for the worsening of depression and the emergence of suicidal ideation, regardless of the cause of such worsening.

In fact, the risk of suicide is already indicated (though admittedly, in language uglier even than that) but is currently relegated to a text-heavy foldout few consumers are likely to read. With the information moved to the more prominent warnings section -- one all doctors should cover with patients prior to prescribing a drug -- some patients may pause before saying yes to antidepressants.

But will that hurt the drug stocks? Probably not too much. Patients are getting used to hearing side effects detailed in TV ads -- some quite serious. Patients also trust their doctors. Bottom line: If you liked the drug stocks before, you can like them still.

Fool Alyce Lomax recently reported that GlaxoSmithKline's (NYSE: GSK) two antidepressants, Paxil and Wellbutrin, are suffering from generic competition. The company, though, has a number of promising new products and sells for a relatively modest 14 times earnings.

Alyce also coveredForest Laboratories' (NYSE: FRX) higher profits thanks to antidepressant drugs Celexa and Lexapro. But it's Alzheimer's drug Namenda that's drawing new investors to this debt-free and cash-rich company. Then again, at a premium 35 times earnings, a lot of happy thoughts are priced in.

Eli Lilly's (NYSE: LLY) antidepressant Prozac has already lost patent protection but remains a legit blockbuster. Lilly has a lot more going for it, too, including strong earnings growth. At 29 times earnings, Lilly should not be hurt by a minor hiccup in antidepressant sales.

Pfizer (NYSE: PFE), with $3 billion in Zoloft sales annually, should also shrug this one off. In the wake of the Pharmacia integration and a large R&D write-off last year, we should probably ignore the company's trailing price-to-earnings ratio and focus instead on the strong free cash flow and forward earnings estimates that value the stock at 15 to 16 times forward earnings.

Wyeth (NYSE: WYE) may be the one that could be hurt by this. The company is already dealing with write-downs on FluMist and Premarin. Antidepressant Effoxor was one of its bright stars. Although, none of its major drugs are close to losing patent protection, the stock sells at an arguably rich 24 times earnings and has a high (68%) debt-to-equity ratio. Mixed with today's news, that could make for one depressing cocktail.

On the balance, however, this is a story of greater import to patients -- and prospective patients -- than to investors. At least, it should be.

Interested in discussing pharmaceuticals or Pfizer with other investors? Try The Motley Fool's Pharmaceuticals or Pfizer discussion boards.

Fool contributor W.D. Crotty does not own any of the stocks mentioned.