Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.
What: Shares of Albany Molecular Research, Inc. (NASDAQ:AMRI), a drug discovery, development, and manufacturing company contracted out by pharmaceutical companies, fell as much as 22% following the announcement that Bristol-Myers Squibb (NYSE:BMY) was discontinuing two studies involving Albany Molecular's technology.
So what: If you recall, this is the second time in a matter of days that Albany Molecular shares have been rocked. Last week, it was earnings skepticism that did shares in after their incredible run higher. Today, word from Bristol-Myers that it was discontinuing two mid-stage clinical trials for BMS-820836 for treatment-resistant depression, which utilizes technology developed by Albany Molecular, is the straw that broke the bulls' back. Albany Molecular signed its original deal with Bristol-Myers with the scope of the pact ranging four compounds -- BMS-820836 was the furthest along of the bunch. Albany Molecular plans to discuss further with Bristol-Myers what will become of the remaining compounds. The company doesn't anticipate any material impact on revenue or EPS in the third quarter or this year.
Now what: Unlike last week when investors largely misinterpreted Albany Molecular's solid results, this does have the makings of a potential problem. My thought last week was that as long as big manufacturing contracts were on the rise, then investors shouldn't worry. Bristol-Myers certainly represents a big dog among a handful of pharmaceutical drug developers, and the loss of BMS-820836 and the potential loss of its remaining compounds could complicate future earnings a bit. I'd really like to see what Bristol-Myers plans to do with its remaining mutual drugs-in-development before suggesting a move here either way, but I do believe this stock should remain on your Watchlist.
Fool contributor Sean Williams has no material interest in any companies mentioned in this article. You can follow him on CAPS under the screen name TMFUltraLong, track every pick he makes under the screen name TrackUltraLong, and check him out on Twitter, where he goes by the handle @TMFUltraLong.
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