What's up with that?
It looks like investors caught the negative statement stashed in the fourth paragraph. InVentiv lost the contract to sell Boehringer Ingelheim's blood pressure medication, Micardis.
By one estimate, the contract was worth only $30 million to $35 million of inVentiv's $1 billion in revenue last year. That alone doesn't justify such a large drop in its stock price. Most likely, scared investors are worried that the loss of the Boehringer contract is foretelling the loss of contracts from other pharmaceutical partners like Eli Lilly
It's true that pharmaceutical companies have been cutting back on staff, but ironically that's not necessarily to inVentive's disadvantage. Outsourcing to inVentive gives pharmaceutical companies flexibility to expand and contract as necessary. In fact, Merck
All is not perfect for inVentiv, however. The slowdown in Food and Drug Administration approvals puts a drain on its ability to get new clients, especially for its communications (primarily marketing) division. Naturally, pharmaceutical companies that get complete response letters and have to go back to the drawing board aren't in the position to be spending money on marketing.
Still, the huge drop Friday seems a bit extreme. The market overreacts some times. Smart investors take advantage of it.
Fool contributor Brian Orelli, Ph.D., doesn't own shares of any company mentioned in this article. Eli Lilly and Johnson & Johnson are Motley Fool Income Investor recommendations. The Fool has a disclosure policy.