Pfizer Inc. (PFE), in a move which was not unanticipated, has announced that it intends to reduce it's workforce by as much as 18% over the next 18 months to five years. This announcement comes as the lead-in to important moves the company must make to remain competitive and profitable in the coming years.

Pfizer (NYSE: PFE) closed at $17.10. PFE is expected to report Q3 EPS on October 20. Pfizer is expected to close on the acquisition of Wyeth (NYSE: WYE) for $33 in cash and 0.985 of a share of Pfizer by the end of 2009. PFE call option volume of 32,111 contracts compares to put volume of 2,590 contracts PFE October and November option implied volatility of 30 is below its 26-week average of 33, according to Track Data, suggesting decreasing price movement.

Financial Select Sector (NYSE: XLF) overall volatility at 39; below a level of 129 from November 2008 and above a level of 33 from September 23 according to IVolatility.com.

Options Update is provided by Stock Specialist Paul Foster of theflyonthewall.com.

Merck (NYSE: MRK) closed at $32.68. The Schering-Plough (NYSE: SGP) and Merck merger is expected to close before year end. SGP shareholders will receive 0.5767 shares and $10.50 in cash for each share of SGP. MRK October and January option implied volatility of 31 is below its 26-week average of 37, according to Track Data, suggesting decreasing price movement.

Pfizer (NYSE: PFE) closed at $16.77.Pfizer is expected to close on the acquisition of Wyeth (NYSE: WYE) for $33 in cash and 0.985 of a share of Pfizer by the end of 2009. PFE October option implied volatility is at 26, December is at 31; below its 26-week average of 36, according to Track Data, suggesting decreasing price movement.

Option Update is provided by Stock Specialist Paul Foster of theflyonthewall.com.

Mergers and acquisitions aren't delivering the fees that investment bankers used to enjoy, but fortunately, the money's coming from elsewhere. Data from Thomson Reuters reports a 29% increase in capital markets and M&A fees for the first time in more than a year. Share sales (e.g., rights offerings) were where dealmakers found the action. In the shrinking M&A space, Morgan Stanley (NYSE: MS) has taken the lead spot.

Since there are fewer banks in the marketplace than there were a year ago -- and they have less money -- the capital is starting to come from elsewhere. Because they aren't lending at their previous pace, companies are issuing bonds and equity to replenish their coffers. Pfizer (NYSE: PFE), for example, raked in more than $23 billion from the bond market to fund its acquisition of Wyeth (NYSE: WYE), and Roche nabbed Genentech with the help of a $30 billion debt issuance.

Pfizer (NYSE: PFE), a pharmaceutical entity whose colleagues include Merck (NYSE: MRK), Novartis (NYSE: NVS), and Johnson & Johnson (NYSE: JNJ), will be reporting first-quarter earnings Tuesday. As one has come to expect, the market believes that the company will be experiencing a decline in bottom-line income. The call is for 49 cents per share versus 61 cents per share in the year-ago period.

That's a drop of 20%. That might not sound so hot, but the good news is that Pfizer has a solid recent track record when it comes to beating earnings expectations. So shareholders might be justified in feeling confident about that aspect of the game.

Wyeth (NYSE: WYE) closed at $43.11. Pfizer (NYSE: PFE) announced on January 26 the acquisition of WYE for $33 in cash and 0.985 of a share of PFE. PFE closed at $14.04. WYE April and May option implied volatility of 23 is near its 13-week average of 23, according to Track Data, suggesting non-directional price movement.

Schering-Plough (NYSE: SGP) and Merck (NYSE: MRK) approved a definite merger agreement on March 9. SGP shareholders will receive 0.5767 shares and $10.50 in cash for each share of SGP. SGP closed at $24.19. MRK closed at $27.16. SGP April and May option implied volatility of 37 is near its 2-week average according to Track Data, suggesting non-directorial price movement.

Option Update is provided by Stock Specialist Paul Foster of theflyonthewall.com

"Long-time healthcare investors can be forgiven their confusion; drug stocks are supposed to be defensive, but many of the largest drugmakers have been pounded," observes Richard Moroney.

Nevertheless, in the blue chip Dow Theory Forecasts, the advisor sees two favorite healthcare and pharmaceutical issues as long-term opportunities: AstraZeneca (NYSE: AZN) and Johnson & Johnson (NYSE: JNJ).

Moroney explains, "Healthcare companies' profits are supposed to remain fairly steady regardless of the economic situation. But hospitals' capital spending fell in the December quarter, and many consumers are putting off medical care because they cannot afford it.

The shares of Dow component Pfizer Inc. (NYSE: PFE) slipped to a fresh 52-week low out of the gate this morning, after the pharmaceutical firm said it was canceling development of two experimental drugs in late-stage trials. Pfizer is scrapping work on esreboxetine, a fibromyalgia treatment, and PD 332,334, a drug for generalized anxiety disorder, because "it was considered unlikely that either compound would provide meaningful benefit to patients beyond the current standard of care."

Currently, Pfizer is fumbling to find a replacement for its successful cholesterol drug, Lipitor, which loses patent protection in 2011. The pharma firm isn't having much luck, though. Two late-stage drugs for pancreatic cancer and for obesity were also recently dust-binned after disappointing study results.

Here are some highlights from this past week's earnings coverage from BloggingStocks:

• Amazon.com Inc. (NASDAQ: AMZN) shares surged after earnings easily topped Q4 expectations.
• AT&T Inc. (NYSE: T) reported that its Q4 earnings fell while its revenue rose marginally.
• Boeing Co. (NYSE: BA) posted a big loss and lower revenue due to strikes and design changes.
• Caterpillar Inc. (NYSE: CAT) reported that Q4 profit fell despite higher revenue and lowered its guidance.
• Danaher Corp. (NYSE: DHR) lower Q4 profit topped analysts' estimates, sending shares higher.
• Eastman Kodak Co. (NYSE: EK) reported a Q4 net loss and announced additional job cuts.

Wyeth (NYSE: WYE) is recently trading at $42.06, above its close of $38.83. Pfizer (NYSE-PFE) is in talks to acquire WYE in a deal valued at $60B, reported the WSJ. WYE is expected to report Q4 EPS on January 29. WYE February and March option implied volatility of 46 is near its 26-week average of 43, according to Track Data, suggesting non-directional price movement.

PFE is recently trading at $16.77, below its close of $17.21. PFE is expected to report Q4 EPS on January 28. PFE February volatility of 37 is near its 26-week average according to Track Data, suggesting non-directional price movement.

Crucell NV (NASDAQ: CRXL), a biopharmaceutical company, and WYE confirmed on January 7 the two firms are in discussion to combine. CRXL closed at $22.39 and was recently trading this morning at $19.91. CRXL February option implied volatility of 70 is above its 26 week average of 63, according to Track Data, suggesting larger price movement.

Option Update is provided by Stock Specialist Paul Foster of theflyonthewall.com.