Pfizer (PFE)
Last year, pharmaceutical giant, Pfizer (PFE: Charts, News, Offers) executed a $68 million deal to purchase competitor Wyeth. Immediately following the deal, Pfizer stock dropped to a thirteen year low. Over the past year, the Wyeth merger has been shown to be good for Pfizer, but federal legislation has the potential to erase gains.
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Stock Analysis
Since the Wyeth deal, Pfizer has worked quickly to integrate and streamline operations, particularly in combining research and development efforts, resulting in a workforce reduction of close to 4,200 employees. The acquisition of Wyeth has helped Pfizer to become a more diversified company. The combined Pfizer/Wyeth has been reorganized under two general headings: Biopharmaceutical and Diversified. Biopharmaceutical includes Primary Care, Specialty Care, Established Products, Emerging Markets and Oncology. In 2009, the Biopharmaceutical division benefited from Wyeth products such as Enbrel and Prevnar to post a profit increase of 30% during Q4 as compared to the previous corresponding quarter. The Diversified arm includes Animal Health, Consumer Healthcare, Capsugel and Nutrition. It was in this half of the company where Pfizer posted the biggest gain: profit in Q4 2009 increased 83% to $1.8 billion from $1.0 billion in Q4 2008. Products such as Centrum, Advil, and Robitussin contributed the most to this increase.
The “Diversified” sector of Pfizer/Wyeth continues to show the most growth potential. Already the largest drug manufacturer in the world in terms of human ailments, the merger immediately made Pfizer the world leader in the development and manufacture of veterinary-prescription medicines.
Many analysts believe that the Wyeth deal and expansion into the field of animal health is Pfizer’s answer to the upcoming “patent cliff” that it is facing in 2011, when the patent on flagship drug, Lipitor expires. Lipitor is a safe and effective drug used to treat high cholesterol. It is the best-selling drug in the world and the most important for Pfizer. Lipitor alone generated $11.4 billion – over 20% of Pfizer’s annual revenue in 2009. The Lipitor revenue is threatened by the coming generics in 2011 on top of similar drugs Pravachol and Zocor, being produced by competitors Bristol-Myers Squibb (BMY: Charts, News, Offers) and Merck (MRK: Charts, News, Offers) respectively.
Pfizer Inc. is still the largest pharmaceutical company in the world, but there is reason to believe that the world might be changing for big drug companies. The United States has debated a major overhaul of healthcare for over a year and the result of that battle will go a long way toward predicting the long term health of Pfizer. Pfizer CEO, Jeffrey Kindler tried to get out in front of the legislation by striking a deal with the Obama administration. In general terms, the industry committed $80 billion to support reform in the hopes that they would benefit from a requirement that people buy brand-name drugs and that government would oppose drug importation and price controls.
Even though the industry has strongly embraced the free market throughout history, a deal in coordination with government seemed like a smart play, particularly if health care reform was sure to pass. However, right now, passage of the legislation is greatly in doubt and the latest version of Obamacare is so stripped-down that it no longer holds any benefit for big pharmaceuticals, particularly Pfizer.
More News about Pfizer:
- Pfizer and Champix: Three British Columbia women file class action suit in regards to the smoking-cessation drug, claiming that it causes depression and suicidal tendencies.
- Lipitor lessens heart risk: High doses of Pfizer flagship drug cut risk of heart attack in some patients by a third compared to the lowest dose.
Other Stocks in the News:
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Joshua Caucutt is long-time market follower and finance writer. Debt management, entrepreneurship and government economic policy are areas of emphasis. He regularly contributes to the
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