Not Running Out to Buy Shares in Pfizer

I shouldn't pick on Jeff Kindler, because I wouldn't want to be CEO of Pfizer (PFE), not the least little bit. But he gave an interview recently to the Financial Times, who asked him (naturally) about the Lipitor patent expiration. His answer:

We're facing a very significant loss of exclusivity in Lipitor at the end of 2011. We have a clear plan for positioning the company for strong, profitable growth after that. That plan consists of pursuing significant new opportunities for increased revenues starting with our internal pipeline, getting further growth out of our existing products, growing in the emerging markets, growing our business on off-patent products. We sell billions of dollars of off-patent products and in many parts of the world that's the most important opportunity to meet unmet medical needs and looking for other potential sources of revenues.

I realize that this is the only sort of answer that he could have given, and the only sort that the FT could have expected. But, still. Distill it down, and you have, basically, "We're going to get around losing all that Lipitor revenue by making more money on all our other stuff". Good to hear that, but I'm still not running out to buy any Pfizer stock.

And while we're on the subject of Pfizer, the layoffs there continue to grind on, from what I'm hearing. I don't think that people have quite heard yet if they're staying or going, but I assume that that will happen in time to give everyone a festive Thanksgiving season. In general, it sounds like the company is heading even further down the path of higher associate/PhD ratio that they announced a couple of years ago, with a lot of outsourcing in the mix as well.

But here's a question: how many of the people who will be laid off are people that Pfizer, at great expense, paid to move to Groton from Ann Arbor? Surely there will be a good number in that category, and they've just barely settled down in Connecticut by now. Pfizer's relocation seems to have been pretty generous - picking up property value differences on house sales and the like - and all for this?

Comments

[Eric K:]

Hey Derek - I don't think many people are rushing out to buy Pfizer because they think it is a great growth story. But with the yield at around 8% how can you go wrong if you are just looking at it as a dividend play? It's almost a safer play then bonds at this point.

By the way.....are you really thinking of going back to pitch for the Red Sox next season? (Had to throw that out there.....)

2008 Nov 03 01:37 PM

[Afthought:]

Pfizer bashing continues unabashed!

2008 Nov 03 04:49 PM

[captainccs:]

>>> Pfizer bashing continues unabashed!

With the price dropping for eight year, did you expect cheering?

2008 Nov 03 05:52 PM

[Afthought:]

re captainccs:

Am I left to wonder if you put your entire stake on Pfizer eight years ago? Did you not catch the bottom of >$15? Do you regard >7% dividend apparitional? Maybe you caught Goldman Sachs above $200, or $175, or $125? Are you a buy and hold kind of mark or a trader?


On Nov 03 05:52 PM captainccs wrote:

> >>> Pfizer bashing continues unabashed!
>
> With the price dropping for eight year, did you expect cheering?

2008 Nov 03 09:26 PM

[nyzach:]

If you wrote on this one year ago, or half year ago, or 3 month ago, even 1 month ago, you would be considered smart. Too late now that you are not a bit smarter than anyone else, if not otherwise.

2008 Nov 03 11:21 PM

[Coach Mike:]

>> But here's a question: how many of the people who will be laid off are people that Pfizer, at great expense, paid to move to Groton from Ann Arbor?

you neglected to mention those who received that same relocation package who went to Sandwich from Ann arbor and those who they moved from Japan from sandwich and of course don't forget those they moved from sandwich to michigan for vet med -after they had alredy moved the Ann Arbor people they wanted, many of whome they had just moved from Kalamazoo the year before.

2008 Nov 04 03:40 AM

[howard_roark:]

I like PFE because of the fat dividend yield, and I add to my position as often as I can. Dividends are important to me because my shares are held in my Roth IRA and they are essentially tax free if I don't cash out before age 59 1/2.

I realize the Lipitor problem coming in 2011, but I also recognize that the restructuring plan is working and is already saving the company a great deal of money. Getting leaner and more efficient certainly helps margins and can offset revenue loss until another blockbuster comes along.

The pipeline looks reasonably strong, and PFE has 26 billion bucks in the bank.

PFE is not gonna pop back into the twenties or mid-twenties overnight, but I'm happy to collect my dividends until it does. I think it's also a solid holding in these recessionary times.

Good luck to all PFE longs.

2008 Nov 04 06:47 AM

[Coach Mike:]

Howard Roark.. we've met and the pipeline seems pretty weak to me, unless they buy someone else... that and selling off their money makers is what got them into this mess, not to mention paying ppl like you too little and Hank too much. but still if chris dodd gets his way, they'll be cutting in the UK not the US. imo.. the EU is poised to become Pfizers best hope, those here in the UK arn't quite as discouraged as those in the US... yet.

2008 Nov 04 08:29 AM

[jimmy Turano:]

Extremely good article Derek. Since your an astute writer and call things
the way you see them, I was wondering if you can sort through all the recent fluff of news releases and sudden uptick on 'MRNA'. After the stock went down almost 94% in the past 12 months, From $20 dollars to $.22 cents, the stock all of a sudden is up to $.50 cents? However their Burn rate is around $24 million per year with hardly any Revenue. Prior to the stocks demise, fund managers always ran the stock up and then sold it short. Is this gambling habit back after Wall Street debacle or is uptick demanding some merit for once?

2008 Nov 04 08:33 AM

[CHASAM:]

Glad to see there are many who are not in awe of your writing. A restructuring plan that is cutting costs dramatically, 26 billion in the bank and a huge dividend; all in a stock that is a leader in its industry. That industry just happens to be less recession prone than most. Derek, where is your head?

2008 Nov 04 06:42 PM