Analysts React to Pfizer 'Analyst Day'

Pfizer (PFE) held its analyst day yesterday and the stock closed at a new multi-year low. Thursday morning the shares are under a little bit of pressure again as analyst reaction to the event pours in.

In a quick-take interview on "Squawk on the Street" Wednesday morning, Credit Suisse pharma analyst Catherine Arnold said, "I think the reality is that the era of trust and patience is gone."

That sentiment is reflected in at least a few analyst commentaries on Pfizer Thursday morning.

Miller Tabak healthcare analyst Les Funtleyder writes in a research note to clients this morning, "In a case of moral relativism, investors still prefer current management over previous management which isn't saying much, but patience is wearing thin."

Bernstein's Tim Anderson put out a note titled, "Pfizer: If Your Expectations Were Low, the Analyst Day Was Fine." Anderson is calling the company's rebuilding strategy a "brick by brick" tack. He writes, "If anything, management seemed to have even more conviction in this approach, which at least some have felt lacks a sense of 'urgency' ."

And Seamus Fernandez at Leerink Swann writes, "Yesterday's analyst meeting featured several late-stage (drug development) pipeline products, but there was little concrete evidence that PFE is on track to generate excess shareholder returns."

But not everyone is bearish.

Barbara Ryan at Deutsche Bank, who has been telling clients to buy PFE for quite some time, is not wavering. She calls her note, "Pfizer: Between a rock and a hard cash place". Ryan maintains the nearly six percent dividend yield is attractive. And she writes, "As investors are pricing in the hit from Lipitor (going generic in 2-3 years) but not the (drug development) pipeline, or the potential for cash to be converted into future revenues and EPS, we see these as likely catalysts for upside."

And Jim Kelly at Goldman Sachs is also reiterating a Buy rating on PFE. He says, "Pfizer boasts the broadest and potentially deepest pipeline in the industry. We expect a significant amount of drug development news flow in 2008, at major medical meetings."

First up could be the American Society of Clinical Oncology (ASCO) conference in early June. Pfizer said yesterday it has submitted about a hundred abstracts (study results) for this year's meeting. For a major pharmaceutical company that up until a couple of years ago had little, if anything, going on in oncology, that's approaching a Genetech (DNA)-type number. In addition, Pfizer announced yesterday that it's creating a separate business unit devoted specifically to cancer. Officials said they're in the process of hiring someone to run it.

Goldman has done and wants to do more investment banking for PFE. Credit Suisse and GS make a market in the stock and a GS Director is also on the Board at PFE. Bernstein and DB also make a market in the stock and own at least one percent of the shares. In addition, someone on the Bernstein research team owns the stock, Deutsche and Credit Suisse want to bank PFE and Leerink Swann may trade in the shares.

Comments

[Dennis Trig...:]

I am a holder of over 27,000 shares of Encysive stock and am filing a complaint with the SEC per below. If you wish to contact me, do so at 702-731-2286 or 702-804-7260. I am also forwarding this email to a leading analyst who follows Encysive, so that there may be full transparency in this matter.


1) That the material misstatements contained in Encysive's 3/4/08 filing invalidates the opinion that Pfizer's bid represented the best and superior offer in the interests of the shareholders.

2) That the material misstatements invalidate the definitive tender offer and definitive sales agreement between Pfizer and Encysive.

3) That Bidders "B" and "C" must be informed of the defect and be invited to re-bid, along with Pfizer, along with any additional unsolicited bidders.

4) That the Encysive board of directors and Morgan Stanley issue a press release to that affect and rescind their previous fairness opinion and best offer statements.

I Will Complain to SEC That Encysive's SC 14D9 Contains a Material Misleading Statement
SC 14D 9, March 4,2008, page 10, last sentence, third paragraph from the bottom, concerning the $130 million convertible note maturing in 2012:

"...all bid proposals for the purchase of Thelin rights outside of the United States, would likely trigger the convertible note holders' rights to require Encysive or its successor to repurchase the notes at par value following such transactions."

The above assertion is overreaching and contradicts language found in the definitive filing statement for the $130 million convertible note, which Encysive filed with the SEC, Form s-3/A, June 15, 2005, page 34, paragraph five from the top:

"The definition of change of control includes a phrase relating to the conveyance, transfer, lease or other disposition of 'all or substantially all' under applicable law. There is no precise established definition of the phrase 'substantially all' under applicable law. Accordingly, the ability of a holder of Notes to require us to repurchase such Notes as a result of conveyance, transfer, lease, or other disposition of less than all of Encysive's assets may be uncertain."

Writer's note: page 31, above SEC filing, fifth bullet point is the full phrase referred to above:

"A sale or conveyance to another corporation of all or substantially all of Encysive's property and assets."

Writer's Opinion: Encysive could argue to the bond trustee the following mitigationg points:

1) Per previous Encysive SEC filings the company does not own or have title to any real property.

2) Asset sale proceeds go back into the company's treasury and are appropriately controlled and reported in SEC and IRS filings.

3) If Encysive sold rights to the PAH drug Thelin, geographically located primarily in the European Union, Russia, Turkey and Brazil, the total population of those countries aggregates only about 1 billion.

4) The total population of Thelin rights in areas retained by Encysive in their entirety and not ceded to any corporation, person or entity, is equal to approximately 5 billion people.

5) Encysive continues to own exclusive and unimpaired rights to TBC3711, a later generation PAH drug compared to the drug Thelin. Encysive has invested a considerable amount of money into the development of TBC3711 and considers it an important, though hard to value company asset.

IF ENCYSIVE FAILED TO PREVAIL IN A COURT OF LAW THE FOLLOWING ARE ONLY A FEW OF THE MITIGATING REMEDIES THAT COULD BE PROPOSED TO THE BOND TRUSTEE AND THE COURT:

A) Segregate funds in an interest bearing controlled account either equal to or as a percentage of the above mentioned $130 million, subject to company and trustee access rules.

B) Offer to partially reduce the debt by a lottery open to all bondholders, offering an enhancement on par value in an indenture amendment negotiated with the bond trustee.

C) Convert the bonds into unsecured plain vanilla bonds at a higher interst rate.

D) Lowering the Encysive share price required for bondholder conversion into company common stock.

2008 Mar 07 08:37 AM