Pfizer: A Compelling Buy Candidate In 2012

| About: Pfizer Inc. (PFE)
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Pfizer (PFE), the largest drug maker in the world, might need to consider a full break-up, Goldman Sachs argues in a recent report. If it were to split, it could mean a rise of up to 18 cents per share in earnings. This is the estimate given by Goldman Sachs analyst Jami Rubin, after having met with Pfizer chief executive Ian Read. A large part of this possible split involves the sale of the animal health and nutrition units. One possible buyer for the nutrition business is the French company Danone, and another is Mead Johnson Nutrition (MJN), which could bid $10 billion. Pfizer's animal health unit could also receive a bid of up to $18 billion from Bayer (OTCPK:BAYRY).

Pfizer is on the up-and-up recently, after having slid dramatically leading into February of this year. Its 52-week trading range is between $16.63 and $22.80. Since July of last year, the shares have increased 8.3%. If Pfizer follows through on the possible split and sale of some units, look for this trend to continue, with the potential for prices to reach around $26.

The talk of Pfizer possibly splitting and selling has been a great boon for its stock amid the recent recession of U.S. stocks. Apparently, consumers were not reassured when the S&P 500 approached a four-year high. Consumer confidence was reported to be the highest in a year in the U.S., but companies like Bank of America (BAC) and Apollo Group (APOL) saw significant losses in U.S. stocks. Despite this trend, Pfizer added 1.5% after the news broke that it might split. Granted, this should be taken with a grain of salt, because healthcare shares have been a main area of growth through some uncertain times.

GlaxoSmithKline (GSK) and Abbott Laboratories (ABT), both competitors of Pfizer, have seen recent declines in share price. Merck (MRK) saw more significant losses, after closing with a price of around $38.31, down 1.26% from its Wednesday open. Each of these competitors has had a similarly good year to Pfizer, but I would stay with Pfizer and wait out the structural changes. I feel optimistic about the company's stock prospects going forward. If the experts are correct about the rise in prices to around $26, that means a substantial increase, which makes Pfizer a great buy right now.

There is, unfortunately, a black mark that is currently looming with Pfiizer. This is the pending class-action lawsuit filed by more than 2,400 people nationwide over the safety of Chantix, a stop-smoking product. The suits were consolidated and handed over, by the United States Judicial Panel on Multistate Litigation, to U.S. District Judge Inge Johnson.

Pfizer retains the view that Chantix is a completely safe drug for smokers who want to quit, despite claims by Kristian Rasmussen, the attorney for the lead plaintiff firm in these cases, that the drug can be causally linked to suicides. Mr. Rasmussen put it this way: "They thought they were taking a safe medication that would help them stop smoking and live longer. Unfortunately, they committed suicide, and we expect the evidence to show Chantix caused it."

If this claim is proven, it will be a bit of a publicity nightmare for Pfizer. The FDA has already updated the Chantix side-effects label to include depression as a possibility, among other things, such as cardiovascular disease and aggression. The main claim in most of the lawsuits is that Pfizer did not adequately warn its users about the possibility of psychiatric side effects. Pfizer is remaining adamant that the drug is not to blame for the suicides and that they provided sufficient information and warning. As long as the plaintiffs cannot prove the causal effect in court, Pfizer will be just fine. That being said, I would keep an eye on this story as it develops.

Pfizer Oncology will be presenting its latest data on cancer research at the 2012 Meeting of the American Association for Cancer Research. I do not expect any large breakthroughs to come out of this presentation, but it certainly is good to see them presenting new data about this research. Another presentation took place at the American College of Cardiology s 61st Annual Scientific Session. This included data on ELIQUIS (apixaban) for the prevention of stroke in a trial fibrillation. This presentation was in conjunction with Bristol-Meyers Squibb (BMY). There could be more significant results in the future stemming from this presentation than the cancer data, because Pfizer is set to reveal the results of two clinical trials, ARISTOTLE and AVERROES. Pfizer is trying to further the safety and success of cardiovascular drugs, such as warfarin and aspirin. Any advancement in this area will mean a boost in business.

Pfizer is the largest pharmaceutical company in the world, sitting on a market cap of $168.91 billion, with 7.54 billion shares. The past year has been quite good for this company, and I fully expect that to continue in the near future, especially when the restructuring takes place. It is looking at a significant rise in stock prices when it splits and sells, and this seems like a good thing to be a part of at the moment.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.