Pfizer Living Life after Lipitor
John is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
Just over a year ago, (February of 2011) Pfizer (NYSE: PFE) announced that it would be cutting into the research and development budget. This is understandable considering the preparation the company would have to do as it was facing a revenue cut in the billions as Lipitor and a few other key patents were expiring. Pfizer was preparing to cut about 25% out of the R&D budget which is its greatest expense. As we move through 2012, the company is wrestling with the changes taking place and it is laying a good foundation for its future as this year looks like a year of reorganization. Here are a couple key moves the company is making that will keep them on top in the next few years:
Repurchasing Program
One thing every company knows it needs to do is keep investors interested and happy. Part of this process is doing what they can to keep earnings meaningful (short term answer). Cost cutting is just part of the answer to that equation. Pfizer is in the middle of a buy back program that will help appease investors and.
This strategy will help increase the value of the stock as well. Obviously each share has more value now since each investors owns a greater percentage of the company. The laws of supply and demand go into effect. There is an increase in demand for the company’s shares of stock by the company itself and perhaps other investors as well, while the supply is being reduced. Thus, economic theory states that prices will rise as a result.
New Drugs in the Pipeline
Pfizer has a number of near-term pipeline opportunities ahead in 2012. Historically, the market values pipeline execution as a significant driver for stock price growth. Between now and the end of 2012, at least five new products are set to launch, more than any other large cap pharma name.
To share an example of potential revenue makers, take a look at a new drug called Eliquis. In conjunction with Bristol-Myers Squibb (NYSE: BMY), this is a new drug, already approved in Europe that exceeded all expectations as a pill to prevent blood clots. It was touted as a “better therapy” for millions of people with atrial fibrillation. In fact, trials went so well, Dr. Fuster, chairman of federal and medical panels on atrial fibrillation said, “This is one of the most significant advances in cardiovascular medicine in the last five years, no question! Its results produced far better than the present go-to drug for blood clot prevention—warfarin.
That is but one example of the new drugs coming on the scene this year. Between the repurchasing program, cost cutting measures, and new drugs coming to market, Pfizer should weather 2012 very well and come out on top in a very short period of time. It may take a long term investor to see past this year, but it will do well!
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