Pfizer's Potential Game-Changing Drugs Great For Investors
Jordo is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
Pfizer (NYSE: PFE) keeps inching ever closer to its year-to-date high, hovering in the mid to high $22 range. With a few miscues behind it, Pfizer has been able to focus on the development of new, profitable treatments. It appears to be doing that very well at the moment.
Last week was filled with announcements, many of which have been the driving force behind its increase in stock price. Pfizer has not looked like a very strong competitor so far this year, but that seems to be turning around. At least analysts are beginning to think so.
Pfizer and Johnson & Johnson (NYSE: JNJ) will be presenting its experimental drug treatment for Alzheimer's this October. This is huge news for both patients and these two companies alike. Alzheimer's, as such an unfortunate disease, affects many lives and leaves so many with so little hope. A cure would see very high usage. With the move in towards focusing on major chronic diseases and illnesses in motion, an Alzheimer's treatment would be a great start.
Another huge move by Pfizer is its new collaboration with Cold Spring Harbor Laboratory to develop new treatments and technologies to accelerate drug treatment of cancer. This move has two major components. The first is Pfizer's collaboration with an academic institution. There has been a move towards collaborating with academic institutions among pharmaceutical companies. While much has yet to be tested, both sides see huge benefits to the collaboration. The second major component is the move to treat another major illness: cancer.
Pfizer is attempting to hit a grand slam by developing treatments for both Alzheimer's and cancer. It will be quite some time before we see the results of either of these developments but positive results will make this stock a significant long-term investment.
Also in the news in the past few days are the results of a completely different cancer treatment Pfizer is developing -- the phase 3 results of a treatment that targets non-small cell lung cancer. The study demonstrated that patients taking this treatment have a statistically significant increase in non-progression survival compared to those taking other drugs or undergoing chemotherapy. This is certainly not a catch-all treatment for cancer, meaning that its use will be limited to patients who have this specific type of cancer. This also means the treatment will not be the highly profitable new treatment that Pfizer so desperately needs to develop. Make no mistake though, this treatment is still great news for patients.
But Pfizer is not without its problems. Notably, it was recently revealed that Pfizer will have to pay $896 million to patients who used its Prempto drug during menopause. On top of this hefty amount, Pfizer also set aside an additional $330 million for other suits. This is needed because the $896 million only covers about 60% cases brought about by the use of this drug. This settlement is both a reminder of the cost of developing a bad drug and of the failures Pfizer has caused before. The last point is one that makes the entire pharmaceutical industry a bit risky. One bad, widely used drug can cause huge amounts of harm to patients and investors alike.
GlaxoSmithKline (NYSE: GSK) has recently been on a fast track as well. However, most of what GlaxoSmithKline has been announcing is overshadowed by the looming acquisition of Human Genome Sciences, an acquisition that is dragging on. Human Genome Sciences has been holding out on GlaxoSmithKline, expecting an offer greater than $13 per share. It just suggested to GlaxoSmithKline that if its tender offer does not exceed $13 that it would get a deal from many other third parties. With huge potential revenues and cost savings, GlaxoSmithKline really needs to cut this deal. Similarly, Human Genome Sciences should be worried that no third party will tender an offer.
Pharmaceutical giant Merck (NYSE: MRK) has increased about $3 per share since its low and is steadily increasing. In fact, its current price of about $40 is the highest it has been this year. It should push higher on the news that it in talks to purchase Micro Labs in India. With the company expected to hit about $1 billion in sales by 2015, this deal on the surface appears to have similar earning potential to the Human Genome Sciences acquisition. However, there are many cost saving synergies with the Human Genome Sciences acquisition, and for this reason it is a much bigger deal.
Johnson & Johnson has also had a good year. Just last week its stock price broke its 200-day moving average, and now sits around $70. It too has been in the process of a major acquisition, one that it finally completed. It purchased the company Synthes for a staggering $19.7 billion in cash and stock. Synthes is a major orthopedics company and its portfolio will bring a lot to Johnson & Johnson. Expect it to tap these resources as soon as it possibly can.
Abbott Laboratories (NYSE: ABT) is expected to continue with its coming split into two public companies. This is an exciting transaction and it is expected to bring a lot of wealth to shareholders. Expect this company to become more focused and efficient after the split.
The pharmaceutical industry has been doing very well of late and it seems like a trend that will continue at least into the near future. Pfizer has not kept up with competition throughout this period but it appears that it is turning around. As the largest pharmaceutical company it has the reserves to undertake ambitious projects and it is doing just that. With a few potential game changing treatments in its pipeline, Pfizer is looking good. I expect this stock to outperform the market overall.
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