Is Pfizer a Good Portfolio Play?

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With shares of Pfizer (NYSE:PFE) trading around $30, is PFE an OUTPERFORM, WAIT AND SEE, or STAY AWAY? Let’s analyze the stock with the relevant sections of our CHEAT SHEET investing framework:

T = Trends for a Stock’s Movement

Pfizer is a biopharmaceutical company that discovers, develops, manufactures, and sells medicines for people and animals worldwide. The company manages its operations through five segments: Primary Care, Specialty Care and Oncology, Established Products and Emerging Markets, Animal Health and Consumer Healthcare, and Nutrition. Pfizer’s main products are human and animal biologic and small molecule medicines, as well as vaccines, nutritional products, consumer healthcare products, and products for the prevention and treatment of diseases in livestock and companion animals.

Reuters, Bloomberg, and Forbes report that Pfizer — currently the world’s largest pharmaceutical company — has been contemplating a takeover of AstraZeneca, an asthma and heart drugs maker. According to Bloomberg, the two companies are no longer in talks, but sources speculate that Pfizer is still interested and may follow up with another bid for the company. Sources announced on Sunday morning that Pfizer’s $101 billion takeover offer was rejected by AstraZeneca. Pfizer is supposedly interested in the company for it’s cancer pipeline, which includes a number of a promising yet risky experimental immunotherapy drugs, which boost the body’s immune system in order to fight cancerous tumors.

Pfizer executives also see an AstraZeneca takeover as a way to boost earnings and generate cost savings, according to Reuters, which noted that a deal at a 25 percent premium would boost the company’s earnings almost immediately. “The consensus AstraZeneca model is hugely dependent on pipeline assumptions, as the base business will deteriorate massively by 2020 as several key products go off patent,” said analyst Mark Schoenebaum, who spoke with Bloomberg. The analyst added that Pfizer shareholders might see more risks than benefits in the deal, given AstraZeneca’s largely experimental pipeline and eroding revenue.

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