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Pfizer Inc. Message Board

  • chrt13sezz chrt13sezz Jan 25, 2009 1:43 PM Flag

    Barron's: Oscar Schafer of OSS Mgmt. on Wyeth and the deal

    Abby recommended Wyeth earlier today. I second that. It s a diversified pharmaceutical company with underappreciated assets. It is facing a near-term patent cliff from products including Effexor XR and Protonix in its traditional pharma business. Expirations could cost it a billin dollars in earnings before interest and taxes.

    But Wyeth has other core businesses. It is one of the top five biotech companies in the world as well as a leading consumer franchise in brands such as Advil, Centrum and Robitussin. It also has a leading animal-health business. Growth in these businesses and cost-savings initiatives should allow Wyeth to maintain earnings through patent cliffs and set the company up for growth thereafter.

    It has $15 billion in cash. The stock price took a hit last year partly on the market's decline and disappointing data on an experimental Alzheimer's drug, bapineuzumab, which Wyeth is developing with Elan. I'm not hopeful bapineuzumab will ever be approved and it's not in the stock price. We took advantage of the decline to purchase stock around $32.

    The biotech business has to leading franchises: Enbrel for rheumatoid arthritis and psoriasis and Prevnar, a vacdcine to prevent pneumococcal bacteria in children. Prevnar could be a blockbuster and will be used to treat adults starting in 2010. The biotech business will overtake core pharmaceuticals as the leading revenue generator in the next few years. The non-pharma business all deserve higher multiples than pharma. On a sum-of-the-parts basis, Wyeth is worth in the low 50's.

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    • As large drug companies replace blockbusters facing patent expiration, the industry will consolidate. Wyeth is a potential target because of its attractive valuation, strong balance sheet and biotech franchise.

      A terrific new CEO, Bernard Poussot, took over in January 2008. He has been with Wyeth for over 20 years. Someone could pay $55 a share for the company, sell off the consumer and animal businesses and pay off the debt in less than two years. The pipeline is attractive.

      According to media reports Friday, Pfizer is in talks to buy Wyeth for more than $60 billion, some $8 billion above Wyeth's market cap at Thursday's close. Oscar praised the potential combination noting it would solve many of Pfizer's problems and get the company into the biologics mrket which it has been looking to enter.

      "Bernard Poussot is one of the best CEO's in the industry and Pfizer's Chirman and CEO Jeff Kindler is a great leader, " he said, adding "the merger would be a match made in heaven."

      Oscar thinks that Pfizer could pay "well in excess of $50 a share" without overpaying for Wyeth which closed Friday at $43.74.

    • So, then, why are you so opposed to this deal, as you've repeatedly posted here?

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