"Pfe recently said it will increase its buyback, cut R&D spending and consider 'all options' to boost shareholder value, including divestitures of smaller businesses. These could include animal health, nutritionals or consumer health. Pfe shares have rallied since our story and at 19 are up 9% so far in 2011, the best showing of the group".
This is part of an article urging Pfe, Abt and others to spin off businesses that trade at higher PEs, such as devices and nutritionals for Abt.
My take, in addition to the above, is that Kindler going has reduced the PE discount, as Read is perceived as more credible and more caring of increasing shareholder value.
I have followed Pfizer for twenty years and I seen the sleeping Giant of a Pharma. Totally bashed by game players (I was censored for making comments and naming them by Yahoo) who were bashing Pfizer but pushing companies like Abbott Labs on their site when Pfizer had a better sheet. I started to make it public. Pfizer is an undervalued company with cash, buybacks, and mergers etc. Just their consolidated R&D is going to be the best in the world.
I was telling investors to load up at $9 range and I still hold a huge position. I tried.... hope they made some $$$$$
One for the "little guy/gal"
Kindler was the guiding genius that made it possible for Pfizer to completely avoid a decline in earnings during the patent cliff period. He was the one that slashed costs, first decided to cut R & D, resumed stock buybacks and reorganized management.
All that Read has done is to increase buybacks at the expense of more KG-like acquisitions and to slash R & D still further.
But make no mistake about it - Kindler also would likely have cut R & D more to make sure he achieved his 2012 forecast which had been reiterated several times. He was not going to miss his number and he would have done whatever it took - including of course cutting R & D some more especially when the FDA is still playing hardball in approving new drugs.
Read is simply putting the finishing touches on what Kindler started and it is Kindler that deserves virtually all of the credit for how well Pfizer's fundamentals are holding up in the wake of all the big patent expirations.
A major reason why the stock has done well the last few months is that so many other big pharmas have been falling on their wallets:
1) JNJ continues to be plagued by manufacturing problems and recalls for Consumer Products. Unlike the Tylenol situation of a couple of decades ago, they just aren't executing in solving their problems this time.
MRK - the new CEO must have been aghast at his predecssor's standing mantra that the company would continue to grow earnings at a high single-digit pace even during the patent cliff period and when Lipitor would be going generic. How can key cholesterol franchise Vytorin/Zetia possibly compete with multiple Lipitor generics selling for 25 cents on the dollar? The new CEO's realistic removal of previous guidance has sent the shares skidding.
3) ABT has had some pipeline problems lately, the badly overpaid for a generics firm in India and they will likely have to pay big bucks to settle an off-label marketing lawsuit that the Justice Department is joining. In addition, their flagship product Humira which is 20% of company gross is starting to appear on radar screens regarding its 2016 expiration. This will be an increasing problem for ABT as when most other pharmas are well beyond the patent-cliff period, ABT will first be facing the loss of this $7B drug.
4/5) Both BMY and LLY are future basket cases that have done little to mitigate their upcoming patent cliffs and earnings will be falling precipitously. With the coming of 2011, this huge overhanging problem can no longer be ignored and indeed the analysts have finally stopped ignoring it.
Those wanting exposure to big, domestic pharma are increasingly turning to Pfizer as best of breed.
"Kindler was the guiding genius that made it possible for Pfizer to completely avoid a decline in earnings during the patent cliff period. He was the one that slashed costs, first decided to cut R & D, resumed stock buybacks and reorganized management".
Why should Kindler be called a genius? The real problem with PFE is its lousy image to stock analysts and serious stock investors as a company that can not successfully develop new drugs in spite of a 9 billion dollar per year R&D budget. PFE has not developed a blockbuster drug in over a decade. All it has done during that time is waste money on colossal failures such as Torcetrapib. Reducing the size of R&D is is a fundamental cost saving measure that doesn't take a 'genius' CEO to implement. Simply reducing the size of R&D is not going to solve the problemof PFE's lousy image. What is really required is to get rid of most of the bozos in the PFE R&D division and replace them with a few well-paid innovative Steve Jobs type of researchers who can nearly quadruple the stock price in two years which Jobs has done at Apple by developing new products that the public wants. Then and only then can the CEO be considered an effective administrator.
Of course Alan has no clue what the term shareholder value means.
There has been chatter about PFE pulling a TYC & spinning off two new companies. This would increase SV by the presumably higher average P/E of the three companies, but would devastate insane, maniacal options positions like Alan's long-term LEAPS & naked puts.
Since the fool has only 100 shares, but is margined to the hilt on PFE & other options "plays", the slight gain in average price of the new stock would not come close to offsetting titanic losses. Hard to say what the new prices would be, but possibly something like $10 for core PFE & average of $5 each for animal health & consumer products spinoffs, for total value of $20 rather than present $19, with dividends presumably comparable.
If SV increases even slightly by such moves, exactly how are my long-term LEAPS calls and naked put positions "devastated?"
Tyco long options holders certainly weren't "devastated" by the spinoffs - the options terms and conditions were simply changed to include the various pieces instead of the previous whole.
If the sum of the Pfizer pieces will be $20, I'm certainly better off with my long LEAPS and naked puts than if the one piece now is $19. Where I come from, long options are worth more and naked puts are worth less when a $19 price becomes a $20 price over a relatively short time frame regardless of how many pieces there are.
As someone who likes to eat, I know I'll be eating more if I have three pies of 7 ounces, 7 ounces and 6 ounces as opposed to one huge 19-ounce pie.
Yup, increasing total stock prices in this way would guarantee ruin for Alan, doomed by being a gambling addict rather than a "serious investor", with a stake in real gains in "actual, factual" shareholder value.