Seidman Investment Portfolio Organization

Company: Pfizer
 
Sector: Health Care (NYSE:PFE)

Strengths:

  • The companies large size offers substantial resources for R&D. 
  • PFE has a large portfolio of patent protected drug formulas including its widely popular drug Lipitor. 
  • It currently hosts 100 plus drugs in its R&D pipeline though most are in the early stages of development.
  • The recent purchase of Wyeth will provide support when current patents on popular drugs (Lipitor) expire. Prior to the purchase of Wyeth, Lipitor accounted for 25% of revenues, post Wyeth purchase, Lipitor will account for only 13% of revenues... A more manageable transition when the patent expires in 2011. 
  • The increased revenues, cost savings and greater array of products will largely offset the interest expense on borrowed funds and equity dilution as a result of the Wyeth purchase. 
  • The high margins on Pfizer drugs offer solid cash flows. 

Weaknesses:

  • Most of the drugs in Pfizer's R&D pipeline are in the early stages of development and thus have higher probabilities of being aborted. 
  • The Wyeth purchase poses a risk of culture clash as the new company may not be properly absorbed. 
  • The Wyeth purchase included $22.5 billion in debt, and $21 billion in equity diluting share value and increasing interest expense. 
  • Lipitor offered a 90% gross margin, its loss to patent expiration offers great risk of lower revenues. 

Key Financials:

  • Dividend 6.10%
  • PFE P/E 14.30 Industry 30.70 S&P 17.40
  • Gross Margin 83.20%
  • Operating Margin 24.28%
  • Total Current Assets $54,253 Mil.
  • Total Current Liabilities $23,340 Mil.
  • Cash/Short Term Investments $34,052 Mil. 

Recommendation: HOLD with caution. The Wyeth acquisition bears close watching.

 

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Page last modified March 14, 2014