Pfizer Inc. (PFE) and Allergan PLC (AGN) are in friendly talks in relation to a potential transaction to create a pharmaceutical colossus. They emphasize that no agreement has been reached, and there can be no certainty that these conversations will lead to a transaction, but the prospect is that the No.1 U.S. drugmaker will seek to avoid U.S. taxes.
Pfizer’s success in building a first-of-a-kind, transportable, modular prototype for oral solid dose pharmaceutical development resulted in inviting other organizations to help transform industry practices. By considering the notable technical and regulatory experience of GlaxoSmithKline PLC (GSK) in continuous processing, Pfizer recently announced a multiyear collaboration; this enables both companies to increase their benefits for patients. Pfizer already has collaboration with Gold Ridge Exploration Corp. (GEA)and G-CON Manufacturing and these old collaborations resulted in the design of the current prototype.
Third-quarter 2015 results
The drugmaker demonstrated strength across key product lines and geographies in which it delivered strong results, showing its strong financial performance.
Due to the performance of several key products and the inclusion of one month of legacy Hospira U.S. operations, operation revenues grew by 4%; this was partially offset by the loss of exclusivity and associated generic competition for Celebrex, Zyvox and Lyrica in certain developed European markets.
In emerging markets, revenues increased 5% operationally, which reflects continued strong operational growth from the innovative products business. Adjusted diluted EPS grew by 5% compared to the same quarter of a year before, and adjusted income and net income increased by 2% and 20% from the third quarter of 2014.
Collaborations
- During the last quarter a collaboration agreement with Merck & Co. (MRK) to develop and commercialize avelumab, an investigational immune checkpoint inhibitor.
- Pfizer completed its previously announced acquisition of GlaxoSmithKline PLC.
- Pfizer completed the acquisition of Hospira Inc. (HSP) which created a leading Global Established Pharmaceutical (GEP) Business.
About the company
It is a research-based, biopharmaceutical company and applies science and its resources to bring therapies to people that extend and improve their lives through the discovery, development and manufacture of healthcare products. The company manages its operations through four operating segments –Â Primary Care; Specialty Care and Oncology; Established Products and Emerging Markets; and Consumer Healthcare. But its commercial operations are managed through two distinct businesses: an Innovative Products business and an Established Products business.
Outlooks
Pfizer is well positioned both financially and strategically to continue delivering value to patients and shareholders. Pfizer raised its 2015 financial guidance for reported revenues and adjusted diluted EPS, which reflects the strong performance to date of Pfizer. It must be considered that the changes in foreign exchange rates since mid-July did not affect its updated guidance.
Pfizer’s GEP business now has a leadership position in the large and growing sterile injectables category. It expects the transaction with Hospira to raise the adjusted diluted EPS upon closing, with an increase of 10 cents to 12 cents per share in the first full year after the close, also with additional increase for thereafter.
The transaction with GlaxoSmithKline adds two high-quality and complementary vaccines to Pfizer’s portfolio and allows the company to reach a broader global population.
Price and fundamentals
The company has a market cap of $210.55 billion with strong fundamentals, according to the last fiscal year.
Profitability and growth has been rated by GuruFocus as 7/10. Returns are positive and well-above the average performance of the Global Drug Manufacturers –Â Major industry. ROE at 13.93% and ROA at 6.01% are outperforming the 61% of its competitors; at current levels the company is having the worst performance of its recent history; profitability is good as well, with operating margin at 24.59% and net margin at 17.75%. Profitability is ranked higher than 83% of its competitors.
Financial strength has been rated by GuruFocus as 6/10, but current ratios such as cash to debt at 0.86 and equity to asset at 0.42 are under performing 78% of other companies.
GuruFocus rates the business predictability as 1 star out of 5, and the DCF calculator gives the company a fair value of $11.62, meaning the stock is largely overpriced by 194% at the current price of $34.14
The company is paying its shareholders a yield of 3.23% with a very comfortable payout ratio of 77%. The company has been increasing its yield since 2010 with a easy growth rate of 1.70% over the last 10 years that raise to 6.70% over the last five.
The price of the stock has risen by 14% during the last 12 months and is now trading near its 52-week high, 19.92% above its 52-week low.
During the third quarter the stock has been sold by five investors, which reduced their stakes; they are Vanguard Health Care Fund (Trades, Portfolio), RS Investment Management (Trades, Portfolio), Manning & Napier Advisors Inc. and gurus Brian Rogers (Trades, Portfolio) and Mario Gabelli (Trades, Portfolio). The only shareholder that increased his stake is the guru Ken Fisher (Trades, Portfolio) with a small add of 0.35%.
The company's leading shareholder among the gurus is now James Barrow (Trades, Portfolio) with a stake of 0.90% of outstanding shares, followed by the firm Dodge & Cox with 0.73%, the gurus Ken Fisher (Trades, Portfolio) with 0.52% and Brian Rogers (Trades, Portfolio) with 0.20%.
