What To Expect From Pfizer Inc. (NYSE:PFE) Billion Dollar Drug Unit?


Dallas, Texas 12/02/2013 (Financialstrend) – Merger of Pfizer Ltd with Wyeth Ltd

One of the top U.S based drug marker Pfizer Inc. (NYSE:PFE) announced before going into thanksgiving holiday’s that its Indian subsidiary Pfizer Ltd has gone ahead and bought out the entire stake in its local partner Wyeth Ltd. Under the buyout/merger terms, existing share holders of Wyeth will be entitled to exchange 10 shares of their stock with 7 shares of Pfizer Ltd share. To complete the buyout, Wyeth will be issuing close to 15.9 million new shares.

Complex Cross Holdings

Readers should note that the cross holdings which are involved are pretty complex. The bio tech company being taken over, the $293 million market capped Wyeth Ltd is currently partially owned by Pfizer Inc. (NYSE:PFE) through its stake ownership of 51.12 percent. The American firm had bought out its then competition Wyeth in India in 2009.  Further, Pfizer Inc. (NYSE:PFE) also owns a majority 63.5% of its Indian sub Pfizer Ltd. This sub has a market cap of $681 million.

With the quasi merger of the two units which were majority owned by Pfizer Inc. (NYSE:PFE), analysts are opining that the combined entity with a market cap of more than $1 billion will be well placed to take on the local competition in the Indian market which boasts of a population of more than 1 billion. It is also being speculated that with a dominant local presence, Pfizer would be well placed to take on local competition in this emerging Asian market, which have built a reputation for themselves as global leaders in generic drug manufacturing.

Strengthening India Arm to Keep Ahead Of Competition

On November 22 one of Pfizer Inc. (NYSE:PFE) closest competitor, Switzerland based Novartis AG (ADR)(NYSE:NVS) announced that it is close to break through with respect to developing a new wonder drug designed to cure Brest Cancer in Women. In a pincer movement, the $196 billion market capped drug maker disclosed that its advanced phase 3 trials are slated to begin this month. It is these fast paced developments in the drug designing and development stream that has promoted Pfizer to build up its Indian arm in order to pursue more R & D at more economical costs in order to stay ahead of competition.

Stock Performance

Pfizer Inc. (NYSE:PFE) has a market capitalization of $208 billion and is tracked both by the S&P 500 index as well as the Dow Jones Industrial index. In the past year it had recorded sales of $53 billion and net income of $10.24 billion. It has provided dividend yield of $0.96 per share in the trailing 12 months and has recorded a dividend yield of 3.03% in the same time period. In the past one year, investors in the stock have seen their stock holdings appreciate by 31% and at current valuations; the stock is trading just 2.3% below its 52 week high price point of $32.5 per share. As of close of business last week, the shares were trading at $31.73 per share which is very close to the analyst’s consensus price target of $32.69.


Competitive Comparison

In the past 6 months the stock of Pfizer Inc. (NYSE:PFE) has seen its market valuation go up by close to 16.5% during trading. It has a larger market cap then all the other three drug and bio tech firms compared here. It has outperformed competition like AstraZeneca plc (ADR) (NYSE:AZN), GlaxoSmithKline plc (ADR) (NYSE:GSK) and Bristol-Myers Squibb Co (NYSE:BMY) by a big margin in the same period with respect to its market appreciation.