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By Jeremy Glaser | 02-01-2011 11:12 AM

Pfizer Shares Still Attractive

A new CEO, a $5 billion share-repurchase program, and a handful of promising new drugs make Pfizer shares look cheap even after today's runup, according to Morningstar's Damien Conover.

Jeremy Glaser: For Morningstar.com I'm Jeremy Glaser.

I'm here today with Damien Conover, the associate director of health care analysis at Morningstar, to take a look at Pfizer's earnings report and see why investors are cheering some of the things they saw in it.

Damien, thanks for joining me.

Damien Conover: Thanks for having me, Jeremy.

Glaser: So Pfizer stock is up about 4% right after the announcement of their earnings. Why are people excited about this? This is a pretty big move for a stock that size.

Conover: It is a big move for Pfizer. It's a very big company, 4%, that's a big deal, and I think there are couple of elements to why it's moving so much.

I'd say one of the key points that we would point to is that Pfizer is now implementing a new stock repurchase program; it's about $5 billion worth of Pfizer stock that should be completed by 2011. So by the end of 2011, $5 billion worth of shares repurchased, which should really help Pfizer mitigate some of the patent losses that it is facing and really help stabilize that bottom line.

Glaser: How much are the changes with the stock repurchase program do you think are driven by the management at Pfizer?

Conover: It's a great question. So Ian Read recently took over as the CEO of Pfizer, and I think the stock repurchase program is largely a direct result of his new management there. I'd say on top of the stock repurchase program, Ian Read has also laid out a plan of reducing R&D costs, which I think is going to be very important for Pfizer, because if you look historically, Pfizer hasn't been as productive as it's needed to be from its research and development efforts. And I think cutting that cost a little bit will bode well for the company. I think they can redeploy those resources by making acquisitions as well as doing some joint development efforts with smaller, more entrepreneurial biotech firms that could help replenish the pipeline more effectively than doing some of those efforts internally.

Glaser: The management change was a bit of a surprise, but you are comfortable with Read at the helm?

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