Pfizer Strengthens Foothold in Nordics with Polocard Acquisition

Valuation by Rajiv Singh

Slew of Recent Acquisitions Seen to Strengthen its Consumer Healthcare Portfolio

h1Pfizer Inc. (NYSE:PFE), the world’s largest drug maker,has sharpened its focus on strategic opportunities that will expand its portfolio of leading brands.As part of these plans, the drug maker announced that its wholly-owned Polish subsidiary has acquired the rights to Polocard, a low-dose aspirin and the leading over-the-counter (OTC) brand for heart attack prevention. Polocard is a leading OTC brand in Poland and belongs to ZF Polpharma SA. Hence, Pfizer’s acquisition is expected to enhance its Consumer Healthcare portfolio and overall market position in Poland.

Operational GrowthAcquisitions Galore!

Pfizer has been recently stepping up the pace of acquisition to enable it to develop capabilities in high-growth categories and extend its global reach, especially in key emerging markets. Looking back over the last two years, Pfizer’s Consumer Healthcare business entered into an exclusive global license agreement with AstraZeneca for the OTC rights for NEXIUM. The drug giant quickly followed that up with the acquisition of Alacer, maker and distributor of Emergen-C products, a popular Vitamin C product line in the US. In addition, it acquiredFerrosan’s Consumer Healthcare business, which broadened Pfizer’s Consumer Healthcare business with leading dietary supplements portfolio. All these acquisitions also enhanced its geographic footprint in the Nordics, Russia and Central and Eastern Europe, a move that is seen by industry experts as part of the company’s larger plan to gain firm foothold in the emerging markets.

Focus on High-growth Areas

Pfizer is largely looking to develop capabilities in high-growth categories in recent years. Last week, the company announced it had completed the acquisition of NextWave Pharmaceuticals, a company developing products used to treat attention deficit hyperactivity disorder.The FDA has approved NextWave’s drug, Quillivant XR, in September. Pfizer now holds North American commercialization rights to Quillivant.

Weighing a $2-billion Bid for Agila

Continuingits aggressive inorganic growth,Pfizer is also considering a $2-billion bid for Strides Arcolab’sAgila Specialties unit. The deal will potentially strengthen Pfizer’s injectables business, which generated only $54 million or 0.4% of the company’s total revenue of $14 billion in Q3 2012, according to company data.Agila’s focus on cancer treatments and antibiotics makes it a strategic fit for Pfizer’s specialty care and oncology segment.

WSA on Pfizer

Source: Bloomberg
Source: Bloomberg

Amidst all the recent changes,Pfizer’sshares prices has vacillated between $31.00 and $32.40 in the last one month. The company’s shares have lost 0.13% in the last one month andunderperformed as compared to the S&P 500, which gained 1.54% during the same period.

Trailing 12M Adjusted EPS

Source: Bloomberg
Source: Bloomberg

Pfizer’s large generic and specialty pharmaceutical asset and recent acquisition makes it’s an interesting stock to watch out for future. WSA revised the EPS estimate for Pfizer from $0.52 to $0.54 for Q4 2013. For FY 2014, we expect Pfizer’s EPS to remain in the range of $2.24 to $2.30. With forward 12 months P/E multiple estimate of 14.5, we recommend a Buy rating on Pfizer with the price target of $34.50.

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