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Deutsche Bank Says Pfizer Has A Strong Financial Position And Attractive Pipeline

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Gregg Gilbert of Deutsche Bank initiated coverage of Pfizer (NYSE: PFE) on Wednesday with a Buy rating and $34 price target.

“While Pfizer continues to face headwinds to top-line growth and has a less obviously compelling pipeline relative to some of its peers, we like the company's strong financial position, attractive valuation and dividend and a management team that is committed to shareholder return,” Gilbert wrote in a note to clients. “We expect Pfizer to leverage its strong balance and cash generation through business development.”

Pfizer has $19 billion of net cash and generates a “robust” cash flow with significant capacity to further borrow to support business development activity. Gilbert estimates Pfizer will increase its net cash to more than $60 billion by 2018 while continued to fund one of the highest yield dividend at 3.6 percent among its peers.

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Pfizer's $120 billion offer to acquire AstraZeneca (NYSE: AZN) should serve as indication that the company may be more open to very large and strategic acquisitions. At the same time, Gilbert also believes that Pfizer may be taking steps to separate one or more of its business units, which could unlock further shareholder value.

Pfizer currently has over 80 clinical trials of which more than half are in either Stage 2 or Stage 3 programs or in registration. The clinical development pipeline includes 61 new molecular entities, five biosimilars, and 17 expanded indications.

Pfizer has an improved pipeline story versus the “old” Pfizer, according to Gilbert. In addition, the analyst notes that Pfizer has a growing pipeline of vaccines including bivalent rLP2086 vaccine for meningitis B, SA4Ag vaccine in a Phase 2 study, Clostridium difficile vaccine in a Phase 2 study and an ongoing Phase 1 study in to vaccines for smoking cessation and asthma.

Bottom line, Pfizer has generally not been viewed as a “pipeline story” in recent years, according to Gilbert. However, this is changing as the analyst now sees more potential value in late-stage pipeline than in the past.

Latest Ratings for PFE

DateFirmActionFromTo
Jan 2020Initiates Coverage OnOutperform
Oct 2019ReinstatesNeutral
Aug 2019UpgradesSellHold

View More Analyst Ratings for PFE
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Posted-In: AstraZeneca Gregg Gilbert PfizerAnalyst Color News Price Target Initiation Analyst Ratings

 

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