R&D and key partnership set to boost sales growth for Pfizer Inc.

Improved sales led to a 7.4% earning jump during the most-recent quarter. Meanwhile, recent acquisitions add to an expanding pipeline of high-potential drugs in a variety of key areas.

The company has also merged its consumer drug business with that of another industry leader. That partnership should immediately cut costs. The stock trades at 14.8 times the company’s 2019 earnings forecast.

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PFIZER INC. (New York symbol PFE; www.pfizer.com) is one of the world’s leading prescription drugmakers. Its top-selling brands include Lyrica (epilepsy), Celebrex (arthritis pain), Prevnar (pneumonia) and Enbrel (rheumatoid arthritis).

Starting with the March 2019 payment, the company increased its quarterly dividend by 5.9%, to $0.36 a share from $0.34. The new annual rate of $1.44 yields 3.3%. Pfizer has now increased the annual rate each year since 2011.

In the quarter ended March 31, 2019, the company’s sales rose 1.6%, to $13.1 billion from $12.9 billion a year earlier. Earnings, excluding one-time items, increased 7.4%, to $4.9 billion, or $0.85 a share, from $4.6 billion, or $0.75, a year earlier. On a per share basis, earnings increased by 13.3%, due to fewer shares outstanding.

The slow sales growth reflects increasing competition from cheaper generic drugs as Pfizer’s medications lose their patent protection. However, the company continues to invest a high 15% of its revenue on research. As a result, it has several promising new drugs in its pipeline. Those include pain drug tanezumab and a new vaccine for pneumonia.

Blue Chip Stocks: Mergers and acquisitions boost drug pipeline

Pfizer and GlaxoSmithKline (New York symbol GSK) recently agreed to merge their consumer drug businesses into a new joint venture. Pfizer will own 32%, while Glaxo will hold 68%. The merger will let both firms cut costs once the deal closes later this year.

The company is also buying Array BioPharma Inc. (Nasdaq symbol ARRY). That firm recently received approval for two skin cancer drugs—Braftovi and Mektovi. Recent studies indicating those drugs may also help treat colon cancer add to potential.

Pfizer will pay a total of $11.4 billion, including Array’s debt. Assuming Array’s shareholders and regulators approve, Pfizer expects to complete the purchase by the end of 2019. The new operations should begin contributing to earnings in 2022.

The company has also acquired 15% of Vivet Therapeutics for $51 million.

Based in France, privately held Vivet is developing a treatment for Wilson disease, a liver disorder that causes copper to build up in the body. That treatment involves injecting new DNA into the body to correct a single faulty gene.

This investment should help Pfizer with its other gene-based therapies. The company also has an option to buy the remaining 85% of Vivet for $584.8 million.

The company will probably earn $2.91 a share in 2019, and the stock trades at 14.8 times that estimate.

Recommendation in Dividend Advisor: Pfizer is a buy.


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