Pfizer Gropes for Answers

Catherine Arnold, an analyst with Credit Suisse, didn't recommend a target, but she did write in a research report that "sizeable acquisitions should be more seriously considered by Pfizer after this news." Arnold, who is neutral on the stock, expects Pfizer to raise its dividend "to keep value investors interested."

The torcetrapib failure won't hurt the company's results for 2007 and 2008 because Pfizer hadn't included the drug in its guidance. Before the research program ended, analysts had offered a best-case scenario in which the combination pill of torcetrapib and Lipitor might have reached the market in late 2008 or early 2009.

Like many others on Wall Street, Arnold worries about the end of this decade and beyond. For 2010, she cut her earnings-per-share forecast to $1.94 from $2.05. Earnings per share could fall as low as $1.70 if Pfizer suffers a setback in its U.S. patent fights over Lipitor, which now accounts for one-fourth of corporate revenue.

Pfizer has won court battles for the key Lipitor patent that expires in March 2010, but it suffered an adverse decision on another patent due to run out in June 2011. Pfizer is appealing.

"We think it's likely that our EPS projections will rise in January" after the company meets with analysts, "since Pfizer had indicated that incremental cost-savings are planned," says Arnold, who doesn't own shares. Her firm has an investment banking relationship with the company.