Maven: Pfizer's Future

The media's missing some major missteps.
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In the star-shine of this morning's predawn hours, it became clear to The Business Press Maven that one week after

Pfizer's

(PFE) - Get Report

pumping of its prospects, then dumping of its signature new drug, we have hit the most important stage of news coverage.

With a touch of the perspective that time can give a business journalist, he can ask the all-important question: Where, exactly, can Pfizer go from here?

The answer -- if there is, in fact, a coherent, specific, workable one -- is of immense importance to investors. Opportunity can obviously be had by investing in a once-great company coming off a huge disappointment

if

there is an identifiable way to form a comeback plan. Without a certain plan, though, investors need to beware. The most common trapdoor of investing awaits those who reflexively buy formerly good companies on bad dips because of investment maxims that are actually famous last words, such as "It can't get worse" or "I'll just trade the bounce up."

Fortunately for the smart investor, the company's course of action (or lack thereof) is usually outlined for us right there in the business media, the week after the event. That's why The Business Press Maven was intrigued to see a

Barron's Online

headline, which bumptiously declared "

Pfizer Can Overcome Flop

."

Considering how many people died in the torcetrapib trials, I found the lead almost comically tasteless: "Patients and their doctors weren't the only ones left heartbroken this weekend ... investors, too."

But, hey, we're talking business tactics here, not taste, so I was willing to give

Barron's

a one-time pass, especially after getting caught up in the excitement of this next line: "Yet investors have a chance to turn Pfizer's flop into a hit for their portfolios."

Do tell, do tell! And that, unfortunately, is where

Barron's

told. "Investors with a little patience may embrace Pfizer as a value play, assuming the company accelerates cost cuts, hikes its dividend and

my emphasis

cuts more deals with other drug makers to fill the gap in its pipeline created by torcetrapib's demise

."

Let's graciously overlook the fact that it is not always so easy to cut thousands of jobs while you are simultaneously hiking a dividend beyond tomorrow. There is something almost magical about the uselessness of the following line, that all they have to do is make some deals to make up for torcetrapib. Oh, is that all?

This, mind you, is a drug that was supposed to replace Lipitor, the company's major seller, as it comes off patent. We're talking billions of dollars in business over the coming years. And all they have to do to move the stock is find something to replace it!

That's a little like telling a young man that all he needs to do to live a happy life is partner with a good-tempered, supremely attractive and brilliant person, and make a lot of money in a field that he loves that also allows him to take Fridays off. Really, that's all.

Not until the third line from the bottom does that article throw a sentence at the fact that those drug deals come at a huge premium. And it doesn't question the competency of management to at least overpay for a workable drug. This is a management, I don't need to remind you, that shouted to the skies how good business was two days after laying off 20% of the sales force and one day before the prized prospect was dumped. Their track record is spotty, at best.

And

Barron's

, like many other post mortems, brings up the quickly emerging conventional wisdom that companies with rival cholesterol drugs, such as

Schering-Plough

(SGP)

,

Abbott Labs

(ABT) - Get Report

and

Kos Pharmaceuticals

(KOSP)

might be a good way to go.

Could be, but the business media are ignoring a possible larger truth here in how the modern reality of drug companies has perverted the normal business relationship between size and risk. Typically, smaller companies are riskier. But drug companies, which rely on a small number of products, compared with, say, a retailer of similar size, have gotten so big over time that for any new drug to have a meaningful impact, it needs to be huge. This has led to bigger gambles, as we saw with torcetrapib, and thus much more risk for investors.

Barron's

sums up with one of the most thinly backed claims I've seen: "So for investors with the patience to wait perhaps two years, the stock may manage to pump out some surprising returns."

The Economist

wasn't much better. In "

Bitter Pill

," it posits that the failure can actually be a good thing in the long term, by becoming the impetus that makes the bureaucratic Pfizer adopt embattled CEO Jeffrey Kindler's new strategy for the firm, which is due to be unveiled in January. The article's ever-hopeful kicker: "But torcetrapib's failure could be the bitter medicine that Pfizer's entrenched bureaucracy needs to make it accept changes."

Sort of Kindler's rope-a-dope. Forgive me if I'm unconvinced.

Forbes

was more responsible, if just as shameless. After Pfizer's now infamous analyst/investor/media conference at which it trumpeted its prospects,

Forbes

fell for it as badly as anyone, running excited stories and not calling into question how a company that had just laid off its sales force 48 hours before the meet could be so happy about future prospects.

Today, though, in a story called ("Holy ride both sides of a story, Batman!") "

Pfizer's Warning Signs

,"

Forbes

starts the important business of figuring out what Pfizer possibly knew and probably should have known. And it also touches on why some of the troubles found could mean challenges for other drug firms, including

Merck

(MRK) - Get Report

.

Business Week

weighs in with "

The Big Rethink at Pfizer

." In terms of the big question of whether the company can reorganize its way to success, as best as I can tell, the verdict here is a big old "Who knows?"

The Business Press Maven knows. With such vagueness in the air in the post-mortems of Pfizer's worst week ever, buying here could damage your portfolio's health.

A journalist with a background on Wall Street, Marek Fuchs has written the County Lines column for The New York Times for the past five years. He also contributes regular breaking news and feature stories to many of the paper's other sections, including Metro, National and Sports. Fuchs was the editor-in-chief of Fertilemind.net, a financial Web site twice named "Best of the Web" by Forbes Magazine. He was also a stockbroker with Shearson Lehman Brothers in Manhattan and a money manager. He is currently writing a chapter for a book coming out in early 2007 on a really embarrassing subject. He lives in a loud house with three children. Fuchs appreciates your feedback;

click here

to send him an email.