How Will Pfizer (PFE) Stock React To Rapamune Settlement?

NEW YORK (TheStreet) -- Pfizer (PFE) agreed to pay $35 million to 41 U.S. states and the District of Columbia today to resolve claims that its Wyeth unit illegally marketed the drug Rapamune, and encouraged doctors and hospitals to prescribe it for off-label uses, Reuters reports. 

Rapamune is used for the prevention of organ rejection in kidney transplant patients. Pfizer generated $350 million of revenue from Rapamune in 2013.

Neither Pfizer nor Wyeth admitted wrongdoing or liability in agreeing to settle, Reuters said.

Shares of Pfizer closed down -0.46% to $28.28. 

TheStreet Ratings team rates PFIZER INC as a Buy with a ratings score of B+. TheStreet Ratings Team has this to say about their recommendation:

"We rate PFIZER INC (PFE) a BUY. This is driven by several positive factors, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. Among the primary strengths of the company is its expanding profit margins over time. We feel these strengths outweigh the fact that the company has had sub par growth in net income."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • PFIZER INC's earnings per share declined by 10.0% in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, PFIZER INC increased its bottom line by earning $1.65 versus $1.20 in the prior year. This year, the market expects an improvement in earnings ($2.24 versus $1.65).
  • Regardless of the drop in revenue, the company managed to outperform against the industry average of 5.4%. Since the same quarter one year prior, revenues slightly dropped by 2.1%. The declining revenue appears to have seeped down to the company's bottom line, decreasing earnings per share.
  • The gross profit margin for PFIZER INC is currently very high, coming in at 73.96%. Despite the high profit margin, it has decreased significantly from the same period last year. Despite the mixed results of the gross profit margin, PFE's net profit margin of 22.92% compares favorably to the industry average.
  • In its most recent trading session, PFE has closed at a price level that was not very different from its closing price of one year earlier. This is probably due to its weak earnings growth as well as other mixed factors. Looking ahead, although the push and pull of the overall market trend could certainly make a critical difference, we do not see any strong reason stemming from the company's fundamentals that would cause a continuation of last year's decline. In fact, the stock is now selling for less than others in its industry in relation to its current earnings.
  • The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Pharmaceuticals industry. The net income has significantly decreased by 79.3% when compared to the same quarter one year ago, falling from $14,099.00 million to $2,912.00 million.

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