Pfizer’s stock jumped 3% in trading on Thursday morning following the company’s announcement on February 5th to acquire fellow pharmaceutical company, Hospira for $17 billion. Sign up for our free newsletter Hospira is known for producing generic inject-able. Pfizer’s decision to merge with Hospira was based on two factors: 1 Hospira is thought to significantly increase Pfizer’s generics business scale. 2 Hospira holds a strong position in a new category of drugs called biosimilars. Biosimilars are similar versions of a brand name drug whose exclusivity patent has expired. Ian Read, Chairman and Chief Executive Officer, said in a statement, "The proposed acquisition of Hospira demonstrates our commitment to prudently deploy capital to create shareholder value and deliver incremental revenue and EPS growth in the near-term… In addition, Hospira’s business aligns well with our new commercial structure and is an excellent strategic fit for our Global Established Pharmaceutical business, which will benefit from a significantly enhanced product portfolio in growing markets. Coupled with Pfizer’s global reach, Hospira is expected to drive greater sustainability for our Global Established Pharmaceutical business over the long term." Hospira shareholders will receive $90 a share, marking a 39% premium to the stock’s closing price before the deal. S&P Capital analyst Herman Saftlas weighed in on Pfizer on February 5 th following the company’s acquisition announcement, reiterating a Hold rating on the stock.He noted, "HSP manufactures generic injectable drugs and biosimiliars with sales of $4.5B. But we believe the offer price, valuing HSP at 38.5X our ’15 EPS estimate of $2.34, well above its 5-yr range of 7X-25X, is significantly overvalued. We see limited low-single digit growth for HSP, whose patented drug, Precedex, went off-patent late 2014. Also HSP’s gross margin at 38% is well below PFE’s 81%. PFE plans to integrate HSP into its Global Established Pharmaceutical unit and sees $0.10-$0.12 accretion in the first full year." Herman Saftlas has rated Pfizer 7 times since June 2010 with a 100% success rate recommending the stock and a +21.2% average return per recommendation. Overall, Safltas has a 75% success rate recommending stocks and a +9.2% average return per recommendation. Separately on February 5 th, Citigroup analyst Andrew Baum reiterated a Buy rating on Pfizer with a $36 price target. He reasoned, "While not on the transformative scale as AZN the acquisition of Hospira even with the c.40% premium, is both EPS and, almost certainly, value-enhancing. i PFE becomes a leading biosimilar player with a broad portfolio of advanced assets allied with significant manufacturing / commercial expertise; ii the acquisition of Hospira’s injectables and biosimilar portfolio transforms PFE’s Established Products business from a declining revenue to a stable or even growth asset, facilitating near term separation and value creation; iii while immediate non GAAP EPS accretion will be achieved through SGA, longer term we anticipate sizeable reductions in COGS given a likely transfer to PFE’s more modern manufacturing capacity. " Andrew Baum has rated Pfizer twice since January 2015 with no success and a -1.7% average loss per recommendation. Overall, Baum has a 21% success rate recommending stocks and a -1.8% average loss per recommendation. On average, the top analyst consensus of Pfizer on TipRanks is Hold. Analysts Weigh in on Pfizer Inc Following Acquisition Announcement of Hospira appeared first on ValueWalk. Sign up for our free newsletter -By TipRanks
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