Foolish Forecast: Pfizer's Out of the Starting Gate

What analysts say

• Buy, sell, or waffle? 10 analysts are saying accumulate shares, while seven say keep what you've got. Nobody is currently saying to dump the stock.
• Revenue. $11.08 billion is the target, down 6.1% from a year ago.
• Earnings.
  Nine analysts have come to a consensus of $0.49 in earnings per share,
  with a range of $0.45 to $0.53. That's down from $0.61 last year, when
  the company missed by $0.05.

What management says

Leading up to the
closing of the Wyeth deal, management has been busy setting up the new
structure of the company, both at the management level as well as with
its all-important drug research operations. The company recently
announced how its research and operations are going to be arranged.

Pfizer has also been working steadily to handle the logistics of the
combination, including getting $13.5 billion in debt financing lined
up. Said chief financial officer, Frank D'Ameio, in the announcement
earlier this month of the new organizational structure:

Having our organizational structure in place is
critical to the combined company being operational on Day One, and the
appointment of these leaders will accelerate our ability to do so. We
have made substantial progress in a short period of time, particularly
in financing, as well as other requirements for closing. Our progress
affirms how well these two companies fit together, the value of this
combination, and the commitment of our companies to rapid and
successful integration.

What management does

Both companies have
high margins, but Pfizer is a bit more erratic when it comes to
controlling operating costs, as can be seen in the lumpiness of the
past several trailing-12-month periods. Wyeth's management seems to
keep its margins steadier, and hopefully the combined Pfizer will
inherit some of Wyeth's stability going forward.

Source: Capital IQ, a division of
Standard & Poor's. Margins are for trailing 12 months for the
quarters ending in the named month.

With merger-related expenses showing up this quarter, expect the margins at Pfizer to fall some.

One Fool says

As my Foolish colleague Brian Orelli recently wrote,
this merger is likely distracting management and researchers at all
levels. Increasing the company's size by over half is not a simple
task. While management is rosy over the prospects, the devil is in the
details.

The company was already in the middle of a rearrangement,
going from geographic-focused divisions to product-focused divisions,
which it started last fall. That plan's now expanding from five units
to nine, as it plans to integrate Wyeth's products, including new units
for consumer health and nutritional health. The last time Pfizer had a
consumer health division, it sold it to Johnson & Johnson (NYSE: JNJ). Maybe management has seen how product diversification has helped J&J and Abbott Labs (NYSE: ABT) and now wants some of that steadiness to offset the highs and lows of being a pure maker and seller of pharmaceuticals.

That will certainly help, but Pfizer will still primarily remain a
drug developer. And on that score, adding Wyeth's pipeline should help
shore up an area of recent weakness for Pfizer. Between its reports
from the end of last September and the end of last month, Pfizer's
pipeline shrank by 14 candidates to a total of 100, with the losses
coming from drugs in the earlier clinical trial phases 1 and 2. That's
disappointing, as it is those early candidates that have the real
potential to become the next big drug.

There are also opportunities to expand the use of certain drugs, but
things have been bumpy for Pfizer there, too. A recent attempt to
expand the label for Sutent from treating digestive-tract and kidney
cancer to treating breast cancer hit a major bump when one phase 3
trial was halted early because Sutent wasn't doing any better than
Roche's Xeloda. However, Sutent did do very well in a phase 3 trial for treating pancreatic cancer, the same type that Apple's (Nasdaq: AAPL) Steve Jobs is reported to have.

It's going to be a turbulent year for investors in Pfizer, as it
works through finishing the Wyeth acquisition, still tries to maintain
sales of its current set of products, and works to bring more drugs to
doctors. Tomorrow is just going to be the beginning. Hang on for the
ride.

© 2009 UCLICK, L.L.C.