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Contributors: Douglas McIntyre Jon C. Ogg

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Wednesday, July 19, 2006

Widely Held 48 Hour Clock: Pfizer Ahead of the Numbers

Pfizer (PFE) is up almost 2% with the broader market ahead of its earnings. The projections are for $0.48 EPS and $12.65 Billion in revenues, but keep in mind that PFE spun-off its consumer products unit to J&J (JNJ) and that sale is still pending. While the company has already telegraphed it will treat this as "discontinued operations," you can bet what you are sitting on that some research will not have properly accounted for that. Unfortunately that is almost always the case.

One of the worries that company is facing is lower priced competition now that the statin Zocor from Merck (MRK) is off patent and has lower generic pricings. Merck undercut the competition by lowering their price to under generic abilities. The issue to realize here is that not all statins are the same, and it isn't fair to presume that all consumers will change because of price. Statin users switch around on their statins, but it is more a function of what their bodies are telling them rather than "$8 per month less."

PFE did lose its antidepressant patent for Zoloft at the end of the quarter, but it is also going to fight the generics with lower prices for the branded drug than generic makers can sell this for. That alone won't stop the lower sales, but it will keep the drug selling and will keep the generic from gaining 80% market share.

With the DJIA trading up about 1.8% and with PFE up 2.70% it looks like the street wants to at least believe that PFE may be getting over the hump or close to it. That may be true and it may not. Our crystal ball is in the shop for repairs so we'll have to wait for the numbers like everyone else.

One thing to consider is that over the last wave of the market downturn, PFE never did go retest the 52-week lows of just under $21.00 which were also multi-year lows. The chart is indicative of a pattern that is at least trying to push out of its longer-term downtrend. That doesn't mean it is an instant reversal or turnaround, but it is better than a kick in the teeth.

We'll also maybe get a clearer picture of what PFE will use the $16.6 Billion for. The proceeds will not transfer until this closes toward the end of the year. There are many drug candidates and existing drugs that are up for sale and are still fairly new that have stable cashflows and growth ahead. The company can always go for the "Buyback and Dividend" route as well.

PFE reports tomorrow morning in pre-market trading hours.

Jon C. Ogg
July 19, 2006

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