Despite losing marketing exclusivity on its monster-seller Lipitor cholesterol drug at the end of November, Pfizer (NYSE:PFE) evidently thinks its stock might still be undervalued, as the company just expanded its share repurchase program by $10 billion.
Of the newly authorized amount, Pfizer plans to buy back about $5 billion in 2012, with the remaining authorized amount available in 2013 and beyond, according to the Wall Street Journal.
Pfizer has already said it expected to buy back $7 billion to $9 billion of stock this year. The company had repurchased about $6.5 billion of shares through Nov. 1, spokeswoman Joan Campion told the Journal.
In another move sure to bring holiday cheer to shareholders, the company bumped up its quarterly dividend 10% to 22 cents a share. Even at that rate, Pfizer still has a way to go before its payment reaches the 32 cents it was paying in 2009, when it sliced the outlay in half to free up cash to fund the acquisition of Wyeth.
Pfizer’s moves evidently appealed to investors. Since Monday, the company’s shares are up a few percentage points to $20.85. At that price, the new dividend rate gives the company a healthy yield of more than 4%.
Of course, the dividend increase is hardly going to make a dent in the pile of dough Pfizer’s sitting on – close to $30 billion in cash, cash equivalents and short-term investments. Even more cash will be coming its way when Pfizer finally finds a buyer for its nutritional and animal health businesses. The company has already said it plans to use the sales proceeds to pump more cash into its drug pipeline.
Most analysts think Pfizer will be able to find replacements for Lipitor, according to Seeking Alpha.
That’s just one of the reasons the site suggests buying the company’s stock. The other is that the company seems to be undervalued, trading at a discount forward price-to-earnings and price-to-book value relative to its peers in the large-cap pharmaceuticals group.
Further, rumors of Lipitor’s death appear to be premature. Pfizer’s multi-faceted efforts to keep the drug in the spotlight seem to be working. Citing IMS data, JPMorgan said Monday that brand-name Lipitor retained about 85% of U.S. prescription volume in the first few days after generic versions were launched, according to the Journal. Of course, that’s likely to change six months down the line, when additional copies enter the market.
Other signs also point to optimism for Pfizer shares. For instance, the company is evidently one of the favorites of New York-based Orbimed Advisors, the world’s largest healthcare investment company, with approximately $5 billion in assets under management. The company’s recent third-quarter filing shows that Pfizer is among its most prominent holdings.
CNBC’s “Fast Money” pro Guy Adami also is a fan, stating that the company is a buy. His endorsement was seconded by Anthony Scaramucci of SkyBridge Capital, who said “You’re seeing all the right trends there. “It’s a very cheap stock and it’s set up nicely for 2012.”
At the time of publication, Barry Cohen was long Pfizer.