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Pfizer's Kindler: Having to Explain The Lipitor Slip

Jeff Kindler
AP
Jeff Kindler

Pfizer Chairman and CEO Jeff Kindler had some explaining to do on the company's earnings conference call this afternoon. He started by telling analysts, investors and reporters who were listening in (everyone's in a listen-only mode, only the analysts are allowed to ask questions), "Let me be direct. It was a tough quarter."

Most of the hour-long call was spent talking about Lipitor, the alleged culprits of the second-quarter plummet in Lipitor sales and whether they were an anomaly. Kindler said, "Regarding Lipitor, we are in a tough battle. The statin market is proving to be even more competitive that we'd thought it would be. Lipitor's performance in the U.S. fell short of our expectations."

At least one analyst is not willing to wait to see if this was a blip. Kevin Scotcher at HSBC is downgrading the stock from Outperform to Neutral on the heels of Pfizer's disappointing earnings report. In a research note to clients he writes, "...the scale of the hit (to Lipitor) was in excess of our and the consensus expectations. We believe that a loss of confidence in a single quarter is enough to persuade investors to defer a decision to buy Pfizer...." Scotcher is lowering his price target from $30 to $25.75. HSBC has done investment banking for PFE and wants to do more.

Barbara Ryan at Deutsche Bank shares Scother's near-term stock outlook writing today that "the market will continue to be unimpressed and will not reward the stock with a multiple until significant strategic initiatives (namely acquisitions of commercial companies) materialze that dilute the dependence on Lipitor." But Ryan's maintaining her Buy rating on PFE and a $30 price target because she thinks the right purchase or purchases will eventually goose the shares. Deutsche Bank owns at least 1% of PFE and has done and wants to do more investment banking for the drug company.

On the conference call Kindler indicated the company is looking for acquisitions, but when analysts pressed him on it he declined to give any details or lay out a timeline. Pfizer has a healthy 4.5% dividend yield, but over the past five years it has been the dog of the Dow--no other stock in the index has performed worse than PFE over that time.

The company has billions of dollars in the bank. How should it spend them? Which company or companies should PFE buy?Send me your ideas and I'll post some of them soon: pharma@cnbc.com.

Questions? Comments? Pharma@cnbc.com