Pfizer Inc. took a nasty fall during pre-market trade on Tuesday, its biggest retreat in more than 10 years - and just 24 hours after the world's largest pharmaceutical company announced it was joining forces with generic-drug maker Mylan.
Pfizer Inc's 6.5% loss was its biggest since January 26, 2009, the day it announced it was buying competitor Wyeth for $68 billion during the gloomy days of an economic turmoil that gripped Wall Street.
The pharmaceutical company's Tuesday retreat likewise came on the heels of a downgrade by Bank of America Merrill Lynch market analyst Jason Gerberry, following news of a deal in which its Upjohn unit will combine with Mylan.
The latest selloff adds to the company's Monday's 3.8% decline, which brings the 2-day fall to 8.81%, it's the worst performance since it shed 9.35% in the same stretch capping January 27, 2009.
Gerberry cut Pfizer's rating from "Buy" to "Neutral", and decreased his price target from $49 to $41. "While the Upjohn merger makes strategic sense, and since it was likely to be a meaningful drag on growth," Gerberry believes the company's stocks can command the market valuation required to get a "bullish buy" grade.
The merger with Mylan is seen to result in Pfizer stockholders acquiring a majority stake in the new company, with Mylan's stockholders owning just a little over 40%, sources with knowledge of the issue, said.
The merged companies, which will market and sell Pfizer's Viagra and Mylan's EpiPen, will operate under a new name in the U.S. The merger will be organized in what is referred to as "Reverse Morris Trust", with Pfizer's Upjohn division divested and combined with Mylan.
Pfizer, a unit of the Dow Jones Industrial Average (DJIA), exceeded earnings projections but fell short on revenue. The global drug-maker was battered by fluctuations in the foreign exchange market, and sales plummeted 10% year-on-year for its popular pneumococcal vaccine Prevnar 13. In other words, Pfizer was dragged down by major drugs like Lyrica and Viagra, that is now being sold as generics globally.
Meanwhile, sales in the consumer healthcare segment were down 3% to $862 billion. Pfizer Inc updated its full-year guidance, taking into consideration its soon-to-materialize partnership with GlaxoSmithKline Plc and near-term closings of its buyout of Therochon Holding AG and Array BioPharma Inc.
Pfizer's projected adjusted earnings per share for the current year is also seen to drop to between $2.75 and $2.88 per share from between $2.82 and $2.92 per share. The latest report from Wall Street has so far been dismal in the first half of the year.
