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November 28, 2011
So What Did Lipitor Do for Pfizer? Or Its Shareholders?
That's what this columnist at the Harvard Business Review would like to know. To the question "Was it worth it?", he answers "Probably not", and lists some things that other companies might learn from Pfizer's experience. I doubt that anyone will, though - the Big Acquisition looks so compelling when it comes along, and it's such a once-in-a-lifetime opportunity, and so different from all those other examples from the past, that gee, there's just no alternative. Right?
Here, for reference, is Pfizer stock versus the S&P 500 since the merger was completed in June 2000. Not that the rest of Big Pharma looks much better - for example, Eli Lilly has been an even worse investment over that span (by a bit), and they're never merged with anyone. (Although there is that Imclone business. . .)
No, big drug companies have been horrendous, hair-curling investments over this span, and yes, I'm not fully taking dividends into account. But there are tax consequences to consider on those, too, versus buy-and-hold capital appreciation. The S&P 500 has been paying in the 2% dividend yield range over that span, while Pfizer's dividend payouts have fluctuated (and the yields, too, of course). But is any dividend yield worth taking a 60% principal hit? It's hard to imagine.
At the very least, then, Pfizer's strategy has not allowed it to stand out. Its stock is in the same nasty shape as its brethren - you have to think that nothing would have gotten much worse if they'd never Lipitored themselves, and things might well have been better. Some record!
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