Pfizer Slumps as Two Firms Downgrade on Mylan Deal Impact
Pfizer Slumps as Two Firms Downgrade on Mylan Deal Impact
(Bloomberg) -- Pfizer Inc. was hit with a pair of downgrades on Tuesday as analysts cautioned over the impact that the company’s recently announced deal with Mylan NV would have on the stock.
Bank of America lowered the stock to neutral from buy while Morgan Stanley cut its view to equal-weight from overweight. Both firms also cut their price targets, with BofA’s going to $41 from $49 and Morgan Stanley’s dropping to $40 from $48.
In the deal, which was announced on Monday, Pfizer said it would combine its Upjohn business, which sells older blockbuster medicines like Lipitor and Viagra, with Mylan.
Shares of Pfizer, a Dow component, fell as much as 6.3%, building on the previous day’s 3.8% drop. Mylan rose as much as 3.4%.
“Pfizer’s planned exit of Upjohn exposes lower-than-expected earnings for both the RemainCo (Innovation) business and Upjohn,” Morgan Stanley analyst David Risinger wrote to clients. While the Upjohn exit is “a strategically sound deal, new 2020 management disclosures revealed earnings power that is much weaker than we realized.”
BofA’s Jason Gerberry also wrote that the deal “makes strategic sense.” However, he added, “for PFE stock to work, the RemainCo would need to trade above 18x forward multiple of EPS which we view as unlikely given current portfolio mix.”
Following the downgrades, Pfizer currently has seven buy ratings, eight holds, and two sells, according to data compiled by Bloomberg. The average price target of $45 implies an upside of about 13%.
To contact the reporter on this story: Ryan Vlastelica in New York at rvlastelica1@bloomberg.net
To contact the editors responsible for this story: Catherine Larkin at clarkin4@bloomberg.net, Steven Fromm
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