Pfizer hires a Wall Street analyst

Plus: Matt Belloni on Apple, Amazon, Netflix and more

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Pfizer’s Hire

A while back I mentioned Pfizer as a relatively new investment in my personal portfolio. I don’t typically add names that are on the 52-week low list to my radar, it’s very out of character for me. Pfizer fell to an eleven year low recently and I doubled my position in the stock. It is now one of my largest individual holdings.

You can watch me explain why here (Brian Belski disagrees with me):

Yesterday, the company announced an interesting new hire. They’re bringing a sellside equity analyst who had been covering the company for Citigroup.

This is interesting from the perspective of a shareholder - it looks to me like a commitment to understand and better speak to what investors in the company’s stock want to see.

Here’s Barron’s:

Andrew Baum, the prominent Wall Street drug company analyst, has never been much of a believer in Pfizer’s stock. He hasn’t had a Buy rating on the shares for over a decade, and has pulled his target price down steadily as the stock has tumbled over the past couple of years.

Pfizer on Monday said it was hiring him anyhow.

It is plucking Baum from his seat at Citi, where he had been head of global healthcare, to be its chief strategy and innovation officer starting next month. He is taking over for Aamir Malik, a McKinsey veteran who became chief U.S. commercial officer late last year.

We don’t know for certain what advice Baum will give to CEO Albert Bourla and chief scientific officer Mikael Dolsten. But we have an idea of what he thinks the company needs to do.

Baum’s take on Pfizer, as inferred from his research covering the company, is that they really need to lean in to the nascent oncology franchises they’ve acquired with the Seagen deal. He doesn’t believe the company is getting enough credit for the potential here.

Barron’s quotes what Baum wrote to clients in March:

“While no investor could ever describe us historically as a Pfizer bull (our last positive rating was 11 years ago), last week’s oncology meeting added to our confidence in our previously published view that the market undervalues PFE’s oncology pipeline.”

It’s fun to imagine the internal strategic conversations including a “But how will this play on Wall Street?” section. Long-term shareholders deserve some love and attention here given how horrifically this stock has performed.

The current CEO has a lot to make up for - the stock is down more than 30% since his tenure began five years ago. The good news is he betting his own money on the turnaround…

Also Barron’s, from Davos in January:

Bourla says he has poured his pension into company shares, personally upping the ante on Pfizer’s plan to deliver on blockbuster drugs after a series of pricey deals and big spending on research and development. As the company faces revenue pressures from a steep patent cliff and lower Covid vaccine demand, the stakes are high.

“All my pension I put into Pfizer stock,” Bourla told Barron’s Editor at Large Andy Serwer on Monday, in a recording of At Barron’s on the sidelines of the World Economic Forum. “I’m all in.”

So, to recap: With Pfizer you have blue chip company that’s been in business since the 1800’s, a 6% dividend yield (recently affirmed by management), virtually no fans on Wall Street, a renewed focus on shareholders via a key new hire, an emerging oncology push that could define the future of the business, a CEO who is “all in” with his own pension and a valuation giving the company little credit for its potential at 10x earnings.

What’s not to like?

The risks here are obvious - Pfizer has some important drugs coming off patent and / or facing threats from competing products coming to market. It’s not a slam dunk that the $40 billion or so they spent on Seagen will reignite revenue growth in the near term. Demand for Covid-era vaccines and Paxlovid does not appear to be coming back. Management could stumble on execution, drug trials could go poorly, Wall Street could continue to ignore pharma / biotech names that do not have a GLP-1 fat drug franchise (Pfizer’s attempt failed last year), etc.

The question for me is whether or not these risks are already priced in. I think they mostly are. No one seems to believe this company can do anything right. I think the more likely outcome is that the tide will turn. If it doesn’t, there will be an activist challenge or a management change. Either way, I think the potential upside is worth the risk. So I’m here.

We shall see.

Media Giants in LA

Matt Belloni was spectacular on the show

Matt Belloni joined us on stage for a wide-ranging conversation about the state of the media and entertainment giants. We talked Disney, Apple TV, Amazon Prime, NBA broadcast rights, YouTube, Netflix, the Paramount bidding war and so much more.

We have the best fans on earth :)

Matt’s podcast, The Town, is the joint production between Puck and The Ringer. It’s become a must-listen show for people in Hollywood and on Wall Street who want to be kept in the loop. Bringing Matt on stage in LA was a dream come true for Michael Batnick and I. You can watch the show right now on YouTube or wait for the audio version to hit our podcast feed tonight.

Michael and I waiting in the green room

I want to say thanks to all the Compound fans who came out and said hello after the show. It was fun taking pics with you guys and hearing your stories.

We will be putting more live events on around the country in the coming months and years. If you want to become a Compound Insider and hear about everything we’re doing early, you can subscribe here: The Compound Insider

Okay, that’s it from me, we have an all new episode of What Are Your Thoughts coming up tonight after a two week absence. We’re live today at 5pm EST. See you later - JB