The Street bid up Pfizer shares to $19.39, a 52-year high. And so it goes. American corporate short-termism at its finest.
Pfizer CEO Ian Read, who took the post after lawyer Jeff Kindler resigned in December due to stress, announced a “fundamental change in culture.” That shift is not a plus for U.S. competitiveness.
Read’s new gambit apparently means genuflecting before the gods of Wall Street by focusing exclusively on quarterly results.
Pfizer attempted to buy growth, shelling out almost $70B to purchase Wyeth in a hope to add some luster to drug development. As evidenced by the R&D cutbacks, that strategy evidently didn’t pan out.
In a remarkable example of corporate-speak, Read said:
“After evaluating our operating plans and capital allocation opportunities, we have adjusted our 2012 revenue target to exclude the projected contribution from future business development transactions and have reallocated funding to support an attractive near-term opportunity to significantly increase our share repurchase activity.”
And don’t fret, Wall Street. Pfizer’s stock repurchases “are not expected to constrain our ability to continue dividend increases or to pursue bolt-on acquisitions.”
Read did not exactly remind anybody of General Patton. He believes “that the planned increase in share repurchases and the decrease in R&D spending will serve to provide a greater degree of certainty and a more clearly defined path for us to achieve our 2012 adjusted diluted EPS target of between $2.25 and $2.35.”
Pfizer's biggest worry is the loss in November of patent protection for cholesterol-fighter Lipitor, the world's top selling drug. That worry is a golden opportunity for Ketchum, Lipitor’s PR firm. Ketchum is charged with helping Ian milk Lipitor for all its worth.
Lots of luck, Ray.