Pfizer Case Analysis

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1) After spending years of effort to integrate Warner Lambert and Pharmacia into Pfizer, should its management have avoided another huge acquisition like Wyeth? Should Pfizer have gone after smaller bio tech firms in a series of small acquisitions in 2008 and 2009? A number of these bio tech firms could have been acquired for the $68 billion price of the huge Wyeth acquisition. Present arguments for and against buying several small firms versus one large firm.

In my opinion, when it comes to the option of bigger or smaller firm acquisition, Pfizer should have invested in a large acquisition like wryeth. This is because Pfizer’s focus is not really on how many firms it can acquire but proceeds and profit margins these acquisitions can
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Pfizer even started to reduce R&D spending over time going noticeably bellow industry average expenditure i.e. “In 2009, Pfizer spent $7.84 billion on research development, representing a net 3% decrease in R&D expenditure since 2007.” (Ibid, 2009 Pfizer Financial Report) “Added to this Pfizer’s 2009 R&D-to-sales ratio was only 15.68%, relatively low compared to the industry’s average of roughly 19%.” (Ibid, 2009 Pfizer Financial Report; Ibid, CBO Study)

Furthermore Pfizer has also fired or laid off scientists over the years.

I think the integration efforts hurt its own research efforts because focus is being shifted from R$D to acquisition integration but financially Pfizer still has enough capital to support both events.

3) Discuss the general arguments for:
(a) larger dividends versus lower dividends for a growth and technology firm like Pfizer;
1. Higher dividends generally attract more investors
2. Provide better tax benefits
3. Provide higher certainty about company’s financial performance

(b) larger purchases of common stock versus little or no purchases of common stock for a growth and technology firm like Pfizer;
1. To increase earnings per share ratio
2. To reduce on total shares available
3. For reinvestment. Buy now when stock is underpriced and sell later at a higher price
4. Capital Appreciation
5. Income
6. Liquidity
(c) paying down debt versus increasing debt levels for a growth and technology firm like Pfizer.

4) For the

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