Pfizer shares end year on high note

December 30, 2011 11:00 pm • Last Updated: December 30, 2011 10:40 pm

By By LEE HOWARD Day Staff Writer

Pfizer Inc. ended the year Friday as one of the top three Dow Jones industrial average share-price gainers for 2011, the first time since the pharmaceutical giant joined the stock market bellwether seven years ago that it has held such a lofty position.

Pfizer, which has a major research-and-development site in Groton, finished the year with a stock price 24 percent higher than at the beginning of 2011. Only McDonald's, up 31 percent, and International Business Machines, climbing 26 percent, beat the performance of the world's pharmaceutical sales leader among Dow Jones Industrial stocks.

Pfizer's stock appreciation was particularly notable since the company's shares had been on a decade-long slide. Even with the recent run-up, Pfizer has seen an overall share-price decline of nearly 40 percent since it joined the list of 30 major New York Stock Exchange-listed businesses on April 8, 2004.

But drug-firm analyst and portfolio manager Les Funtleyder of Miller Tabak & Co. in New York City said this year has been a good one for drug companies as investors sought stable companies with good dividends, significant profits and cash on hand.

"There's been a flight to safety, a flight to dividends," Funtleyder said. "Health care in general is one of the top three performing sectors this year."

He added that virtually every big pharmaceutical company has outperformed the Standard & Poor's index over the past year, which ended the year virtually unchanged from the beginning of 2011.

Bristol Myers, which is not part of the Dow Jones, is up 33 percent; Eli Lilly & Co. has risen 19 percent, and Merck & Co., one of the laggards, still managed a more than 4 percent gain.

Pfizer's stock price has appreciated more than other pharmaceutical companies for several reason, Funtleyder said, including a multibillion-dollar stock buyback program, dividend boost and a stated intention to spin off parts of the company. In addition, several new Pfizer drugs, including rheumatoid arthritis treatment Tasocitinib, lung-cancer pill Xalkori and anticoagulant Apixaban - all developed by scientists in Groton - either won U.S. Food and Drug Administration approval or are showing signs of nearing a final OK, he said.

Driving interest in Pfizer next year, Funtleyder said, will be chief executive Ian Read's decision on which of its business units may be placed up for sale. The company already has spun off its Capsugel pill-casings manufacturing unit to KKR & Co. for $2.4 billion, and is considering whether to do the same with its animal health and baby food businesses, which have combined sales of $5.5 billion annually.

Although Pfizer's stock run-up roughly coincided with the announcement in February that it was shaving $2 billion or so off its research budget, closing several R&D sites worldwide and reducing its local work force by 1,100, Funtleyder said he didn't believe the company's share-price appreciation would drive continued major cuts in scientific personnel.

"If the shares continue to perform well, the pace of layoffs wouldn't be as great," he said.

l.howard@theday.com