Pfizer shares are somewhat cheaper now than a decade ago, even though the company’s per-share profits are more than 70% higher. The stock is despised for a reason: Pfizer, like many drug makers at the moment, is finding it difficult to develop new medicines.

The company’s biggest retailer, Lipitor for lowering cholesterol, faces the loss of patent protection in 2011. Two of Pfizer’s history hits, Zoloft for depression and Norvasc for high blood pressure, are already losing sales to generic competitors. Last year, capable inhaled insulin flopped in the marketplace. The year before, a drug that elevate levels of so-called good cholesterol proved too risky, and research was halted.

And Pfizer isn’t alone. Last year, the Food and Drug Administration accepted just 16 first-of-its-kind drugs, a 20-year low.

Some Pfizer Products

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All that said, I think the stock deserves a purchase at today’s price for five reasons.

1. Pfizer’s drug pipeline is unexciting, but not empty. The company has eight molecules in last stage testing, four of which are for new uses for existing medicines, which makes them relatively safe bets. It also has adequate money to buy promising drugs or drug makers: some $22 billion in cash and equivalents.
2. The stock is unpopular. Almost two-thirds of analysts who cover it do so with a “hold” recommendation. That means expectations are low.
3. In the short term, the company can increase profits without boosting sales. Pfizer has insistently cut costs in recent quarters, and has spent billions to retire shares, so 2008 earnings are seen increasing a respectable 9%.
4. The stock is cheap. Based on its price/pay ratio, Pfizer trades at a discount of 35% to the broad market and 45% to other drug makers. The dividend defer backed up by that aforementioned cash stockpile — now stands at 5.5%.
5. Pfizer still spends up for research, which bodes well for future profits. Lately the company has lay off chemists and hired biologists, since living organisms, rather than chemical compounds, are expected to yield the most promising future drugs. The stock turned up in a recent stock screen I ran at SmartMoney.com. It looked for drug makers with, among other things, low prices relative to their research spending.

Buy Pfizer through our Online Pharmacy, FinlandiaPharmacyOnline.com or call our toll-free hotline
1-888-288-4847.

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