An entity with deep pockets is looking to buy boatloads of Pfizer Inc. (NYSE:PFE) stock. And we’re talking yacht-sized boatloads — not canoe-sized ones. Who is this big spender eager to buy shares of the pharmaceutical giant?
None other than Pfizer itself.
Familiar pattern
Pfizer Inc. (NYSE:PFE)’s board authorized a new $10 billion share-repurchase program this week. That comes on top of $3.9 billion remaining under the company’s current share-buyback authorization.
The latest move is part of a familiar pattern for Pfizer Inc. (NYSE:PFE). Over the past two and a half years, the company has embarked upon four different repurchase programs. Including the latest authorization, the combined amount of these buybacks totals around $39 billion. That’s a boatload of money in anyone’s book.
This new buyback of $10 billion plus the remaining $3.9 billion from the last authorization comes to nearly 7% of the company’s current market cap. Pfizer also plans to retire around $11.4 billion in shares with its spinoff of animal-health business Zoetis.
Other alternatives
Of course, some investors might have preferred that Pfizer Inc. (NYSE:PFE) bump up its dividend instead. Pfizer’s yield stands at 3.4% currently. That’s not bad at all, but it’s lower than the five-year average yield of 4.4% that shareholders have enjoyed.
On the other hand, Pfizer’s yield already stacks up pretty well against some other big pharmas. Bristol Myers Squibb Co. (NYSE:BMY) has a dividend yield of 3.1%. Merck & Co., Inc. (NYSE:MRK)‘s yield stands at 3.7%. Pfizer fits right in the middle but still pretty close to both of these peers.
Other investors might wish that Pfizer Inc. (NYSE:PFE) would use some of its cash to acquire a few smaller companies. Protalix BioTherapeutics Inc. (NYSEMKT:PLX) has been mentioned as one possible candidate. The two companies already partner together on Gaucher disease drug Elelyso. In February, Protalix BioTherapeutics Inc. (NYSEMKT:PLX) spurred rumors that Pfizer could be interested in buying the company after it announced that it had engaged Citigroup Inc (NYSE:C) to pursue a “broad array of strategic alternatives.”
The Elelyso connection does appear to make Protalix BioTherapeutics Inc. (NYSEMKT:PLX) a reasonable fit for Pfizer. Israeli newspaper Calcalist reported in February that Protalix wanted to sell for $1 billion. That’s more than twice the current market cap of the company and could be more than what larger players are willing to pay. However, that price tag is only a drop in the bucket for Pfizer.
Motley Fool analyst Max Macaluso suggested nearly a year ago that Pfizer should seriously consider partnering with MannKind Corporation (NASDAQ:MNKD). Max saw some synergies in the two companies’ working together on commercializing MannKind Corporation (NASDAQ:MNKD)’s inhalable insulin product, Afrezza. MannKind has stated that it is in discussions with potential partners.
Partnering is a different proposition than buying a smaller company. However, many of the same reasons given for a partnership could also apply to an outright acquisition. Even with MannKind Corporation (NASDAQ:MNKD)’s big stock run-up this year, Pfizer Inc. (NYSE:PFE) could easily foot the bill if it chose to buy the up-and-coming biotech.
