ASSIGNMENT

Assignment



Assignment

Introduction

This report presents an analysis of two companies that are operating in pharmaceuticals sector. It also presents and makes recommendations on which company investor should invest based on the objective of wealth maximization. The investor is specifically interested in investing in a company with a good track record of following an effective policy of Corporate Social Responsibility. Therefore, two companies that have been selected for the analysis include Bristol-Myers Squibb and Pfizer Inc.

Company Overview

Pfizer Inc.

Pfizer is a global research-based pharmaceutical company with two core business segments: biopharmaceutical and diversified. In 2009, Pfizer merged with Wyeth, which represents a major effort by Pfizer to increase its presence in biopharmaceutical drug development and thereby plug the impending holes in its product sales when patents expire in the next few years (Pfizer, 2012). The company's diversified segment includes animal health products, consumer healthcare products and nutrition products.

Between 2010 and 2012, drugs that make up 42.0% of Pfizer's pharmaceutical revenue will lose patent protection. The company's most pressing challenge is with the 2011 patent expiration for the cholesterol-lowering drug Lipitor, which accounts for about 15.0% of the company's revenue and remains one of the best-selling drugs in the world (Ibis World, 2012a). The deal could help Pfizer retain as much as 40.0% of Lipitor users through May 2012, protecting nearly $700.0 million in revenue that Pfizer could lose without the strategy (Ibis World, 2012b).

Bristol-Myers Squibb

With origins dating back to 1887, Bristol-Myers Squibb (BMY) is another key player on the UK pharmaceutical stage. In 1989, Bristol-Myers merged with Squibb to form Bristol-Myers Squibb, the then second-largest pharmaceutical group in the world; though its position has slipped significantly since (BMY, 2012). The company has been involved in a number of acquisitions and divestments in line with its sharpened focus on medicines. Today, it operates solely in pharmaceuticals since it split off its holdings in the infant-formula maker Mead Johnson Nutrition in order to focus on biopharmaceuticals. The company has four key franchises: cardiovascular (about 43.0% of pharmaceutical sales), virology (19.0%), central nervous system (14.0%) and oncology drugs (9.0%). The company's pipeline is concentrated in cancer medicines (Ibis World, 2012b).

BMY's pharmaceuticals segment comprises its global pharmaceutical and international consumer medicines business. The company's pharmaceutical products include anti-infective, cardiovascular, virology, immunoscience and anticancer products. In recent years it has sought to narrow its focus to 10 disease areas while also focusing on biological products (BMY, 2012). Additionally, BMY has been moving away from products that have lost exclusivity and toward new products that have been developed to meet significant unmet medical needs.

BMY is facing patent expirations for two of its three top sellers, Plavix (2011 for basic UK exclusivity) and Avapro (2012 for same), while its deal to market Abilify is due to expire in 2012. The loss of all three products in that time frame is pressuring revenue. While several major players are involved in giant acquisitions, BMY is trying to find strategic fits with drugs in external development and relatively small acquisitions, in hopes ...