WR Hambrecht Said Pfizer (PFE) May Buy Nektar (NKTR) Following Torcetrapib Blow-Up
The firm said, "While our fundamental analysis of NKTR shares on rapidly improving Exubera visibility over the next few months remains unchanged with our target price of $30, the news of Exubera partner Pfizer's most visible late stage pipeline product which was touted as the next Lipitor to reach the market in the next few years at its annual R&D day last Thursday is nothing less than shocking and raised the obvious question: What can PFE do to close this strategic gap where some $10B in future potential revenues is suddenly removed from everybody's models. In our view, Pfizer senior management is now more likely to look outside the company for growth which should include potential acquisitions that will increase earnings in the 2008 + timeframe. As we have opined in the past, NKTR captures about half of Exubera earnings which looking out to 2010 represent about 30% in operating income or around $300M of the projected $600M of $2B worldwide Exubera sales (PFE's guidance has been north of $2B by 2010). Valuing NKTR via discounting 2010 earnings ($2.00) or the NPV of PFE's lost Exubera earnings it would have by owning NKTR, we estimate NKTR value to PFE at $35 to $40 which does not include a potential premium for NKTR's pipeline which now has 10 products in clinical trials or the potential strategic value of a San Francisco Bay Area footprint to amplify PFE's R&D capability which judging from the news out this morning may be more productive externally than what has been coming out of Groton, CT."