Pfizer's foolish bidding war

Why is it going after Ratiopharm? This one just doesn't make sense.

By Jim Cramer Mar 9, 2010 8:26AM
Jim Cramer

By Jim Cramer, TheStreet


Someone want to tell me what Pfizer (PFE) is doing with this potential acquisition of Ratiopharm and the subsequent bidding war with Teva Pharmaceutical (TEVA) and the Icelandic Actavis? Why does Pfizer need a generic-drug maker? What was the point of the Wyeth move? Can't that sustain earnings power?

When people look at the Dow Jones averages and want to know what takes them over the top, a couple of key stocks are going to have to break out: Alcoa (AA), Verizon (VZ), AT&T (T), Intel (INTC) and most definitely Pfizer and Merck (MRK). I had high hopes for Merck - Schering-Plough, and it looks like that deal is going to be a good one.


I thought Pfizer-Wyeth would do the same. Pfizer needs growth and I thought Wyeth had it. If it didn't, then Pfizer ought to go after a Gilead Sciences (GILD) or a Celgene (CELG), where growth is assured. It most certainly shouldn't be going against Teva, which has a terrific fit with Ratiopharm as far as its generic side goes.


There are some press reports that imply Pfizer is just trying to goose the price up to hurt Teva. If that's the case, frankly, there is a better use of Pfizer's time.

Either way this bidding war smells of desperation for Pfizer, which shouldn't have to go down this path after all that it has said about Wyeth.

Normally I would advise buying the company that has been softened up and gone down because of a bidding war. It either gets it and then the numbers can go up in the out years or it doesn't and the stock rebounds.


Bing: More on Pfizer


In this case, the play is Teva, as any Action Alerts PLUS subscriber knows. Pfizer? It remains, after Alcoa, the most problematic stock in the Dow.


At the time of publication, Cramer was long Teva Pharmaceuticals and Gilead.


Jim Cramer is co-founder and chairman of TheStreet. He contributes daily market commentary for TheStreet's sites and serves as an adviser to the company's CEO.


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