Pfizer (PFE) at Morgan Stanley Notes

According to a fund comparison with the S&P 500 that PFE performed, spinoffs may be just as unlikely to create value as they are likely to create value

“The key point I was trying to make on the earnings call was that spin-offs, in and of themselves, don’t automatically create value. And we’ve actually looked historically over the last 10 years or so, and quite frankly, in many instances they have created value, and in many instances, they have not created value. There’s actually a fund that we looked at, compared it to the S&P 500, and if you looked at it on a one-year, a five-year, and 10-year return basis, after one year, the S&P performed better. After five years, it was roughly a push and a little bit favorable towards spin-offs. And after 10 years, I forget – 100 basis points – it wasn’t material either way. But if you look at all of them individually, many did and many didn’t in terms of creating incremental value.”  Frank D’Amelio – Executive Vice President, Business Operations and Chief Financial Officer


Thus, PFE asks four questions when considering spinoffs or splits

“The same four questions that we talk about all the time in terms of are the companies performing well inside the Company? Would they continue to perform well outside the Company? Is there a trapped value, and can we unlock that trapped value in a tax-efficient way? The answer to all four questions needs to be yes.” Frank D’Amelio – Executive Vice President, Business Operations and Chief Financial Officer


Transparency regarding pricing would benefit the pharmaceutical industry, and progress may be made in 2017

“We believe improved transparency into the entire system is a good thing… And we actually believe that that conversation, those discussions, are going to start taking place in the coming months in 2017. We think all players in the industry, whether it’s the providers, the managed care companies, the product manufacturers like ourselves, will benefit from increased transparency. And most importantly, we think patients will benefit as they better understand relative value for the healthcare services that they’re receiving.” Frank D’Amelio – Executive Vice President, Business Operations and Chief Financial Officer


PFE has $20-something billion in cash held outside of the United States that is potentially subject to repatriation charges. You can get an estimate for fees by examining the footnotes of their financial statements. It is a big number.

So at the end of the second quarter, we had $34 billion, I believe, in cash and investments. So up to $10 billion of that would be in the U.S., which means the remainder of that would be outside the U.S. If there was a repatriation, how much cash would we bring back? A lot. I’d bring back a whole lot… So you’ve got to read off footnotes. We give information on that. The other thing is you could look at the balance sheet, look at deferred tax liabilities, and you can engineer a number. We don’t give a number, but you can make assumptions about how much of that would be a gross number, basically, that we would bring back, where the liability’s been recorded but the cash hasn’t been paid… So you can make assumptions about what tax rate would be charged that gets you to that, whatever, $20-something billion deferred tax liability and gross that up, and that would give you an estimate of that plus existing cash overseas, gives you a feel for what the number would be. It’s a big number. Frank D’Amelio – Executive Vice President, Business Operations and Chief Financial Officer


PFE has been very consistent with the social contract put forth by Allergan regarding pricing and the impact on patients

So obviously, I read the social contract in terms of what was committed to in that. From my perspective, that’s what we do. If you look at Pfizer in terms of what we’ve done over the last several years, very consistent with what Allergan said. But we’ve always done that. I think we’ve always been very good actors in this space. We’ve been very responsible. And it doesn’t just happen by accident. We are very prudent, very diligent in terms of sensitivities to price increases and the impact that that will have on individuals and patients. Frank D’Amelio – Executive Vice President, Business Operations and Chief Financial Officer

Pfizer (PFE) at Wells Fargo Conference Notes

CEO Ian Read prefers a more transparent market system over a one-payer system

“So I prefer not a one-payer system, but a graded system where you individually have enough transparency and understand your healthcare policy. So that you can make choices on what type of drug coverage, what type of health coverage you want and what’s your skin in the game on accountability, you’re health, your exercise.” Ian Read – Chief Executive Officer


Hillary Clinton’s policies are a step in the direction of a one-payer system

“Well I think in this totality, it will be very negative for innovation. In the totality, now you can always pick out one thing like — that would appeal particularly to your industry like limited co-pays. But you know you can’t just pick one thing, it’s a whole system you can’t pull out one string without pulling the whole jersey undone. So I think overall, I think the Clinton approach to healthcare drives you to a one-payer system, it drives you to rationing, drives you to a place where most consumers don’t want to be.” Ian Read – Chief Executive Officer


Tax reform is needed to give US companies a level playing field, and Ian Reads a new President and Congress will be able to tackle the issue

“when you compete against companies that are not in your tax system, it gives them a huge advantage to either report higher profits or to take those profits and invest in research, which is why you need a level playing field…

making tax reform is essentially to allow U.S. companies have a level playing field. Hopefully when a new congress is formed and we have a new President, I think there is a lot of appetite to understand how to try and fix that. Ian Read – Chief Executive Officer


PFE is launching a dozen biosimilars, some of which are aimed at Johnson & Johnson

“We have, I think 12 Biosimilars, we have the big five under development, we are preparing to launch in fact this — the Biosimilars to J&J’s product this year.” Ian Read – Chief Executive Officer


Ian Read advocates for intellectual property protection through trade agreements. Ironically, the Trans-Pacific Partnership is criticized for this

“what’s so paradoxical about what went on with the Pacific trade agreement that you have one part of the pool spectrum saying that the U.S. government is negotiating too hard on the intellectual property, but that same group is saying, why are we letting them free ride on our innovation. So strong patent protection, strong intellectual property through trade agreements allows more of the burden of innovation we borne globally and not just by the U.S. consumer. So I think the solution is through very strong trade agreements where the U.S. uses its marketplace to say, it’s not acceptable for you to free ride on our innovation” Ian Read – Chief Executive Officer

Pershing Square Capital Management, L.P (PSCM) Q2 2016 Conference Call Presentation

(Available at till Wednesday, August 3, 2016)

Bill Ackman, Founder and CEO

Q2 performance positive but year to date negative 

“Q2 [performance] was between 5 and 6 % depending upon the funds. The performance month to date is between 3 and 3 ½ %…Year to date numbers are in the -14% range for the private funds  and -18% for Pershing Square holdings…The difference in performance is because PSH is leveraged.”

Leading with Mondelez, Lagging with Valeant

“In terms of contributive performance for the quarter, Mondelez is the biggest contributor at between 3 and 4 %…Valeant, a detractor, between -1.6 to -2.1%…Of course, our performance to date is a negative number, -14% negative for the private funds  and -18% for Pershing Square Holdings .”

Significant redemptions but lower than industry averages

“We think about redemptions as a percentage of capital and not obviously the absolute dollar amount…Redemptions [this quarter] were 37% lower than the average of the last eight years. My guess is that our redemptions that we’ve received as a percentage of capital are probably among the lowest in the industry, and that’s really because we benefit from a very stable capital base and that’s because our investors have been incredibly supportive of us.”

On Valeant

“Valeant was at a total shareholder return of -23.4% for the quarter. It represents 6% of capital…During the quarter, we restructured our option position in the company…People have mischaracterized Valeant’s R&D programs. Historically, this company has one of the most productive R&D programs of any pharmaceutical company in the country.”

On Herbalife

“We´re short the stock not for emotion, not for anything else other than we believe this is a massively overvalued company. We believe the company is a fraudulent business [and] will not survive.”


Ali Namvar – Partner

On Mondelez´s offer to acquire Hershey

“While an acquisition of Hershey would strengthen Mondelez´s confectionary presence in North America., whether or not a deal creates value for shareholders depends on the price paid, the acquisition currency used and, importantly, the ability to generate significant cost savings at Hershey.”

Cost savings at Mondelez should continue even with acquisition

“So in short, as shareholders, we would find it unacceptable for an acquisition of Hershey by Mondelez to delay or derail the productivity and cost savings transformation that’s under way at the company.”

Mondelez and Hershey seem like a good fit

“Mondelez does not have a strong confectionary presence in the U.S. and clearly Hershey is the dominant US confectionary player. One of the reasons we do like Mondelez though is that it has exposure to international markets where there is more growth in these categories than in North America. So we do have a question as to what Hershey’s growth rate is in the future, and whether it would be better for Mondelez to invest more in its emerging markets businesses and grow the assets there.”


Extra notes on their Herbalife Presentation, No longer business as usual

  • “We believe the implementation of the settlement will cause the pyramid scheme to collapse.”
  • “The FTC findings confirm our long-held allegation that Herbalife operates as a pyramid scheme.”