Is Pfizer’s Stock a Buy with Lyrica?

With shares of Pfizer Inc. (NYSE:PFE) trading around $24.53, is PFE a Buy, a Wait and See, or a Stay Away? Let’s analyze the stock with the relevant sections of our CHEAT SHEET investing framework:

C = Catalyst for the Stock’s Movement

The big story for Pfizer has been Lyrica. This new drug is used for pain treatment. The biggest selling point is that Lyrica only needs to be taken once per day. There is only one other well-known pain drug on the market that only needs to be taken once per day, which is Eli Lilly’s (NYSE:LLY) Cymbalta. Even though Lyrica might have a bright future, it’s going to be difficult to compete with Cymbalta simply because Cymbalta can also be treated for depression. On the other hand, Lyrica has the potential to perform better than GlaxoSmithKline’s (NYSE:GSK) and Xenoport’s (NASDAQ:XNPT) Horizant, which serves the same purpose as Lyrica but must be taken multiple times per day.

Recently, Lyrica showed no significant reduction in seizures for patients with epilepsy. However, at the highest doses, 45.5% of patients experienced a 50% decrease in seizure frequency. This was better than the 35.8% reduction in the placebo group. While these are encouraging numbers, they still weren’t good enough for the FDA. The good news is that Pfizer isn’t the type of company that quits. They will continue with Phase 3 Trials soon and attempt to make any necessary adjustments.

With the potential of Lyrica and a 3.60% yield, Pfizer has attracted many investors over the past few years, which can be seen in the steady ascent of the stock price.

E = Debt to Equity Ratio is Close to Zero

Pfizer has a debt-to-equity ratio of .47. This is a safe and solid number. It’s also very similar to Eli Lilly’s debt-to-equity ratio of .34. The aforementioned Xenoport has an even more impressive debt-to-equity ratio of 0.00, but this is rare, especially in this sector. Pfizer looks a lot stronger than GlaxoSmithKline in this area, which has a debt-to-equity ratio of 2.49.

Pfizer has $23 billion in cash and $31.08 billion in debt. Eli Lilly has $6.90 billion in cash and $5.51 billion in debt. Xenoport has $114.8 million in cash and $0 in debt. GlaxoSmithKline has $5.83 billion in cash and $21.06 billion in debt.