Does Pfizer Inc. Stock Offer a Market-Crushing Opportunity in 2015?

By Markets Fool.com

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Source: Flickr via Montgomery County Planning Commission

As the world's largest pharmaceutical company, Pfizer rarely inspires investors seeking high-growth opportunities. Indeed, its stock has performed rather poorly compared to the broader markets over the past decade.

PFE Chart

This year, though, the pharma giant may finally awaken from its long slumber to produce market-crushing returns. Here's why.

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Source: Pfizer

Pfizer is shedding weight to let its top-line shine through
Pfizer CEO Ian Read has been slowly restructuring the company in a manner that should allow fast growing newer products to finally have a meaningful impact on the bottom line in 2015. I think Read's restructuring plan will ultimately unfold as a four step process, with two now completed.

The first step was the IPO of Pfizer's animal health business that gave rise to Zoetis in June 2013. That move cleared the way for the next step, namely reorganizing the company into three operational units: global innovative pharmaceutical segment (GIP); global vaccines, oncology, and consumer healthcare segment (VOC); and a global established pharmaceutical segment (GEP).

I believe one of the two forthcoming steps will involve the sale of Pfizer's GEP segment to a generic drugmaker, possibly to Teva Pharmaceutical Industries to negate the impact of double-digit revenue losses for a host of products.

And based on Pfizer's flirtation with AstraZeneca last year, the other step will probably be a major acquisition that would complement Pfizer's rapidly growing GIP and VOC segments.

And by complement, I mean that it would result in an influx of promising new clinical candidates -- especially in immuno-oncology -- and perhaps lower Pfizer's effective tax rate that presently exceeds 26%.

A merger with AstraZeneca would have fulfilled both of these operational goals nicely. But the revised tax codes instituted by the Treasury Dept. last year to stop tax inversions might force Pfizer to place a heavier emphasis on upgrading its oncology portfolio -- rather than lowering its effective tax rate. Time will tell how this plays out.

Pfizer is growing by leaps and bounds in certain areas
The company's GEP segment essentially led to the 2% drop in total revenue in the third quarter, showing why Pfizer needs to shed this problematic business soon.

The good news is that the VOC business is growing at breakneck pace, and this pattern should continue for the foreseeable future.

Digging into this particular segment a bit deeper, we learned that vaccine sales have been skyrocketing due to thePrevnar franchise. In the third quarter, for instance, Prevnar sales climbed by a whopping 26% because of government purchasing programs, as well as increased demand.

In 2015, this strong growth in vaccine sales should continue for two big reasons. First, Prevnar 13 recently gained additional approvals in the EU, and should be approved for use in older patients (65 years or older) in the U.S. by May 2015, helping to expand the vaccine's already large market share. Secondly, Pfizer completed its acquisition of Baxter's vaccine portfolio for a reported $635 million at the end of 2014, giving the unit additional sources for top-line growth in 2015.

The company's oncology sales also ripped higher by 17% in the third quarter, fueled by strong sales for Xalkori, Inlyta, and Bosulif. But that may be nothing compared to what's to come if Pfizer can get its new breast cancer drugpalbociclib approved this April.

Pfizer is seeking approval for palbociclib as a front-line treatment forestrogen-positive, HER2-negative breast cancer when used in combination withNovartis' Femara. What's noteworthy is that peak sales for this combination have been estimated to be as high as $9 billion!

Should investors buy Pfizer right now?
I think Pfizer's long turnaround process is nearing a tipping point that could unlock the company's latent value, perhaps resulting in market-beating returns in the process. Before jumping into this stock, though, it might be wise to wait until an acquisition target has been named.

Over the last few months, several biopharmas like AbbVie , Actavis , and even Celgene have been floated as possible targets of Pfizer's affection. Each of these companies provides intriguing upsides, but they would also all result in fundamentally different businesses via a combined entity.

Another big question mark is the fate of the GEP segment. Right now, this business accounts for about half of total revenues, meaning that management may be reluctant to sell it for a price that a company like Teva would be willing to pay. By the same token, its value is dropping quite literally by the day, as more drugs come off of patent protection.

I, for one, want to know what I'm buying before doing so. And right now, I'm not entirely sure what Pfizer is going to become because of these lingering issues.

That said, I do see huge upside potential in this stock, if management can complete a value-adding acquisition and transition away from its core GEP business, making it a stock to watch this year.

The article Does Pfizer Inc. Stock Offer a Market-Crushing Opportunity in 2015? originally appeared on Fool.com.

George Budwell owns shares of AbbVie. The Motley Fool recommends Celgene and Teva Pharmaceutical Industries. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.