Thursday, December 30, 2010

Pfizer's (NYSE:PFE) Acquisition of Synbiotics a Good One?

Yesterday Pfizer (NYSE:PFE) announced they had acquired Synbiotics, a move by them into the veterinary immunodiagnostics business.

Over the last three quarters, the animal-health division of Pfizer has generated about 5 percent of revenue for the company; not a small amount, as if were measured as a drug, it would only be behind Lipitor as a revenue generator.

It appears this is a move to build a foundation toward building out more diagnostic products for animals.

In the short term this won't do too much, as the overall animal-health industry is growing at about a 4 percent rate.

What it does over the long term though is provide a revenue stream base in one segment of the company that can be counted on to be predictable.

Drugs for humans are volatile and uncertain, and last only as long as the patents. Drug pipelines are also unpredictable, as numerous failed clinical trials have revealed.

This is a good move by Pfizer which should pay long term dividends to the company and its shareholders, although Merck (NYSE:MRK) and Sanofi-Aventis (NYSE:SNY) have also seen the need for more stability in some of their segments, and are moving toward animal-health as well.

Pfizer was trading at $17.53, down $0.07, or 0.40 percent, as of 1:38 PM EST.

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