Pfizer takes J&J to court as analysts shake up pharma ratings

Morgan Stanley analyst David Risinger upgraded Pfizer (PFE) this morning to Overweight, a Buy-equivalent rating, as he believes investors underappreciate the global prospects for breast cancer drug Ibrance. Meanwhile, his peer at Goldman Sacks cut Johnson & Johnson (JNJ) to Sell as he sees more downside relative to peers. Also being announced today is news that Pfizer is currently suing Johnson & Johnson for anticompetitive practices. BUY PFIZER: In a research note to investors, Morgan Stanley's Risinger upgraded Pfizer to Overweight from Equal Weight saying that following underperformance, the company shares are poised to outperform given the global rollout of its "number one growth driver", Ibrance. The analyst pointed out that he believes Ibrance is underappreciated given peers' limitations. Competitor Novartis' (NVS) Kisqali initial launch in recent months has been slow due to requirements for cardiac and liver function monitoring, and competitor Eli Lilly (LLY) disclosed abemaciclib first-line data on September 10 indicating elevated diarrhea and blood clot risk, he noted. He also cites the stock's favorable risk-reward, and M&A optionality, especially with the prospect of U.S. tax reform. Risinger raised his price target on Pfizer shares to $39 from $35. SELL JOHNSON & JOHNSON: Meanwhile, Goldman Sachs analyst Jami Rubin downgraded Johnson & Johnson to Sell, while raising his price target on the shares to $130 from $125. The analyst told investors in a research note of his own that while pharma has improved and he expects accelerated growth in the near-term, pressure on key products coupled with still-slow Medical Devices & Diagnostics growth and persistent pressure in consumer leaves J&J with a below-average, long-term growth outlook that suggests valuation is stretched. Further, Rubin noted that he believes Johnson & Johnson's lack of optionality for value creation - high value pipeline assets, transformative M&A and operating leverage - relative to peers, challenges the sustainability of its outperformance. He prefers names like AbbVie (ABBV), Bristol-Myers Squibb (BMY) and Eli Lilly with more identifiable, needle moving catalysts. PFIZER SUIT AGAINST JNJ: Pfizer has filed suit in the U.S. District Court for the Eastern District of Pennsylvania against Johnson & Johnson. The suit alleges that Johnson & Johnson's exclusionary contracts and other anticompetitive practices have denied U.S. patients access to therapeutic options and undermined the benefits of robust price competition in the innovative and growing biologics marketplace for patients. It further claims that Johnson & Johnson's systematic efforts to maintain its monopoly in connection with Remicade by inappropriately excluding biosimilar competitors violates federal antitrust laws and undermines the principal goals of the federal Biologics Price Competition and Innovation Act. WHAT'S NOTABLE: Morgan Stanley's Risinger also downgraded Allergan (AGN) to Equal Weight from Overweight this morning. PRICE ACTION: In morning trading, shares of Pfizer have gained over 1% to $35.96, while Johnson & Johnson has dropped more than 1% to $133.41.