Weekly Pharmaceutical Notes: Pfizer, Bristol-Myers Squibb And Roche

Last week wasn’t too eventful for big pharma companies except for a couple of developments here and there. Overall, the shares of the big pharmaceutical firms fell slightly which isn’t too surprising considering the end of the year and no strong catalytic events. The decline in the stock price was most significant for Roche Holdings (NASDAQ:RHHBY) which suffered from the failure of two drugs in late stage clinical trials. In this note, we bring to you the key developments for the biggest pharmaceutical companies in the U.S. during the past week.

Pfizer

The possibility of Pfizer taking another shot at AstraZeneca seems to be declining. AstraZeneca’s CEO recently stated that he considers such an attempt quite unlikely, and intends to grow the company’s sales to $45 billion within a decade. We still believe that a big acquisition may be on cards for Pfizer, even if it is not AstraZeneca (read Pfizer’s Acquisition Strategy: Will Pfizer Still Go For A Big Acquisition? (Part 1 of 2)). The company is motivated by its desire for cost synergies and a stronger oncology pipeline.

We estimate revenues of around $49.65 billion for Pfizer in 2014 and non-GAAP diluted EPS of $2.15. We maintain a $35 price estimate for Pfizer’s shares, which is more than 10% above the market price. The company’s shares fell slightly during the past week.

Merck

Merck got some good news on Cubist when the FDA recently granted regulatory approval to zerbaxa, a drug intended to treat urinary tract and abdominal infections. Although this approval was largely expected, it comes as a respite considering court’s recent invalidation of Cubicin’s patents. Merck is in the process of acquisition of Cubist Pharmaceuticals for $8.4 billion. Shortly following its announcement, a US court invalidated four of five key patents covering the company’s flagship product, Cubicin. The invalidated patents would have allowed patent protection to extend to 2019 and 2020.

We estimate revenues of around $42.33 billion for Merck in 2014 and non-GAAP diluted EPS of $3.38. We maintain a $52.50 price estimate for Merck’s shares, which is about 10% below the market price. The company’s shares fell slightly last week.

Roche

Roche’s two drugs recently failed late stage clinical trials for certain conditions, which resulted in more than 5% decline in its shares. These drugs include an experimental Alzheimer’s disease drug, gantenerumab, and an already marketed cancer drug, Kadcyla. The decline in the stock price is significant considering that the company’s market capitalization is nearly $237 billion. This means that the market was valuing these drugs at roughly $12 billion. Another recent key development was Roche’s acquisition of Bina Technologies, which specializes in the processing and management of genomic data. The company did not disclose the deal price.

We estimate revenues of around $52.75 billion for Roche in 2014 and non-GAAP diluted EPS of $1.98. We maintain a $38.54 price estimate for Pfizer’s shares, which is more than 10% above the market price. The company’s shares fell slightly during the past week.

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