Pfizer Gets European Approval To Expand Prevenar Usage

Pfizer (NYSE:PFE) recently received approval in Europe to expand the usage of Prevenar 13 to adults aged 18-49. ^[1] Prevenar 13 is a pneumococcal conjugate vaccine that prevents invasive disease caused by Streptococcus pneumoniae, and was previously being administered to children aged 6 weeks to 17 years and adults aged 50 years and above. ^[1] The approval will help Pfizer expand sales at time when it is battling against a patent cliff. The company has stopped focusing on cardiovascular R&D (research & development) as the sales of its blockbuster drug Lipitor continue to dwindle. Revenues from other cardiovascular drugs have also declined and the overall cardiovascular drugs market is expected to shrink despite the growth in Asia-Pacific region. As a result, Pfizer is shifting its focus to more profitable markets and recent approval of Prevenar comes as welcome boost.

See Full Analysis For Pfizer

Lipitor & Other Cardiovascular Drugs Are Going Through Hard Times

Pfizer’s pharmaceutical division has continued to suffer due to patent expiry of Lipitor, a blockbuster cardiovascular drug. Lipitor was the world’s largest selling drug at one point. It lost its patent protection in November 2011, and Pfizer’s cardiovascular division has been suffering ever since. From about $10 billion in 2011, Lipitor’s sales declined to about $4 billion in 2012, as generics penetrated the market.

Another drug, Caduet, a pill combining Pfizer’s Lipitor and Norvasc for the prevention of cardiovascular events also lost exclusivity in the U.S. in November 2011, and in other markets in 2012. Benefix also lost patent protection in 2011. Both of these drugs generated more than $1 billion in sales in 2011. The expiry of these patents is having a substantial effect on overall revenues for Pfizer’s cardiovascular division in the near term. In addition to this, margins are under pressure as cheap generic versions flood the market, resulting in lower pricing power.

Growth In Sales Of Prevenar 13 Will Help

Prevenar 13 is a vaccine to prevent pneumococcal diseases such as pneumonia and meningitis. European approval will open up a big market for Pfizer, and will aid its growth in 2013 and beyond. With no significant competition in the market, the Prevenar franchise has the potential to make up for the company’s revenue losses due to expiration of several patents. Prevenar is currently Pfizer’s 2nd biggest brand in terms of sales after Lyrica, and could well become the biggest brand in the next couple of years. We expect the franchise’s sales to increase from $4.1 billion in 2012 to $7 billion by the end of our forecast period.

Prevenar 13 was first introduced for infants and young children in 2009 in Europe, and has since been approved in over 120 countries for use in infants and young children, and in over 80 countries for use in adults of age 50 years and above. With the recent approval, the vaccine is now practically available to the entire population of Europe, which stands at well over 700 million. The vaccine is useful for people who are at higher risk of contracting pneumococcal diseases due to their age or underlying chronic medical conditions that weaken the immune system, making it easier for opportunistic infections to spread.

Research firm Datamonitor expects the U.S. pneumococcal vaccine market to grow to $2 billion by 2019, which will be almost entirely dominated by Prevenar 13. In addition to this, it expects top 5 European markets to account for almost $3.5 billion in pneumococcal vaccine sales by 2019, with Prevenar 13 having a near monopoly again. We believe that Pfizer will leverage its monopolistic position in the market and build Prevenar into a very strong franchise over the next few years.

Our price estimate for Pfizer stands at $32, implying a premium of about 5% to the market price.

1. Pfizer Receives European Approval To Expand Use Of Prevenar 13* To Adults Aged 18 To 49 Years For The Prevention Of Invasive Pneumococcal Disease, Pfizer Press Release, July 10 2013 [↩] [↩]