Weekly Pharma Notes: Pfizer, Bristol-Myers Squibb, Johnson & Johnson, Merck And Roche

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Last week was not very eventful for big pharmaceutical companies, except for few announcements here and there. However, pharmaceutical stocks declined slightly due to broader market fall. For investors, it will be worthwhile to look forward to couple of data presentations from clinical trials of Pfizer (NYSE:PFE) and Merck (NYSE:MRK). There was also a partnership announcement between Novartis and Bristol-Myers Squibb (NYSE:BMY) which seems interesting considering their relevance to hot research area of immuno-oncology drugs. Let’s take a brief look at key developments for big pharmaceutical companies over the course of last week.

Pfizer

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Pfizer announced that it will present data from phase 1 and phase 2 trials of its investigational Staphylococcus Aureus vaccine at IDWeek 2014. A vaccine specifically for Methicillin-Resistant Staphylococcus Aureus (MRSA) bacteria is has the potential to be the largest vaccine in the industry if it confers the breadth of coverage and reduces the need for anti-biotic treatment. MRSA is a strain of staph bacteria that’s become resistant to antibiotics commonly used to treat ordinary staph infections. MRSA infects 53 million people worldwide and causes higher number of deaths in the U.S. than AIDS (acquired immuno deficiency syndrome).

We estimate revenues of around $50 billion for Pfizer in 2014 and non-GAAP diluted EPS of $2.13. We maintain a $34 price estimate for Pfizer’s shares, which is around 15% above the market price. The company’s shares traded in small range during the past week.

Bristol-Myers Squibb

Novartis recently partnered with Bristol-Myers Squibb to test the effectiveness of three of its oncology drugs when combined with latter’s anti-PD1 drug Nivolumab. One of these drugs has been approved while the other two are experimental. This marks another key development in immuno-oncology drug research which appears to be a very promising area. According to some estimates, the market could be as big as $35 billion.

We estimate revenues of around $17.5 billion for Bristol-Myers Squibb in 2014 and non-GAAP diluted EPS of $2.07. We maintain a $36 price estimate for BMY’s shares, which is around 30% below the market price. The company’s shares declined by roughly 1% during the past week.

Johnson & Johnson

There was not much development for Johnson & Johnson (NYSE:JNJ) during the past week except for the company announcing a new milestone for one of its partnership programs, Sight for Kids. The program, which is one of the largest vision screening programs in the world, has now reached over 20 million children. The company will provide additional funding for further expansion. Apart from this, Johnson & Johnson has been in the news for its recent announcement of acquisition of Alios BioPharma to leverage its potent drug pipeline catering to treatment of viral diseases.

Please note that the company will release its Q3 2014 earnings on October 14th and you can read about what to expect from the upcoming results here.

We estimate revenues of around $74.4 billion for Johnson & Johnson in 2014 and non-GAAP diluted EPS of $5.53. We maintain a $97 price estimate for J&J’s shares, which is more than 5% below the market price. The company’s stock fell by roughly 2.85% last week primarily due to broader market decline.

Merck

Last week, Merck sold $3.1 billion (or Euro 2.5 billion) of Euro denominated bonds with maturities of 7 years, 12 years and 20 years. [1] The majority of the proceeds will go in the repayment of older debt and the rest will be used for general corporate purposes. The move appears to be motivated by the spur in European bond market for long maturity bonds and cheaper financing rate.

Merck stated last Wednesday that it will release phase 2 clinical trial data for C-Swift hepatitis C medicine next month at the meeting of American Association for the Study of Liver Diseases. Hepatitis C is a promising market for drug makers and positive data could influence investor sentiment.

We estimate revenues of around $42.9 billion for Merck in 2014 and non-GAAP diluted EPS of $3.42. We maintain a $57 price estimate for Merck’s shares, implying a slight discount to the market price. Merck’s share price fell by less than 1.5% during the last week.

Roche

The U.S. FDA recently accepted the filing of supplemental Biologics license application for Swiss pharmaceutical giant Roche Holdings’ (NASDAQ:RHHBY) drug Lucentis for curing diabetic retinopathy. The agency has also granted priority review to the filing. We note that Lucentis earned around $1.82 billion in revenues for Roche in 2013.

Roche has also announced the acquisition of technology and patent rights from AbVitro, which is primarily involved in therapeutic target discovery. AbVitro’s technology will support next generation sequencing. This very much relates to Roche’s announcement of the acquisition of Genia Technologies earlier this year. Genia is involved in developing a next generation, single-molecule, semiconductor based DNA sequencing platform using nanopore technology. If DNA sequencing helps Roche in developing 1-2 targeted drugs for cancer and other serious illnesses, the incremental sales could be significant.

We estimate revenues of around $54.3 billion for Roche in 2014 and non-IFRS core diluted EPS of $2.05. We maintain a $40 price estimate for Roche’s shares, implying a premium of about 20% to the market price. The company’s shares were down 4% primarily due to broader market decline.

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Notes:
  1. Merck Prices EUR 2.5 Billion Debt Offering, Merck Press Release, Oct 6 2014 []