Pfizer Earnings Were Not Impressive
Pfizer’s (NYSE:PFE) sales declined by 2% in Q3 2014, which was not surprising considering the lack of catalysts and a large number of drugs losing out to competition. The termination of certain co-promotion agreements has further worsened the situation and has overshadowed the impressive growth in oncology and vaccine segments. The issue is that these businesses are still small and despite their strong growth, their incremental revenue contribution is still not sufficient to offset the sales decline in legacy products. Considering lack of breakthrough products on the horizon and recently failed bid to acquire AstraZeneca, we expect Pfizer’s growth to remain subdued. This may encourage the company to look for other smaller acquisitions or further streamlining its business.
Our price estimate for Pfizer stands at $35, implying a premium of about 20% to the market price.
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Competitive Pressure From Generics And Termination Of Agreements Continued To Plague Pfizer’s Growth
Pfizer continued to face the impact of termination of co-promotion agreements of certain important drugs such as Enbrel. The drug is used for the treatment of plaque psoriasis, rheumatoid arthritis and psoriatic arthritis. Pfizer and Amgen had co-marketed this product in North America (U.S. and Canada) until a year ago. Apart from this, the company’s revenues have also suffered due to the ongoing termination of the Spiriva collaboration in some geographies, along with the patent expiry and the resulting competition for Detrol LA in the U.S. Pfizer’s other legacy products are also facing competitive pressure which is evident from a 7% decline in the revenues from ‘global established products’ segment in Q3 2014. The figure for the first nine months of 2014 stood at 8%. These products still form a big portion (roughly half) of Pfizer’s pharmaceutical revenues which implies that even if the percentage decline is small, other growing and yet relatively small product categories will have to accelerate their growth in order to make up for the revenue shortfall.
Silver Lining As Vaccines And Oncology Sales Went Up
Pfizer’s revenues related to oncology drugs jumped 16% globally in Q3 2014, sustaining the growth rate observed in the second quarter and representing growth acceleration compared to the first quarter. [1] For the first nine months, the segment’s revenue growth stood at roughly 13%. The figure is the highest among the company’s primary business segments, with vaccine sales racing past that of oncology drugs only in the third quarter. This is a silver lining for Pfizer as the company has seen its revenues decline from $67.8 billion in 2010 to $51.6 billion in 2013. Pfizer had pinned its hopes on some recent drug launches, but the market adoption has been rather slow.
As far as vaccines are concerned, Prevnar 13 saw strong growth of 26% in the U.S. driven by timing of purchases from the U.S. government. The international growth remained in double digits as well (excluding the impact of currency movement) due to higher number of shipments for GAVI (Global Alliance for Vaccines and Immunization). Prevnar 13 has a dominant position in the U.S. and is expanding in Europe as well.
Additionally, recently launched products such as Eliquis and Xeljanz helped offset some of the decline. Eliquis will help Pfizer grow its cardiovascular segment sales due to the drug’s continued adoption among healthcare specialists and the approval for conditions beyond atrial fibrillation. In late July, the European Commission approved the drug for the treatment of Deep Vein Thrombosis (DVT) and Pulmonary Embolism (PE), as well as for the prevention of recurrence of these conditions. Eliquis is essentially a blood thinner and considering the decline in Lipitor’s sales, becomes a critical product for Pfizer as far as revival of cardiovascular drug business is concerned. We estimate that this segment constitutes roughly 10%-15% to Pfizer’s value.
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Pfizer Gets Drug Approval For Hot Flashes, Targets 33 Million Women In The U.S.
October 8th, 2013 by Trefis Team
The FDA recently granted approval for Pfizer’s (NYSE:PFE) Duavee, which has been developed by its wholly-owned subsidiary Wyeth in collaboration with Ligand Pharmaceuticals Inc. [1] The drug introduces a novel approach to treating hot flashes in menopausal women, and is also approved for the treatment of postmenopausal osteoporosis (common bone disease due to low estrogen levels). Unlike other drugs in the market, Duavee pairs conjugated estrogen (CE) with an estrogen agonist/antagonist (also known as a selective estrogen receptor modulator). The drug has the advantage of protecting uterus lining against hyperplasia, which increases risk of cancer of uterine lining and can happen with estrogen-only treatments. [1]
Given the reduction in cancer risk, we expect the drug to gain traction. There are approximately 33 million women in the U.S. between the ages of 45-59 (menopausal), and most of them experience hot flashes. [1] The quality of life can get significantly affected if this common condition is left untreated. Pfizer’s existing drug Premarin, which primarily consists of conjugated estrogen, earned over $1 billion in revenues in 2012. We expect Duavee to cannibalize some of Premarin’s sales starting from the first quarter of 2014. Furthermore, given that Pfizer is a well diversified company with several other major drugs, Duavee’s success will lead to only a small incremental value add.
- Pfizer’s SEC Filings [↩]