Pfizer’s Future Is Starting To Look Better

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Pfizer‘s (NYSE:PFE) Q3 2015 earnings reinforced our belief that the last quarter was a turning point for the company’s business. The third quarter built upon that momentum, and we saw good growth across key drugs including Prevnar, Eliquis, Ibrance and Lyrica. However, the longer term growth is likely to come from new drugs or the extension of current drugs for additional indications. Considering the recent pipeline activity, acquisition of Hospira, and the company’s quest for more strategic alliances, we believe that Pfizer may launch some successful drugs in the next 5 years. While the currency movement has acted as a dampener, the underlying operational growth is reviving.

We are currently reviewing our price estimate for Pfizer in light of recent earnings, and will have an update ready soon.

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See Full Analysis For Pfizer

Vaccines Sales Were Strong, But May Slow Down

Vaccine division’s year-on-year sales growth was down compared to the second quarter, but it still stood at a healthy 37% (excluding the impact of currency movements). [1] The growth of Prevenar family of vaccines was a staggering 77% in the U.S. which can be attributed to its success in the adults aged 65 or older. The company has managed to vaccinate 25%-30% of the eligible adult population and this happened faster than it expected. [2] However, acquiring the next set of adult customers is going to be incrementally difficult and therefore, we expect a slight slowdown in vaccines sales growth going forward.

Vaccines are becoming a major thrust for Pfizer. Earlier this year, the company recently announced its decision to acquire two meningitis vaccines, Nimenrix and Mencevax, from GlaxoSmithKline (GSK) for $130 million. [3] Pfizer’s strong presence in pneumococcal vaccines with near monopoly in the U.S. will be complimented by its expansion in meningococcal vaccine market, which is expected to hit $3.76 billion globally by 2019.

Here Is How Pfizer Plans To Fuel Its Growth, And It May Work

While Pfizer has few drugs that are expected to continue to grow for the foreseeable future, since most of its drugs have either lost, or will soon lose, patent protection. It is clear that new drugs have to replace them and this can happen in the following ways:

1) Pfizer continues to invest R&D dollars and partner with other firms to develop novel therapies. As is the case with the industry in general, Pfizer is likely to find most promise from its immunotherapy pipeline. It has made some progress in developing drugs that use anti-PD L1 mechanism. The FDA has granted Orphan Drug and Fast Track designation to avelumab, which Pfizer is developing in partnership with Merck KGaA. The drug is aimed at treating a rare but aggressive type of skin cancer, Merkel Cell Carcinoma. The company expects avelumab’s commercial launch in 2017 and more anti-PD L1 drug launches in the subsequent 5 years. [2] Overall, Pfizer is likely to have 10 immuno-oncology drugs working with different mechanism under clinical trials by 2016.

2) Pfizer will leveragethe acquisition of  Hospira’s to expand aggressively into  biosimilars and sterile injectibles, where it has positioned itself as a leading player following the move. The approval of biosimilar version of Remicade has paved the way of a new era wherein biologics may no longer enjoy the extended protection periods. This presents an opportunity for companies such as Pfizer, which don’t have a very strong presence in biologics. Additionally, considering the clamp down by the FDA on several U.S. sterile injectibles manufacturing units, the U.S. firms have been looking at international companies to either acquire or import. This gives Pfizer an advantage as the acquisition of Hospira has made it the second largest global player in sterile injectibles.

3) Pfizer looks for more acquisitions to boost is drug portfolio and pipeline, as well as potentially reduce taxes.

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Pfizer Gets Drug Approval For Hot Flashes, Targets 33 Million Women In The U.S.

by Trefis Team

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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.

Notes:
  1. Pfizer’s Earnings Release []
  2. Pfizer’s Q3 2015 Earnings Transcript [] []
  3. Pfizer Enters Into Agreement To Acquire Nimenrix And Mencevax From GlaxoSmithKline, Pfizer Press Release, Jun 22 2015 []