This site requires a more recent version of Adobe Flash Player to function properly.
Go here to get Flash.
Trefis's graphical modelling tools require Flash, but here's a preview of some of the content you'll see once
Flash is enabled:
Investment Overview for Pfizer (NYSE:PFE)
Key drivers of Pfizer's value that present opportunities for upside or downside to the current Trefis price estimate for Pfizer:
More than expected biosimilar success
- Revenue from Other Pharma & Consumer: Pfizer's acquisition of Hospira could be seen as a big bet on biosimilars. The company is currently testing some biosimilars for Remicade, Rituxan/MabThera, Avastin and Herceptin. All these three drugs are blockbuster biologics. If biosimilars are approved worldwide, Pfizer could be looking to target a market of more than $15 billion with its phase 3 biosimilars. This assumes that biosimilars will be priced 30% below patented drugs. However, at present, only Europe has an established process to approve biosimilars, though there has just been a single approval in the U.S. As such, the timeframe for approvals is even less clear than normal. Additionally, we need to consider the evolving competition which may bring the prices further down. In fact, some competitors are offering discounts of as much as 70%. If the company exceeds our expectations and sees unprecedented success in biosimilars market, it could add nearly $5 billion over our current estimates leading to nearly 10% upside to our Trefis price estimate for Pfizer.
Phase 3 pipeline fires
- Pfizer's Oncology Drugs Revenue, Neuroscience Drugs Revenue and Cardiovascular Drugs Revenue: Pfizer's pipeline is reasonably strong. The phase 3 oncology pipeline has 4 drugs with combined peak sales estimate of $6.5 billion. Overall, the the company has 9 drugs in phase 3 which can bring in combined peak sales of $10 billion. Our valuation reflects probability adjusted revenues assuming 50% probability of phase 3 drugs reaching commercial launch stage. However, if all phase 3 drugs are approved within the next 3 years, it could imply 10% upside to our price estimate.
Pfizer is the world's biggest pharmaceutical company in terms of revenues. It was founded in 1849 and went public in 2004. In October, 2009, Pfizer completed the acquisition of pharmaceutical giant Wyeth for $68 billion and went on to acquire Hospira in 2015 which positions it strongly in sterile injectibles and biosimilars market.
The company reports its results primarily in the following segments: 1) Innovative products business 2) Established products business
Innovative products business includes relatively new or growing drugs which are still patent protected. These drugs span across multiple therapeutic areas including oncology, anti-infectives, immmunology, cardiovascular, metabolism, musculoskeletal and others. Its established products business includes drugs that have gone off patent in one or more major markets (U.S. or EU), products acquired from Hospira acquisition including biosimilars and sterile injectibles, and consumer healthcare. Apart from this the company also reports revenues from alliances.
The biggest contribution to the value of the stock comes from the Other Pharma and Consumer segment which includes revenues from Pfizer's alliances with other companies, legacy pharma products, sterile injectibles, biosimilars, consumer healthcare, infusion systems and other drugs not reported separately. This is due to the following reasons:
A big chunk of Pfizer's revenues comes from this segment
The revenues for 'other pharma and consumer division' stood at $18.34 billion in 2016 accounting for nearly 35% of Pfizer's overall revenues. This can be attributed to the fact that the company's legacy pharma products, its revenues from alliances, its consumer healthcare division and sterile injectibles business, each are quite size-able.
Despite already being huge, the revenues from 'other pharma and consumer' are likely to grow
This division has been significantly strengthened by the acquisition of Hospira in late 2015. We expect Pfizer to leverage Hospira's competency in sterile injectibles and biosimilars (Hospira was the first to launch biosimialr version of Remicade) to offset the decline in legacy pharma products. In fact, Pfizer has biosimilars for blockbuster cancer drugs Avastin, Herceptin and Rituxan in phase 3 trials currently.
Loss of patents impacting sales
In the last few years, several blockbuster drugs have lost patent exclusivity which includes Lipitor. This has not only impacted Pfizer, but the pharmaceutical industry as a whole. As a result, Pfizer and other firms will need to focus on growing areas of immunology and oncology.
Growing threat of generic products
The fast growing pharma market in emerging economies or referred to as the 'Pharmerging' economies have the capability and technical prowess to manufacture generic versions of blockbuster drugs. These generic drugs are often sold at prices that substantially cheaper then their branded counterparts, thereby severely affecting big pharma's ability to generate profits in the long run.
Biosimilars gaining traction
Previously, Food & Drug Administration Authority (FDA) did not have a process to grant approvals for Biosimilars. However, recent approval of biosimilars in Europe and the FDA approval of first biosimilar in U.S. are likely to pave way for further approvals. Pfizer is focusing on developing biosimilars and its acquisition of Hospira will bolster that effort.
Globalization of healthcare reforms
Governments around the world are trying to rein in fiscal spending in order to manage their budget deficits
Since healthcare costs are one the biggest components of any national budget, it is obvious that increased healthcare legislation and reforms around the world will hurt revenues for the entire pharmaceutical sector.
How Does Trefis Modelling Work?
How do we get the historical numbers for this chart?
Trefis has a team of in-house Analysts who gather historical data from company filings and other verifiable sources. When historicals are available, we explain how we got them at the bottom of the Trefis analysis section below.
Who came up with the Trefis forecast for future years?
The Trefis team of in-house Analysts considers a variety of factors when projecting any forecast. The rationale for our projections is explained in the Trefis analysis section below.
How does my dragging the trendline on the chart impact the stock price?
- We use forecasts for business drivers to calculate forecasted Revenues and Profits for each division of the company.
- We then use forecasted Profits in a Discounted Cash Flow (DCF) model to obtain the Price Estimate for the company.
See more on: DCF Methodology
View All Help Topics