Pfizer Earnings Preview: Expect Moderate Growth As Ibrance, Eliquis Ramp Up

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Pfizer (NYSE:PFE) saw a revival in its growth in the first nine months of 2016. We expect this trend to continue when the company reports its Q4 2016 results tomorrow. While sales of several of its drugs are under pressure due to the competition from generics, the vaccine business remains resilient and the company’s investment in cancer drugs is paying off. Additionally, blood thinning drug Eliquis has been a huge success. We expect these products were the key factors governing Pfizer’s fourth quarter results. Apart from this, we may see some impact from recent acquisitions of Anacor and Medivation. Overall, Pfizer has managed to keep investors interested with new FDA filings and approvals, acquisitions focused on strengthening core product portfolio, and consistency in returning capital return to shareholders. We expect the company give investors some color on the potential and uptake of new drugs.

Our price estimate of $36 for Pfizer stands at a premium of around 15% to the market.

Here Is What Will Drive Q4 Growth For Pfizer

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We believe the Prevnar vaccine franchise, oncology drugs including Ibrance and Sutent, and the blood thinner Eliquis to drove Pfizer’s fourth quarter results. The company has a near monopoly in pneumococcal vaccine market with Prevnar, which brings in about $10 billion in annual revenue. There is a potential to expand further as the adoption among adults increases. Additionally, the ramp up of immuno-oncology drugs has been encouraging and cancer franchise, overall, will continue to play critical role in Pfizer’s growth. We estimate nearly $4 billion in peak sales for metastatic breast cancer Ibrance and the phase 3 oncology pipeline has a combined peak sales potential of nearly $5 billion.

Additionally, the completion of Medivation acquisition will have an incremental impact of nearly 1.5% on Pfizer’s revenue. Medivation currently has one commercial product – cancer drug Xtandi, and shares the drug’s U.S. commercial rights with Astellas. Pfizer benefits from the fact that Xtandi has emerged as a strong competitor for J&J’s Zytiga. The drug has done reasonably well among oncologists but it has significant urology applications as well. With Pfizer’s marketing muscle, Xtandi can accelerate its uptake among urologists.

Approval Of Inflectra And Crisaborole: Limited Impact But Watch Out Initial Sales Ramp Up

The U.S. launch of Inflectra, a biosimilar version of J&J’s Remicade, was an interesting event that occured in late November. While we don’t think it will have a notable impact on Pfizer’s Q4 2016 results, we look forward to management’s commentary on the drug’s uptake. Pfizer has priced Inflectra at 15% discount to Remicade. With the acquisition of Hospira, Pfizer has gained a strong biosimilar pipeline. This is a good strategic move considering a number of successful biologics are going off-patent. The Biosimilar market could reach $35 billion by 2020 and government support likely due to potential cost savings of $44 billion over 10 years. Besides, high drug pricing has become one of the key issues that the U.S. government wishes to tackle, suggesting that investment in biosimilars could pay off.

Pfizer’s also received the FDA approval for the eczema drug crisaborole in the fourth quarter. The drug was added to its portfolio with the acquisition of Anacor. The estimates peg the peak sales at somewhere around $2 billion. Pfizer has a strong presence in the primary care and pediatric treatments, which is what crisaborole will target.

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