Pfizer’s Earnings Suggest That A Stock Trigger Is Unlikely In The Near Term

by Trefis Team
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Pfizer (NYSE:PFE) recently reported its Q1 2017 earnings, which were mixed due to the long line of legacy products weighing on its top line. On one hand, Ibrance, Eliquis and Xeljanz grew strongly, but on the other hand, the problems with Prevnar and legacy drugs continued. Some of the company’s newly launched and key pipeline drugs have reasonable potential, but we have yet to see a truly game-changing and first-in-class therapy from Pfizer in immuno-oncology. Below we discuss some takeaways from the earnings release and the company’s outlook going forward.

Our price estimate of $33 for Pfizer is roughly in line with the market.

Pfizer Is Facing Some Problems With Growth

Pfizer’s revenue declined by 2% in the first quarter. This was partially due to fewer selling days and partially due to adverse currency impacts. Even if we exclude these factors as well as the impact of any acquisitions and divestitures, Pfizer’s revenue was essentially flat. The company has numerous drugs in the market, and the offsetting impact of legacy drugs against newer launches has kept its growth in check for a while. Prevnar was one of the company’s growth engines, but with new adult vaccinations on the decline in the U.S, it becomes difficult to see how the franchise can grow further. In addition, Xtandi, which Pfizer added to its portfolio when it acquired Medivation, seems to be having some trouble with reimbursements. Xtandi’s net sales in the first quarter declined 11%, but demand grew by 13%. [1] This can be attributed to an increase in utilization of Pfizer’s patient assistance programs. However, the company believes that this will stabilize and reimbursements are likely to flow better going forward.

However, Some Products Are Doing Well And Pipeline Holds Promise

As expected, the sales of cancer drug Ibrance, blood thinner Eliquis and rheumatoid arthritis drug Xeljanz grew sharply. Ibrance’s revenue jumped nearly 58% to $679 million, and we expect its annual sales to cross $2.5 billion this year. Eliquis’ revenue grew more than 50%, which was consistent with what Bristol-Myers Squibb, which shares marketing rights to the drug, reported in its earnings announcement. Xeljanz expanded nearly 27% to $250 million in revenue, and we expect the momentum to continue considering its EU approval in March. As far as the biosimilar business is concerned, Pfizer is seeing some initial success with Inflectra but the impact is too small to notice at the moment. We’ll have to wait and see how the rest of the year plays out.

In addition, Pfizer stressed the strength of its pipeline. The FDA recently granted approval to Avelumab for metastatic merkel cell carcinoma. Pfizer also mentioned that it has initiated Avelumab combination studies with chemotherapy and targeted therapies, and expects to see early data from these studies in 2017. However, we note that Viagra and Lyrica will lose their exclusivity soon, which is again a cause of concern.

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Notes:
  1. Pfizer’s Q1 2017 Earnings Transcript []
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