Prevnar Helps Pfizer Post Better Than Expected Q3 Results

by Trefis Team
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Pfizer’s (NYSE:PFE) recently released Q3 results were above street estimates, led by higher than expected sales of Prevnar. The company also raised its full year earnings guidance to $2.54 – $2.62 per share. Trefis currently estimates the full year earnings to be $2.57. The company’s management stated during the earnings call that it may decide next year to spin off or sell the consumer business, which includes Chapstick, Advil and Anacin.

Looking at the performance of the pharmaceutical business in Q3, oncology drugs saw a 46% jump in revenues, led by Ibrance. Among other notable drug performance, Eliquis and Lyrica posted double-digit growth while Prevnar was down 1% but beat street estimates with sales of over $1.5 billion during the quarter.

Despite better than expected results, Pfizer’s stock did not react much, and was flat in trading Tuesday, a trend seen over the past several quarters. In fact, the stock has remained largely rangebound in the past five years. It appears that the market has priced in the impact of the patent cliff on the pharma business. It remains to be seen if a sale or spin-off of the consumer business could trigger momentum for Pfizer’s stock.

Looking forward, we continue to believe that the oncology segment will be one of the key growth drivers for Pfizer. The company is focused on strengthening its oncology business, which currently contributes less than 20% of its total valuation, according to our estimates. Pfizer hadn’t seen significant growth in its oncology segment until recent years with Ibrance. The company expects more anti-PD L1 drug launches in the coming years. This, combined with Ibrance and Bavencio sales, will likely drive the segment’s growth in the coming years.

Pfizer also co-developed Bavencio, an anti-PD L1 cancer drug, with Merck, and it has been recently approved by the European regulators for the treatment of a certain type of skin cancer. Bavencio appears to be a milestone drug for Pfizer, and the expected peak sales have been touted to be in the range of $4-6 billion, translating into sales of $2-3 billion for Pfizer. Overall, we estimate the average annual revenue growth for the oncology segment to be north of 12%, which is substantially above what we expect for Pfizer as a whole.

We currently have a price estimate of $35 for Pfizer, which is around its current market price.

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