Morningstar | Pfizer Posts Strong 2Q Buoyed by Eliquis, Xeljanz, and Ibrance, Leading to FVE Increase
Pfizer posted strong second-quarter results ahead of both our and consensus expectations, and we plan to slightly raise our fair value estimate based on the results. We continue to view the stock as undervalued, with the market likely underappreciating the firm's emerging pipeline. The strength of the pipeline and currently marketed drugs also helps reinforce our wide-moat rating.In the quarter, strong gains from several established drugs (Eliquis for cardiovascular disease, Xeljanz for rheumatoid arthritis, and Ibrance for breast cancer) helped offset generic competition on older drugs, leading to total sales growth of 2% operationally. We expect this growth to accelerate into 2019, but we expect generic competition on neuroscience drug Lyrica (8% of total sales) in mid-2019 to slow growth. Nevertheless, Eliquis should continue to gain share from older drug treatment warfarin based on significantly better efficacy and side effects. Also, new indications (ulcerative colitis and psoriatic arthritis) for Xeljanz should drive future growth. Ibrance's recent launches internationally set up strong growth potential and we expect positive adjuvant studies in 2020 to reaccelerate growth in the United States. However, the Ibrance study Paloma-3 failed to improve overall survival, or OS, and even though the study wasn't optimized to show an OS benefit and competitive data so far looks similar to Ibrance, competitors could use this setback if their studies show an OS benefit.
Beyond currently marketed drugs, Pfizer is developing a good pipeline. The decision to move the next-generation pneumococcal vaccine covering 20 serotypes (up from 13 with Prevnar 13 and 15 from Merck's late-stage competitive threat) into Phase III development should keep this vaccine franchise well-positioned for many more years. Also, the positive Phase III data for pain drug tanezumab opens potential for a high-risk/high-reward opportunity, and we model a 55% probability of success for the drug.
For a complete review of the NGF market and the outlook for tanezumab, please see our report "No Pain, Potential for Lots of Gain for Pfizer, Lilly, and Regeneron." Also, the report "Key Opinion Leader Call: Anti-NGF Treatments From Pfizer, Lilly, and Regeneron Address Unmet Need in Chronic Pain Market" provides insights from Thomas Schnitzer, MD, PhD, on the outlook for the NGF class.
Pfizer is a research-based biopharmaceutical company. The company is engaged in discovering, developing, manufacturing and distributing of healthcare products, including medicines and vaccines. The company manages its commercial operations through three businesses: Pfizer Biopharmaceuticals Group, which includes Oncology, Inflammation and Immunology, Rare Disease, Hospital, Vaccines and Internal Medicine business units, as well as a hospital business unit; Upjohn, which includes the company's solid oral dose brands such as Lyrica, Lipitor, Norvasc, Celebrex, Viagra, and certain generic medicines; and Consumer Healthcare, which is an over-the-counter medicines business.
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