On Wednesday, Dec. 5, Pfizer (PFE) released positive test data for PD-0332991, a drug aimed mainly at breast cancer. The stock appreciated approximately 30 cents on the news. According to the sell side, PD-0332991 has a peak sales potential of $5 billion annual sales. According to results, the drug has been almost 300% more effective than previous breast cancer solutions. I believe the drugs PD-0332991, Eliquis, and Xeljanz can drive Pfizer's price in 2013. With a dividend yield approximately double the industry average, a low P/E of 11 times, and these very high potential drugs on their way, I believe Pfizer is a buy.
Pfizer is the second largest pharmaceutical company in the world, with a market capitalization of $189 billion, behind Johnson & Johnson (JNJ). Pfizer is a biopharmaceutical and engages in the discovery and commercialization of medicines for both humans and animals. Pfizer's drug portfolio includes Viagra, Lipitor, Lyrica, Celebrex, Geodon, Sutent, Protonix, etc. The major catalyst in the biopharmaceutical industry is the development of new drugs. I have shortlisted three drugs that can drive Pfizer's growth and are not already priced in.
Yesterday, Pfizer announced results for Phase II data for PD 0332991/cyclin-dependent kinase 4 and 6 (CDK4/6). The results show that in combination with letrozole the drug considerably increased progression free survival, compared with letrozole alone, in post-menopausal patients with positive estrogen receptor ER+, human epidermal growth factor receptor 2 negative (HER2-) locally advanced or metastatic breast cancer. Breast cancer is the most common form of cancer and the leading cause of cancer-related deaths among women, which goes to show the huge success of the drug. According to the company:
These results are especially important because of the magnitude of clinical effect observed and the fact that PD-991 represents a potential first-in-class compound. Based on these positive Phase II data, Pfizer is planning to open a randomized Phase III study of PD-991 in this patient population in 2013.
This is a big breakthrough in the fight against breast cancer. According to the company, patients who took PD-0332991 and letrozole had a progression free survival of 26.1 months. This means that they lived approximately 26.1 months before they died from their cancer or the cancer started to progress again. This is a 300% improvement over the older breast cancer treatment, which is with Letrozole alone. There was an 18-cent increase in Pfizer's share price after the news broke. According to the sell side, the drug has peak sales potential of $5 billion.
Bristol-Myers Squibb (BMY) and Pfizer have a joint venture on the blood-thinning, anti-stroke drug Eliquis. The drug has the potential to add approximately $2.5 billion in sales by 2015, according to Tim Anderson, a Sanford C. Bernstein & Co. analyst in New York. The approval was expected back in June, but the FDA rejected the application on the grounds of insufficient data from the trials already conducted. According to Pfizer, the new target for Eliquis is March 17, 2013. This approval can be a major catalyst for stock appreciation for both Bristol-Myers and Pfizer. The FDA has accepted the companies' resubmission of an NDA after delaying this approval twice. The drug has already received approval for distribution in Europe for patients who have already undergone certain surgeries.
Pfizer's Xeljanz is its latest successful FDA nod and received FDA approval last month. The drug is primarily used in the treatment of rheumatoid arthritis. It has been approved by the FDA for patients who cannot tolerate methotrexate or show limited response to its treatment. The cost of Xeljanz treatment is $2,055 per month -- i.e., approximately $24,000 annually. The market is expecting Xeljanz to hit peak sales of $3 billion. This is a big amount, especially considering Pfizer's second-best selling product, Lyrica, garnered sales of $3.7 billion last year.
The stock is currently trading around $25.60, and the mean target price of sell side analysts is $27.70 -- an upside potential of 8%. I believe the market is still not accounting for these three drugs still in the pipeline. The stock is currently trading at a P/E of 11 times its 2013 earnings. I believe these drugs can expand Pfizer's P/E to the market average of 15 times, giving us a target price of $34 for December 2013 -- a 30% upside. The stock also pays a dividend yield of 3.4%, almost double industry average of 2.03%.
Given everything notes above, I believe Pfizer is trading at low multiples and these drugs can trigger capital gains in 2013.