Pfizer On The Move: A Rise In Dividend, Precious Approvals Gained

Jan.14.13 | About: Pfizer Inc. (PFE)

Dividend increase

Pfizer (NYSE:PFE) declared a 24-cent first-quarter 2013 dividend, payable on March 5, 2013, to shareholders of record on February 1, 2013.

The dividend increased approximately 9 percent, from 22 cents per share to 24 cents.

The first-quarter 2013 cash dividend will be the 297 consecutive quarterly dividend paid by Pfizer.

The pharmaceutical giant's dividend is yielding 3.8 percent on a payout ratio of 75 percent of trailing earnings. Pfizer's dividend was slashed in 2009, but has since recovered by 37.5 percent.

Precious approvals


In December 2012 the FDA approved Eliquis (apixaban) for reducing stroke risk in patients with nonvalvular atrial fibrillation, becoming the third oral anticoagulant to reach the US market.

Eliquis is co-marketed with Bristol-Myers Squibb.

Analysts expect the new tablet will dominate what could be a $10-billion warfarin-replacement market.

"Eliquis should be the preferred choice for stroke prevention in atrial fibrillation, but being third-to-market means the launch will take time," wrote Leerink Swann's Seamus Fernandez in an investor note this week. Fernandez expects a "relatively slow initial launch that picks up over time."

Despite some safety issues, physicians say they have been prescribing the two previously approved oral blood thinners, Boehringer Ingelheim's Pradaxa and Bayer's (OTCPK:BAYRY)/Johnson & Johnson's (NYSE:JNJ) Xarelto, to maintain anticoagulation levels among patients who have problems complying with Coumadin (the brand name for warfarin) therapy, which is notorious for requiring regular monitoring to ensure patients' anticoagulation levels stay within an accepted range.

The availability of a cheap generic form of Coumadin could also slow Eliquis' takeoff. The new drug has a wholesale price of $8.35 per day, which is similar to Pradaxa and just above Xarelto.

In the first nine months of 2012, partner Bayer reported Xarelto ex-US sales of about $235 million. Pradaxa had $617 million in global sales for the first six months of the year.

The FDA has approved the 5 mg twice-daily dose in a second-line setting and has required further data to assess the benefit/risk profile of the 10 mg twice-daily dose.

Portola's antidote

A potential solution to a critical issue may have helped Eliquis' approval.

Eliquis, like the new generation of blood thinners in general, lacks an approved antidote that could be used in bleeding emergencies.

In November 2012 Portola Pharmaceuticals, a small South San Francisco biotech, signed an agreement with Bristol-Myers Squibb and Pfizer to test an agent that reverses the effects of Eliquis in the event of bleeding from injury, surgery, or some other cause.

Portola's compound, PRT4445, is a universal Factor Xa inhibitor antidote in clinical development, designed to reverse the anticoagulant activity of any Factor Xa inhibitor.

Portola has presented nonclinical data on PRT4445 at major scientific conferences and has shown reductions in bleeding in animal models taking enoxaparin (low molecular weight heparin), GlaxoSmithKline (NYSE:GSK)'s Arixtra (chemically related to low molecular heparin) and Johnson & Johnson's and Bayer's Xarelto.

Bristol-Myers Squibb and Pfizer will pay an undisclosed amount to Portola upon start of the proof-of-concept study with Eliquis. The trial was scheduled to begin before the end of 2012.

The existence of the antidote would give doctors and patients peace of mind and greatly help Eliquis' launch.

The antidote won't work on Boehringer Ingelheim's drug Pradaxa, because it has a different mechanism of action.

It's hard to overestimate the critical importance of Eliquis for Bristol and Pfizer's business. Analysts predict that it could earn anywhere from $3 billion to more than $5 billion a year.


In November 2012 the FDA approved a pill called Xeljanz to treat adults with moderate to severe rheumatoid arthritis who did not respond to methotrexate, a standard of care.

Some analysts expect the drug, which competes with such biologics as Humira from Abbvie (NYSE:ABBV), to become a blockbuster.

The drug is the first pill in a class of medications known as JAK inhibitors and data has indicated it would offer similar efficacy to the widely used injectables, which collectively generate some $13 billion in annual sales.

Pricing is an issue, however.

Pfizer is charging $2,066 for a 30-day supply, at wholesale, or about $25,000 annually, an amount higher than expected, which places the drug in the same price range as anti-TNF injectables.

A recent survey by Reimbursement Intelligence, a market research firm, queried 22 medical directors at national and regional health plans about the chances for reimbursing Xeljanz.

The survey found that payers are more willing to shift coverage when net discounts reach 7 percent and are more likely to approve the pill for early use when discounts exceed 10 percent.

As for patients, the co-insurance rate is likely to be 20 percent.

Replacing Lipitor

The company's patent loss on Lipitor crushed revenues, but some of the lost revenue was offset by sales of other blockbuster drugs.

Worldwide sales for the first 9 months of 2012 of the five largest drugs other than Lipitor were:

Lyrica ($3.026 billion), Enbrel ($2.78 billion), Prevnar 13 ($2.275 billion), Celebrex ($1.969 billion) and Viagra ($1.498 billion).

Lyrica, approved by the FDA in 2004 to treat pain, has also been used by doctors to treat anxiety, epilepsy, and restless-leg syndrome. Lately it was also approved for broader use to treat neuropathic pain from spinal cord injury, which has opened a larger market for it.

Pfizer logged $3.7 billion in Lyrica sales in 2011.

A recent win in a court case has given Pfizer exclusive rights to sell Lyrica until 2018, before generics are allowed.

The vaccine Prevnar 13, which already has $3.5 billion in annual sales from its use by those over age 50 and under age five, is designed to protect against pneumonia, meningitis and other infections caused by pneumococcal bacteria.

In November 2012 a late-stage trial of the vaccine did protect against pneumococcal bacteria in adults aged 18-49.

But the success of Prevnar 13 in the adult population is firmly hinged on the results of the large-scale (84 thousand patients) Capita phase 4 clinical trial being conducted in the Netherlands. Even if results are positive, Pfizer will still need to prove that the vaccine is cost effective in reducing the incidence of pneumococcal disease.

Prevnar 13 protects against 13 strains of the bacterium. An older version protected against 7 strains. A competing vaccine from GlaxoSmithKline, Synflorix, protects against 10 strains.

Investor's summary

Pfizer's third-quarter 2012 revenues of $14 billion decreased 16 percent year-over-year, driven mainly by the loss of exclusivity of some key products, notably Lipitor in all major markets.

Pfizer is lowering its revenue guidance for the full year to $58 billion from $60 billion and expects to spend more than $12 billion on dividend payments and share repurchases during 2012.

Pfizer repurchased $5.9 billion in the 9 months of 2012 through October 31, 2012.

Also the Board of Directors authorized a new $10 billion share repurchase program upon sale of the nutrition business. The completion of the sale to Nestlé is expected in the next few months.

Pfizer's stock is almost 30 percent cheaper than the industry, based on forward valuation. Its price-to-book of 2.3 also trumps 2.7 for its peer group.

In the latest ranking of the components of the S&P 500 ordered by market capitalization, Pfizer has taken over the #12 spot from Procter & Gamble Co. (PG), according to The Online Investor.

The well-known value investor, Ken Fisher, had almost $800 million invested in the stock at the end of September.

Says Fisher: Pfizer's "near endless top-notch brand names, and a stream of new products will capture growth from an aging developed-world demographic plus new emerging middle classes overseas-all wrapped in a classically cheap stock."

Pfizer is a company that can afford to and does have a hand in every pie in the pharmaceutical business. It firmly believes that of a huge number of attempts a few will eventually achieve blockbuster status. And a few usually do.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.