Pfizer's (PFE) future revenue growth is based on a balance between drugs with declining sales and new drugs approved since 2010. The key question is whether revenues from its new drugs will be sufficient to offset the lost revenues from its flagship drugs such as Lipitor. If not, then where could Pfizer see the growth in income? In this article, we analyze the revenue streams for PFE from 2013 to 2016. We estimate that PFE will see $60B in revenue in 2013. Its revenue may reach $64B in 2016 with an annualized growth rate of less than 3%. Pfizer would likely continue managing its earnings through cost-cutting, spin-offs, and share repurchases. However, the slow growth rate going forward suggests to us that PFE's current stock price ($27.1) is currently fairly priced.
We previously estimated that the patent expiration or lost exclusivity of Pfizer's best-selling drugs such as Lipitor, Effexor, would have a significant negative impact on Pfizer's revenues going forward. These drugs, with a combined $17B or 25% of Pfizer's total sales in 2011, have indeed experienced a decline of over $7B revenue (or -40%) in 2012 when compared to 2011. We estimate that the revenue from these drugs will continue declining to $5.6B in 2016 (see Table below).
Newly approved drugs, including Prevnar-13, Sutent, Inlyta, Xalkori, Xeljanz (Tofacitinib), Eliquis, Bosutinib, and Tafamidis will contribute to the majority of revenue growth from 2013 and 2016.
Prevnar 13 is a vaccine for the prevention of pneumococcal diseases. In 2012, Prevnar 13 had $3.7B sales. As Pfizer expands Prevnar 13 to a broader population worldwide, we estimate that it will have a steady growth rate of 8% between 2013 and 2016.
Sutent is a multi-tyrosine kinase inhibitor with $1.2B sales in 2012. PFE continues to expand its usage into other cancer types, including pancreatic neuroendocrine cancer. We estimate that it will have a steady growth of 8% between 2013 and 2016.
Eliquis (apixaban) is a Factor Xa inhibitor co-developed between Pfizer and Bristol-Myers Squibb (BMS). It received FDA and EU approval in 2011 for the treatment of blood clots in patients after elective hip- or knee-replacement surgeries. As we predicted, Eliquis eventually also received approval for a second indication in December 2012: reducing the risk of stroke and systemic embolisms in patients with atrial fibrillation. We estimate that Eliquis will start generating revenue in 2013. Eliquis will directly compete with Xalreto, marketed by Johnson & Johnson (JNJ).
Tofacitinib is a JAK kinase inhibitor developed by Pfizer for the treatment of autoimmune diseases, including rheumatoid arthritis (RA). It received FDA approval in November 2012, as we predicted. Tofacitinib (Xeljanz) is the first new oral disease-modifying antirheumatic drug (or DMARD) for RA in more than 10 years. As a first-in-class JAK inhibitor, Tofacitinib has great potential to expand to other autoimmune diseases. In fact, Pfizer has lined up clinical trials for Tofacitinib in other autoimmune diseases, including psoriasis, psoriatic arthritis, ulcerative colitis, Crohn's disease, and ankylosing spondylitis (PFE drug pipeline). We project its sales to be $700M in 2013, eventually reaching over $2B in 2016, assuming it is also approved for other indications.
Xalkori (crizotinib) is an ALK-specific inhibitor that received FDA approval in 2011 for the treatment of ALK-positive lung cancers in the U.S. Xalkori represents Pfizer's first entry into precision medicine - it is a breakthrough in lung cancer treatment and is the first new drug approved by the FDA for lung cancer in six years. We estimate that Xalkori will experience fast growth over the next several years with initial sales of $400M in 2013 and reach blockbuster status by 2016.
Inlyta was approved in early 2012 for patients with advanced renal cell carcinoma (MRCC). While the market size for mRCC is about $2B, there are several other drugs in the market for this indication. Accordingly, our projected revenues for Inlyta are moderate growth from $300M in 2013 to $500M in 2016.
Bosutinib is an inhibitor of Abl and Src kinases approved for the treatment for chronic myeloid leukemia (CML). As a 3rd line therapy, Bosutinib's sales will be limited, especially in the crowded CML field. We project its sales to be $300M in 2013, eventually reaching approximately $500M in 2016.
We estimate that these newly approved drugs will contribute $4.8B to $8.9B between 2013 and 2016. The combined revenue from these two groups of drugs will result in revenues in the $14.5B range from 2013 to 2016. The total revenue from all products is estimated to be $60B in 2013 and may reach $64B in 2016. In our next report, we will evaluate how this revenue growth translates to earnings projections from 2013 to 2016 and derive PFE's fair value.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.