With a market cap of just over 200 billion dollars, Pfizer is among the biggest in the healthcare industry, with revenues of around 59 billion dollar a year (2012). It spends 8.4 billion dollars for research and development a year (2007-2012 average), which has given it one of the most impressive pipelines in the sector. Plus, its current dividend is 3.5% yearly.
Revenue down by patent loss
Pfizer lost the patent for Lipitor, its cholesterol lowering drug, on November 30th 2011. As a result, revenues from Lipitor went from $9.58 billion (2011), to $3.95 billion. This caused PFE's total revenues to drop in 2012, but reduction of costs has led to an increase in income.
Income from continuing operations going up
This graph shows that even with revenues going down, income is still going up sharply. PFE's income has gone from $8.14 billion in 2007 to $9.52 billion in 2012. This is an average yearly increase of 3.2%. This has been largely due to a decrease in cost of sales, which went down from $16.3 billion in 2010 to $11.3 billion in 2012, as can be seen in the graph below.
Research and development costs: Back to pre-2010 levels
R&D costs in 2010 ($9.4 billion) and 2011 ($9.1 billion) were a lot higher than in the 2007-2009 period ($7.9 billion a year average). 2012 R&D costs were $7.9 billion. The graph below clearly shows the 2010 and 2011 peaks.
Impressive pipeline promises future growth
As of November 8, 2012, Pfizer had a total of 78 new medicines in its pipeline, consisting of 25 in Phase 1, 28 in Phase 2, 17 in Phase 3 and 8 in registration. Pfizer recently approved medications include Bosulif, for treatment of leukemia, which is expected to bring in $171 million in sales in 2015, and Xeljanz, for treatment of rheumatoid arthritis. With a price tag of just under $25.000 a year per patient, Xeljanz is expected to bring in $2.5 billion a year in sales.
EPS and dividend going back up
After hitting a low in 2010, earnings per share and its dividend have been climbing back up. At today's prices, PFE will yield a 3.5% dividend. In my opinion, Pfizer has done an amazing job compensating for the loss in revenue from it Lipitor patent, by decreasing costs of sales and R&D spending. I believe that, considering its impressive pipeline, and growing EPS, combined with its high dividend yield, we're at a good point in time to get some shares in Pfizer.
What's your view on PFE? Please comment below.
Disclosure: I have no positions in any stocks mentioned, but may initiate a long position in PFE over 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.