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Summary

  • The loss of patent exclusivity for major drugs continued to weigh on the company's overall revenue growth during the last reporting period.
  • Pfizer expects drugs such as Eliquis and Duavee, as well as the expected launch of an OTC version of Nexium, to add to incremental revenues this year.
  • With no significant competition in the market, Prevnar has the potential to make up for the company's previous revenue losses due to the expiration of several patents.

Pfizer (NYSE:PFE) had a lackluster first quarter, and the continued profit decline, accompanied by a lack of groundbreaking drugs on the horizon, disappointed investors. The shares fell following the earnings announcement. The loss of patent exclusivity of major drugs continued to weigh on the company's overall revenue growth. The situation was made worse by expiration of certain co-promotion agreements for drugs such as Enbrel. However, the company is still hopeful and expects some of its products to help stem the revenue decline in the near future. The essence is that while the current situation is not looking good, there was some silver lining to the results. Here are some of the drugs that the company appears to be pinning its hopes on.

(Our price estimate for Pfizer stands at $34, implying a premium of about 15% to the market price.)

Eliquis, Duavee And Nexium Will Add To Incremental Growth

Pfizer expects its relatively new drugs such as Eliquis and Duavee, as well as the expected launch of an OTC version of Nexium, to add to incremental revenues toward the latter half of the year.

Eliquis (Apixaban) is a drug used in blood thinning and is part of the antithrombotic family, which helps prevent clotting that can restrict blood circulation to the organs. These are still early stages for Eliquis, which is expected to garner as much as $3 billion in peak sales. The drug will not be able to achieve its full sales potential without its extension to treatment for VTE (venous thromboembolism) and acute coronary syndrome (related to the blockage of coronary arteries), which affects millions of patients worldwide each year.

In late 2013, the FDA granted approval for Duavee, which has been developed by its wholly-owned subsidiary Wyeth in collaboration with Ligand Pharmaceuticals Inc. The drug introduces a novel approach to treating hot flashes in menopausal women, and is also approved for the treatment of postmenopausal osteoporosis (common bone disease due to low estrogen levels). Unlike other drugs in the market, Duavee pairs conjugated estrogen (CE) with an estrogen agonist/antagonist (also known as a selective estrogen receptor modulator). The drug has the advantage of protecting the uterus lining against hyperplasia, which increases risk of cancer of the uterine lining and can happen with estrogen-only treatments. Given the reduction in cancer risk, we expect the drug to gain traction. There are approximately 33 million women in the U.S. between the ages of 45-59 (menopausal), and most of them experience hot flashes. [1] The quality of life can be significantly affected if this common condition is left untreated. Pfizer's existing drug Premarin, which primarily consists of conjugated estrogen, earned over $1 billion in revenues last year.

Prevnar Franchise Is Expected To Remain Robust

Pfizer's Prevnar franchise has strong potential to grow both in the U.S. and international markets. A pneumococcal vaccine, it is already Pfizer's second largest drug franchise. The overall market is expected to increase at a healthy rate and we expect Pfizer's vaccine to have a near monopoly in it. As far as Q1 2014 is concerned, the sales from the franchise grew only 2% operationally (excluding the impact of currency movements). The demand was relatively low due to adverse weather conditions and the impact of timing of purchases by several international governments. However, the long-term potential looks intact.

The U.S. pneumococcal vaccine market stood at roughly $1.4 billion 2010 and is expected to reach $2 billion by 2019. [2] Additionally, the European Commission's approval for expanded use has opened up a big market for Pfizer and will aid its growth in 2014 and beyond. With no significant competition in the market, the Prevnar franchise has the potential to make up for the company's revenue losses due to the expiration of several patents. Prevnar is currently Pfizer's second biggest brand in terms of sales after Lyrica and could well become the biggest brand in the next couple of years. We expect the franchise's sales to increase from $3.97 billion in 2013 to $5.1 billion by the end of our forecast period. Research firm Datamonitor expects the top five European markets to account for almost $3.5 billion in pneumococcal vaccine sales by 2019, with Prevnar 13 having a near monopoly again. We believe that Pfizer will leverage its monopolistic position in the market and build Prevnar into a very strong franchise over the next few years.

Disclosure: No positions.

Source: Despite A Disappointing Performance, Pfizer Pins Its Hope On These Drugs