The news is awash these days with well-meaning analysts' rhetoric of Pfizer's (PFE) upcoming demise due to expiring patents. But scrutiny of Pfizer's 2010 Annual Report offers the long-term investor a more balanced perspective. Not only does Pfizer have 24 drug programs in Phase III clinical trials, it also has an additional 354 products under various stages of development. Surely a company known for delivering blockbuster drugs such as Lipitor, which loses its exclusivity this month, and Viagra, which loses its patent protection in 2012, has the scientific capability to continue to deliver breakthrough drugs in the future.
On a side note and interestingly enough, Viagra was targeted by the government as a drug class "erectional dysfunction" that could not be cost-reimbursed through Medicaid or Medicare Part D. Apparently the federal government did not want any potential four-hour porn stars roaming the land. Pfizer cautions that the government could always target other drugs in such a manner for varying reasons.
However, the strong pipeline of new drugs and commitment to R & D bodes well for Pfizer's future. And two of the drugs under development, or perhaps offshoots thereof such as "Bapineuzumab A beta amyloid inhibitor for the treatment of Alzheimer's disease being developed in collaboration with Janssen Alzheimer Immunotherapy Research & Development, LLC (Janssen AI), a subsidiary of Johnson & Johnson" and "Dimebon (latrepirdine) A novel mitochondrial protectant and enhancer being developed in collaboration with Medivation, Inc., for the treatment of Alzheimer's disease and Huntington's disease" have the potential to become Holy Grail drugs of the 21st Century. Dimebon studies faced a setback during Phase III clinical trials and did not meet expectations for moderate-severe Alzheimer's. But is now being considered on milder cases. Bapineuzumab is moving forward with international clinical studies. According to Pfizer, most developed nations require their own in-country clinical trials based on local populations prior to receiving the green light for approval.
In an article entitled Alzheimer's Association Study 'Generation Alzheimer's' Defines Baby Boomers Disease And Urgency To Increase NIH Research, posted on Memoryzine.com, it is noted that:
"In 2011, the oldest Baby Boomers turn 65 -the age when Alzheimer's disease starts to rise. Thus begins an 18 year process when every 7 seconds another American turns 65- 12,342 people daily ending in 2029 when half of those remaining will be impacted by Alzheimer's disease."
As noted in the Sept 10, 2010 Pharmaletter:
"DR's Pharmacor 2010 findings from the topic titled Alzheimer's Disease reveal that growth will be driven primarily by the first biologic agents to enter the market - Eli Lilly's solanezumab and Johnson & Johnson/Pfizer's bapineuzumab. These anti-beta-amyloid monoclonal antibodies (MAbs), which have the potential to slow the rate of neurodegeneration and cognitive decline, together will earn more than $6.9 billion in the world's major pharmaceutical markets in 2019."
Pfizer has restated its commitment to focused research in this and other areas in its annual report:
"We recently announced a focus on fewer disease areas where we believe we can deliver the greatest medical and commercial success."
"Innovation by our research and development operations is very important to the Company's success. Our goal is to discover, develop and bring to market innovative products that address major unmet medical needs. We spent $9.4 billion in 2010, $7.8 billion in 2009 and $7.9 billion in 2008 on research and development."
Pfizer's 2010 expenditures represent a 20% increase in R&D which is a significant increase considering Pfizer has trimmed back the fat in its research arm since the acquisition of Wyeth Pharmaceuticals. This fact alone indicates that the company is not content to sit on its laurels.
Pfizer's revenue stream is well diversified:
Not only does Pfizer have a healthy pipeline of new drug programs under development, it also has one of the most diversified revenue streams in the industry:
"Revenues from operations outside the U.S. of $38.8 billion accounted for 57% of our total revenues in 2010. Revenues exceeded $500 million in each of 18 countries outside the U.S. in 2010. The U.S. was the only country to contribute more than 10% of our total revenues, comprising 43% of total revenues in both 2010 and 2009 and 42.3% of total revenues in 2008. Japan is our second−largest national market, with 7.5% of total revenues in 2010, 8.5% of total revenues in 2009 and 7.7% of total revenues in 2008."
Relating this to the future potential of Alzheimer drugs, let it be noted that over half of all patients live in Asia.
Pfizer is well capitalized:
One might believe that given the daunting task of remaking the EU in the eyes of Ben Bernanke and other central banking "superstars" and possible economic pressures in Asia that Pfizer may have a tougher time ahead of it to obtain operational financing. However, Pfizer believes differently:
"The challenging economic environment has not had, nor do we anticipate it will have, a significant impact on our liquidity. Due to our significant operating cash flow, financial assets, access to capital markets and available lines of credit and revolving credit agreements, we continue to believe that we have the ability to meet our liquidity needs for the foreseeable future."
Pfizer's debt issues are also highly rated with Moody's and S&P , garnering an A1 and an AA Rating with a Stable outlook from both.
Pfizer is a dividend king:
For DRI investors and those looking for a long-term play for retirement, Pfizer looks attractive. It has paid out dividends for the past 289 quarters-and, straight through the U.S. financial crisis so far. Its dividend is currently at .80 or (4.1%) per annum. Pfizer can be found on several Top 10 lists of best companies to purchase using Dividend Reinvest Plan investors. Click here to read Pfizer's DRI brochure.
Pfizer may very well prove to be one of the best companies to own over the next twenty years as they focus their efforts on baby boomer related meds. An interesting idea for investors wishing to profit on the other side of the patent expiration play is Teva Pharmaceuticals (TEVA), an Israeli based firm that is going after the generic Viagra market and also has a large and growing portfolio of generics.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.