Pfizer (NYSE:PFE) is one of the most appealing investments in the big pharma sector for a long-term defensive position. Current shareholders should hold long-term and interested investors should initiate a position before Pfizer moves beyond its current resistance level. Pfizer has a more expansive and balanced portfolio with more products in the pipeline than its peers in the industry. Pfizer is strategically offsetting its loss of exclusivity with Lipitor by divesting noncore functions and reducing operating costs in order to focus on high margin pharmaceutical development. Pfizer is available at a substantial discount and has comparable metrics to other the big pharmas.
Johnson & Johnson (NYSE:JNJ), Merck (NYSE:MRK) and GlaxoSmithKline (NYSE:GSK) are some of the big pharmas that are most comparable to Pfizer. All of these trade for over $45 per share while Pfizer trades for around $25 per share. Johnson & Johnson, Pfizer and Merck's price are all around 22 times earnings. Pfizer's EPS is around $1.15, up 9% this year and projected to increase 5% next year. Pfizer's sales have grown 6.8% in the last 5 years and its price to sales ratio is around 2.9.
Pfizer's beta score is around 0.7 and its average volume is around 31.6 million trades, these are the highest among these big pharmas. Pfizer's 1.87 short ratio is the lowest among the big pharmas. Its ROE is 10.5%, its operating margin is around 20% and its profit margin is around 13.8%, these margins are most comparable to Merck & Co. Pfizer's stock is 5.6% in the past month, up 26.6% YTD and up 6.3% since its last earnings release. Pfizer's annualized dividend is around $0.88.
On Pfizer's most recent earnings release, second quarter revenues totaled $15.05 billion, down 9%, YOY. Cost of sales totaled $2.75 billion, decreasing 23%, YOY; costs accounted for 18.3% of total revenues. R&D expenses totaled $1.69 billion, down 24%, YOY; R&D expenses accounted for 11.3% of total revenues. Pfizer's net income totaled $3.25 billion, up 25%, YOY; net income accounted for 21.6% of total revenues. Pfizer's long-term debt totaled $30.8 billion, down from $34.92 billion, YOY. The declining revenues were mainly attributed to the loss of exclusivity of Lipitor in most markets.
Pfizer's revenue for Lyrica increased $127 million, a 14% increase, YOY. Pfizer's Prevnar 13 revenues increased by $95 million, increasing 12%, YOY. Ten of Pfizer's products increased in revenue from second quarter 2011; around 17 of Pfizer's products declined in revenues, YOY. Lipitor revenue declined by $1.3 billion, decreasing 53%, YOY. Revenue from the Animal Health Products increased 3% and Consumer Healthcare products revenue increased 8%, YOY. Total biopharmaceutical revenues totaled $13.1 billion, decreasing 10%, YOY. Pfizer's Emerging Markets and Established Products division revenues totaled $5.3 billion, increasing 12% worldwide and 46% in the US, YOY.
Pfizer was challenged from industry-wide macroeconomic headwinds in the US and Europe, including mandated price reductions, more generic competition, and an increasing number of patients turning to Medicaid that reduced earnings. Pfizer is focused on realigning and reducing its R&D footprint and expenses. It's focused on outsourcing functions that don't drive a competitive advantage while adhering to five high priority areas of immunology and inflammation, oncology, cardiovascular, metabolic, and endocrine diseases as well as neuroscience, pain, and vaccines. Management projects $58 to $60 billion in revenue, around $9.1 to $10.3 billion in net income and $6.5 to $7 billion in R&D expenses for 2012.
Around 5% of Pfizer's products in development are vaccines, 26% pertain to oncology, 17% for cardiovascular and metabolic diseases, 14% pertain to inflammation and immunology and 20% focus on neuroscience or pain. Pfizer currently has 82 drugs in the early or mid-stage of its pipeline and has 11 that should achieve regulatory approval and be registered in the near term. Johnson & Johnson has 18 products in phase iii or awaiting regulatory approval, Bristol-Myers Squibb (NYSE:BMY) has 46 products in trial stages, Merck has 35 products in phase ii or phase iii trials and Eli Lilly (NYSE:LLY) has 62 products under development. Pfizer is currently seeking approval from Europe and the FDA for Xalkori, a drug for lung-cancer.
Pfizer recently announced that clinical trials for Study 302 failed to meet the co-primary endpoints in its Alzheimer's Immunotherapy Program for Bapineuzumab IV, but it remains committed to the cause and expects results from Study 301 to be available mid-2013. Pfizer is also seeking to expand European regulatory applications for Prevenar 13 to adults from 18 to 49, this is one of Pfizer's leading products and approval would significantly bolster revenues from vaccines.
Pfizer recently received approval for marketing authorization from the EC for Inlyta, a drug for advanced renal cell carcinoma for patients that haven't benefited from Sutent or cytokine treatment. This latest approval bolsters Pfizer's portfolio for products that treat advanced RCC. India recently revoked Pfizer's local patent for Sutent, but Pfizer still feels this is the standard for advanced RCC treatment over competing brands like GlaxoSmithKline's Votrient because of Sutent's long-standing familiarity with both practitioners and patients. Sutent suppresses RCC progression over a month longer than Votrient and patients and practitioners are already accustomed to mitigating adverse effects through simple tasks like applying skin cream or maintaining a healthy diet. Sutent generated $319 million for Pfizer in the second quarter, increasing 8%, YOY and generated $1.6 billion in 2011. Votrient only generated $160 million in 2011 for GlaxoSmithKline.
Bristol-Myers and Pfizer recently announced consistently lower rates of stroke and bleeding risks in a sub analysis of the Aristotle clinical trials for Eliquis when compared with warfarin. This collaboration combines Bristol's expertise in cardiovascular drug development and Pfizer's global scale portfolio and operations to help prevent stroke and systemic embolism. Eliquis recently received a positive opinion from the CHMP of the EMA, this will be reviewed by the EC and the treatment may eventually be approved for all 27 members of the EU along with Iceland and Norway as well.
With a renewed focus on developing its diverse pipeline of high margin pharmaceuticals, Pfizer has improved its outlook for increasing revenues and replacing earnings from its blockbuster product Lipitor in the near future. Pfizer has a more abundant, balanced and global portfolio that is superior to its peers in the industry. The RCC developments and potential for Eliquis alongside its discounted price in the industry make Pfizer an ideal candidate for capital appreciation and ROI in the near term and for the long-term as well.
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.