Still stuck in a trading range, Pfizer Inc. (NYSE:PFE) may continue to drift in either direction after its quarterly earnings report supplied no near-term catalysts. Revenue growing just a percent from last year is uninspiring, while some of the smaller units, like Oncology and Rare Diseases, showed some growth. Pfizer’s drug Viagra coming off patent protection is still the biggest headwind for PFE stock at the moment. Even though the company has a strong list of new blockbuster drugs ahead, their success is hardly certain.
Pfizer’s Viagra Loses Exclusivity
PFE lost its exclusivity for Viagra in December and is the primary reason for the company reporting revenues dropping 2% operationally. Supply shortages at hospitals for Hospira, competition for Enbrel in Europe, and weak sales for Ibrance and Xeljanz put a drag on Pfizer’s performance for the quarter. Still, revenue for Ibrance,which treats metastatic breast cancer, grew 35% year-on-year, due to 12,000 physicians prescribing the drug during the period.
Xeljianz sales rose 29% to $326 million. It crossed through two milestones. First, the FDA Advisory Committee gave a favorable outcome for moderately to severely active ulcerative colitis. Then the Committee for Medicinal Products for Human Use for the European Medicines Agency gave a positive opinion on the drug for treating psoriatic arthritis.
Atopic Dermatitis Drug Update
Investors should note that PFE started the Phase 3 trials for a once-daily JAK-1 in atopic dermatitis (AD). If it is successful, the drug will open up opportunities in billions of dollars worth of sales. Millions in North America suffer from AD. JAK-1 is one of 10 immunokinase studies that PFE is conducting. But Pfizer’s Eucrisa drug, also known as crisaborole, an ointment for AD patients, has limited efficacy with patients and therefore sales are lagging.
When one analyst asked if the company had many free Eucrisa samples in the channel, management did not give any details. Instead, it said prescriptions totaled 90,000 in the quarter, up only 6%. Pfizer said that the start of the year typically means patients adjust to the start of their insurance plan, disrupting demand. To offset the churn, the company is broadening trials for Eucrisa in an effort to raise its awareness with dermatologists and to increase adoption rates.
Ultimately, low access rates will hurt sales. Look at Sanofi SA (ADR) (NYSE:SNY) and Regeneron Pharmaceuticals Inc (NASDAQ:REGN) as an example of what companies must do to improve access. The pair struck a deal to cut prices of Praluent by 70%, in exchange for Express Scripts Holding Co. (NASDAQ:ESRX) making the drug more accessible.
Bottom Line on PFE Stock
PFE has between 25 and 30 approvals expected through to 2022. The company will most likely find a blockbuster to replace Viagra, but investors will need to exercise the usual level of patience. New drugs take time to catch on in the market. Initial sales are almost always slow initially, so while the dividend yielding 3.8% rewards shareholders, the stock’s rise will happen slowly, in the best case scenario. Pfizer’s share buyback would have increased shareholder value but the $5 billion spent between February and May 2017 only offset the employee share-based compensation.
Pfizer stock is trading close to the Wall Street average price target of $40 but its fair value is potentially higher. If the dividends grow steadily and the company’s sales increase 2-3% over the next five years, then PFE stock could be worth around $45 a share.
Disclosure: Author does not own shares in any of the companies mentioned.
