Pfizer - zu Unrecht im Keller

aus: www.valueline.com/dow30/f7040.pdf

Pfizer scored a critical legal victory in 2005’s closing days. In mid-October, a U.K. court upheld a patent on Lipitor, giving Pfizer exclusivity well into 2011. Even more important, in late December, the company achieved the best-case scenario when a Delaware judge ruled favorably on two patents that, unless nullified on appeal, maintain U.S. exclusivity for the huge-selling cholesterol-lowering drug into mid-2011. The U.S. victory is critical on two fronts. First, it protects a drug that generated domestic sales of about $7.3 billion in 2005. Second, it gives Pfizer ample time (probably two to three years) to shift patients from Lipitor to a combination Lipitor/ Torcetrapib product, which represents its best new-drug prospect. The combination is expected to both reduce bad cholesterol and increase good cholesterol.

The gigantic drugmaker still has lots of challenges ahead. The withdrawal of pain reliever Bextra last April (at the FDA’s request) dented revenues, and sales of its other Cox-II inhibitor Celebrex have fallen sharply. Top-line contributions from several other blockbuster products will also evaporate over the next few years, as Zithromax lost patent protection in November, and Zoloft and Norvasc will soon face competition from generics. Moreover, the impending availability of Pravachol [Fettsenker von BMY] and Zocor [Fettsenker von MRK] generics, along with insurers’ increasingly aggressive efforts to drive patients towards the far cheaper copies, suggest that management will be hard pressed to keep Lipitor sales rising. Share earnings were likely down last year. All in all, though, we like these shares for the long haul. Pfizer has a wellstocked (and deep) R&D pipeline, with seven new drugs either launched recently or awaiting regulatory approval. The company also has huge cash reserves and cash flow, which give management ample flexibility with respect to continuing to acquire new products/ prospects, repurchase stock, and/or increase the dividend. As well, ongoing efforts to cut at least $4 billion in costs ought to help share net rise over the next 3 to 5 years. Pfizer stock fell late last year after it withdrew all earnings guidance, but valuations should expand after management outlines its long-term plans at a February analysts meeting.

George Rho January 20, 2006