Pfizer, Inc.’s PFE shares rallied 20.5% in 2018 compared with the industry’s 4.7% increase. Pfizer’s outperformance was backed by decent quarterly results, positive news flow and regulatory updates.
Higher sales of key products like Ibrance Eliquis, Prevnar and other drugs, cost-cutting efforts, a lower tax rate and share buybacks supported Pfizer’s bottom line — a trend expected to continue in 2019.
Pfizer gained FDA approval for four new cancer medicines last year, which can boost its oncology sales in 2019. These include Daurismo (glasdegib) for previously untreated AML, Lorbrena (lorlatinib) for second line non-small-cell lung cancer, Vizimpro (dacomitinib) for advanced NSCLC with EGFR activating mutations and Talzenna (talazoparib), an orally-available PARP inhibitor for advanced breast cancer.
Pfizer also boasts a strong pipeline and looks well positioned to deliver several potential new breakthrough innovative medicines in the next five years. These medicines have the potential to drive long-term growth. Pfizer expects approximately 25 to 30 drug approvals through 2022, including approval for 15 products that have blockbuster potential. These include line extensions for Xtandi, Ibrance & Xeljanz/XR. Half of these potential blockbusters are expected to receive approval by 2020. Bavencio, though approved for two small indications currently, is being considered a key long-term growth driver for Pfizer if it can gain approval for label expansion.
In 2018, Pfizer made significant progress with its biosimilar portfolio. In the United States, a biosimilar of Amgen’s AMGN Neupogen was launched in late September 2018 while a biosimilar version of Epogen was approved in May 2018. Biosimilar versions of Roche’s cancer drugs, Rituxan, Avastin and Herceptin are under review in the United States with FDA decisions expected in 2019.
Pfizer is evaluating 13 biosimilar molecules in various stages of development including that of AbbVie’s ABBV Humira in late-stage development. Pfizer hopes to launch five biosimilars in the next two years, which will bring in additional sales.
Pfizer has also been working on strengthening its product portfolio through acquisitions and licensing deals. In October 2018, Pfizer formed a collaboration agreement with Novartis NVS to research on combination therapies of their early-stage investigational candidates for the treatment of non-alcoholic steatohepatitis (NASH), a fatty liver disease with no approved treatments at present. In the same month, it also announced the creation of a new biotech, Cerevel Therapeutics in partnership with private equity firm Bain Capital, LP. The biotech will focus on developing drugs to treat central nervous system (CNS) disorders, including Parkinson’s and Alzheimer’s disease.
Importantly, it resolved a long pending issue in 2018 by announcing an agreement to merge its consumer healthcare unit with Glaxo’s unit. The new joint venture (JV) will be the world’s largest consumer healthcare business. While Glaxo will own a controlling stake of 68% in the JV, Pfizer will own 32%. The JV will operate under the GSK Consumer Healthcare name. The separation of its consumer health unit will allow it to better concentrate on its core pharmaceutical unit in 2019.
Conclusion
Pfizer faces its share of challenges in the form of loss of exclusivity for some key drugs, supply challenges in the legacy Hospira portfolio, lower sales of legacy Established Products in developed markets, pricing pressure and rising competition. However, we believe that Pfizer will be able to overcome these headwinds, as it did in 2018.
Pfizer currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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