Pfizer sheen dulls, for now, after painful setbacks
June 18, 1999
By Ransdell Pierson
NEW YORK (Reuters) - Pfizer
Inc., whose profile and stock
soared last year with the launch
of impotence pill Viagra, is
nursing painful bruises after a
series of recent setbacks that hurled its share price back to
earth.
The nation's No 2 drugmaker has been hurt by dire safety
warnings about its antibiotic Trovan, as well as the failure of
Viagra to live up to bullish sales forecasts, interest-rate worries
and other factors weighing down the whole drug group.
New York-based Pfizer has seen its share price careen from a
lifetime high of $150 in April to Thursday's closing price of
$100.25 -- a 33 percent drop that has rubbed much of the luster
off the company's image as a powerhouse drugmaker.
"For the year to date, Pfizer's shares are down 20 percent,
making it the worst-performing stock among major U.S.
drugmakers. It's phenomenally disappointing that this could
happen to such a high-quality company," said Brown Brothers
Harriman drug analyst Mike Krensavage.
"People realize now the company does not walk on water," said
Krensavage, who maintains a "neutral" rating on Pfizer, even
though he expects it to post impressive per-share earnings
growth of 20 percent this year and 19 percent in 2000.
Krensavage said that's better than the 15 percent earnings
growth expected this year and next for Pfizer's peers.
"But Pfizer's stock is about 30 percent more expensive than the
rest of the drug group," he added, noting it's priced at about 41
times expected 1999 earnings of $2.40 per diluted share.
On April 12, Pfizer stock hit its all-time high of $150. The stock
prices of Pfizer and other large U.S. drug companies began
falling that week as investors fled to shares of "cyclical"
companies whose prospects improve with a strengthening global
economy.
Pfizer shares also took a pounding April 15 when the company
warned that second-quarter growth in per-share earnings would
be held to single digits, in part because of a dramatic boost in
research and development expenses.
The company added that second-quarter comparisons also
would suffer because wholesalers stocked Viagra more heavily
in the same quarter last year, soon after its U.S. launch.
On another negative note, Viagra's first-quarter 1998 sales of
$193 million were 18 percent less than those seen in the fourth
quarter of 1998, Pfizer said.
ABN-Amro drug analyst James Keeney said Viagra is likely to
have 1999 global sales of $915 million, only 16 percent higher
than last year, despite its introduction this year to Japan and
many other nations.
He predicted Viagra will achieve ultimate peak annual sales of
$1 billion to $2 billion -- only half the magnitude of some
forecasts that echoed through Wall Street in the heady days
after the blue, diamond-shaped pill's debut in May 1998.
Keeney said Viagra revenues in most countries typically begin
strong but then taper off after pent-up demand wanes.
Moreover, many countries have curtailed availability of the pill
under government-financed insurance programs.
Earlier Friday, Australia said it would not cover Viagra usage
under its health benefits plan. The government said it feared
coverage would lead to misuse and overuse of the drug.
Pfizer's luck worsened June 9, when the U.S. Food and Drug
Administration urged doctors to sharply limit use of its Trovan
antibiotic after 14 cases of acute liver failure, which the agency
said were "strongly associated" with use of the drug.
The FDA warning prompted analysts to slash their peak sales
forecasts for Trovan to about $100 million a year, from earlier
blockbuster projections of up to $1 billion.
"Pfizer's stock has been coming down and could continue falling
because of Trovan's diminished prospects and the flattening out
of Viagra sales," Keeney said. "Who would have thought this
would happen?"
Although Pfizer shares have been punished in recent months, the
stock price has almost doubled in the past two years -- thanks to
the company's launch of three top-selling drugs, said Banc of
America Securities analyst Len Yaffe.
In 1997, Pfizer began co-marketing Lipitor, a
cholesterol-lowering drug developed by Warner-Lambert Co. of
Morris Plains, N.J. Pfizer is believed to keep 40 percent or more
of all profits from Lipitor, which is expected to garner sales of
$4 billion next year and peak sales of $6 billion by 2003.
In May 1998, Pfizer introduced Viagra, and it was like a shot
heard round the world. Doctors complained of writers' cramp
amid the frenzy for Viagra prescriptions.
Last January, Pfizer began co-marketing the hot-selling arthritis
drug Celebrex, with its developer Monsanto Co. of St. Louis.
"Launching three such big drugs in successive years is
unprecedented in this industry," Yaffe said, adding that sales
growth of those medicines will ensure Pfizer average earnings
increases of about 18 percent over the next three to five years.
Analysts said Pfizer is expected to introduce other fairly
important drugs in the next few years that should augment
earnings growth -- including Relpax for migraines, Tikosyn for
heart arrhythmias and inhaled insulin for diabetes.
But Keeney cautioned that Pfizer's best-selling drug, Norvasc
for hypertension and angina, could face strong competition by
late 2000 from a promising anti-hypertension drug being
developed by Bristol-Myers Squibb Co..
Bristol-Myers, based in New York, has said it plans to seek U.S.
approval to market its anti-hypertension medicine, Omapatrilat,
by December, and considers it the most promising drug in its
pipeline.
At the close Friday, Pfizer stock was down $1.25 to $99.1875 in
composite New York Stock Exchange trading. Warner-Lambert
stock rose $1.1875 to $65.75, while Bristol-Myers fell 62.5 cents
to $67.375 and Monsanto slipped 56.25 cents to $41.375, also in
composite NYSE trading.
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