Their stock certainly has held up better than other pharma. PFE is the benchmark for execution in the pharma industry, no question about it. They are unparalleled in the industry in marketing savvy. The fact that you unreservedly believe in Lipitor attests at least in part to their skill as marketers. In a comparison trial (of which I'm sure you are familiar) Lipitor was shown to reduce serum cholesterol by an average of 40%, while Zocor reduced it by an average of 38%. The 2% difference was not even statistically significant, but PFE skillfully developed the detailing tagline, "the lower the better", and kept Zocor from ever getting out of the gate! I don't dispute any success/failure stories that you know of with these two therapies. I'm just pointing out that Lipitor's success is due at least in part to skillful marketing.
What is one of the secrets of their margin efficiency? Their ability to "pulse" new products. Prior to the late 90's a "blockbuster drug" was defined as one that attained $1B (US) in sales within 5 years of launch. That definition has changed - it now needs to achieve $1B in annual sales within 1 year of launch. PFE knows how to use its sales force and other marketing channels effectively to get sales at 70-80% of maturity in just a few months after launch. This has changed industry sales tactics radically. Just compare the charts of Celebrex vs. Vioxx sales. Because sales force expenditures were about the same for both PFE and MRK, the difference between the two revenue amounts was pure profit to PFE! (Note: I've used mainly PFE and MRK examples here, but I don't work for either.)
Note that Viagra is not even close to being a blockbuster. It has been 4 years since launch, and is only now attaining $1B in annual sales. Although it has captured the popular imagination, the Cardio/hypertension, CNS, Arthritis, Oncology, and Obesity therapeutic super-classes are where the real money will be made over the coming decade. The EDS market is nowhere close to the crack cocaine market in terms of sales or profitability. -g-/-ng-
The downside for PFE could be a result of its historical success - it has been known to quickly integrate acquired companies, and to do it well (from a shareholder's standpoint). PFE's culture is legendary throughout the industry. The PFE folks I know are all smart, but also very status-conscious (lots of impressive titles at PFE) and a bit arrogant. An appropriate attitude for M&A Masters of the Universe in the late 90s, perhaps, but this is no longer an age when hubris is excused.
PFE's big year for patent expirations will be 2005, but I believe that they lose the patent for Procardia XL next year.
One of the great conceits of the 90s was that growth could be created though finding "synergies" in a merger. But, it's obvious that most mergers create absolutely no shareholder value, and that the majority subtract from shareholder value. Value is created though organic growth, not creative merger deals.
There are several major pharma companies with good pipelines, but the challenge will be getting to actually launch the pipeline. The FDA has only approved 7 new drugs this year.
This could be the decade of the joint venture between major pharma and biotech, but with biotechs so cheap right now, I don't understand why major pharma isn't simply scooping up a few of them. (instead, PFE buys PHA? whatta joke when one could buy Human Genome or Millenium for less than 2/3 of current assets minus receivables)
I like PFE... I may pick up some here, but BMY, SGP, and others are very attractive here as well... I have been buying biotech also.
FWIW |
