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Biotech / Medical : PFE (Pfizer) How high will it go? -- Ignore unavailable to you. Want to Upgrade?

To: Jerry Olson who wrote (2246)	5/8/1998 2:10:00 PM
From: Anthony Wong	Respond to of 9523

Article - Is Viagra Worth 53 Times Earnings? News Story PFE - NYSE By Lisa Kalis SmartMoney Interactive Shares of Pfizer (PFE) are behaving like ... well, like they're on Viagra. Since the drug giant launched its now-illustrious (and apparently ubiquitous) impotence medication, its stock has jumped 13.9% to 109 1/16, pushing an already rich multiple of 47 times projected 1998 earnings to a sky-high 53 times expected profits. It's true that consumers continue to jam doctors' offices looking for Viagra prescriptions. And the diamond-shaped blue pills are selling like hot cakes at $10 a pop. But insurers are balking at reimbursement payments and some wonder whether the hype surrounding this drug can possibly continue. All this leads to a tricky question: Is there any point in buying this high-priced stock right now? Or has the buying binge put Pfizer shares out of reach? BUY! "We found the company attractive when we originally forecast Viagra sales at $1.8 billion for 2001. They might do $1.2 billion this year. so I don't know why we wouldn't find it more attractive now." --James Keeney, ABN AMRO Chicago Pfizer boasts an impressive rate of growth. Viagra and other new drugs in Pfizer's pipeline will pu sh the company's long-term growth rate to at least 24% over the next five years and perhaps as high as 30% in the next three years. There are more new products coming. Pfizer announced it will spend $2.5 billion this year in research and development, which is promising. The company has 18 major products in development, including one drug in Phase I testing for cancer therapy. I'm not particularly worried about insurance reimbursement for Viagra. While it's true some insurers aren't reimbursing patients now, it's likely that they will in the long run. Even if they don't, consumers are certainly willing to foot a portion, if not all, of the bill for this drug. DON'T BUY! "The stock is significantly ahead of itself - we think it's overvalued at any price over 100. There is more risk than reward at these levels." --Neil B. Sweig, Southeast Research Partners Thirty percent? I'd say earnings are more likely to expand 20% this year. Given my 1998 estimate of $2.05, the stock is trading at 53.5 times earnings - that's way overvalued. Even if you raised the projection a little, you'd still have the highest P/E in the drug group by far. Yes, the company is spending heavily on new drugs - so much so, in fact, that it has made Pfizer's quarterly earnings difficult to predict. The company has warned more than once that high expenses associated with R&D will hurt upcoming quarters. This is making results more volatile than I would like. The concern with Viagra is that insurers will decline to reimburse consumers for this drug. Already, Bermuda insurance companies have announced they will not cover any percentage of consumer spending on the drug. That's an indication that U.S. consumers will have to pay at least 50% of the drug's price tag, and that will slow sales. (For more information and analysis of companies and mutual funds, visit SmartMoney Interactive at smartmoney.com (END) DOW JONES NEWS 05-07-98